Are you planning on buying a property in Dubai? There are many additional costs that property owners need to take into account with the total cost of the property. Service charge is a cost that must be familiarized recognizing its importance and how it affects the overall cost of a property.
What is service charge?
Service charge is simply the cost of the maintenance and upkeep of properties. These are fees that occur on an annual basis and cover two sections:
The first section covers the general fund of the normal day to day services such as security, repair services and other common areas for property management. Second is the sinking fund which is set aside reserved for major repairs in the future such as any damages caused by unforeseen circumstances, fire alarms and safety systems and elevator replacements. These feeds prevent any ups and downs in service fees. Other service charges are add-ons for chiller and cooling units
How is the service charge calculated?
There are several factors that can affect overall service price regardless of the property type.
Service charge is calculated as per square foot basis taking size into the calculation. Villas are based on plot area with Jumeirah Golf Estates as a sole exception based on a built-up area of the villa. Apartments are subject to the developer where some take into balconies where homeowners are expected to pay a lower charge. It is all about location with the charge depending on neighbourhood and developer under which project is under. The use for the property is also taken into account whether it is used commercially, retail or as a residence.
The service charge index is a great tool to achieve the complete breakdown of accurate charges for projects as well as providing the maximum and minimum charge within the community.
The common service charges that are forwarded to the owner includes services, maintenance, utilities, management, insurance and master community.
Here are a few examples of service charges of projects in sought after areas in Dubai:
1. 29 Boulevard in Burj Khalifa District for residential purposes have a service charge with a total of 14.34 AED/Sq.Ft with additional charges of 4.05.
2. Diamond Views 4 Apartment in Jumeirah Village has a service charge of 10.27 AED/Sq.Ft.
3. The Pulse Boulevard C2 in Dubai South has a service charge of 12.64 AED/Sq.Ft.
4. The Grandeur Residence Villas in Palm Jumeirah has a service charge of 14.61 AED/Sq.Ft.
To know more on these charges for various properties in Dubai, you can visit the Dubai Land Department’s service charge index to find out more: https://dubailand.gov.ae/en/eservices/service-charge-index-overview/service-charge-index/#/
It is important to know that the older the properties get, the more maintenance it requires therefore the service charge will definitely rise with time.
How do I pay for the service charge?
In 2019, the New Common Properties Law No 6 was passed requiring all new freehold projects a homeowner’s association with developers no longer collecting service charge. This means that only homeowners and approved project management companies have the responsibility to pay charges.
RERA has total control over setting dedicated auditors to go through budgets with the home owner’s association which will be collected by approved banks in Dubai. They have the final say on how much service charge will be for each project.
The introduction of Mollak in 2019 (means owner in Arabic) is an electronic system aimed for service charges to be payable directly in a very secure and efficient manner. The CEO of RERA ensured owners that this framework would allow complete transparency breaking down every fil that is allocated to the maintenance and upkeep for the building. Also, owners won’t be required to pay any surplus in charges unless approved by RERA.
It is very important as a homeowner to make sure service fees are paid within the 30 days post legal notice. Unpaid fees can prevent homeowners to register or renew ejari rental contracts thus properties can’t be leased and other activations such as DEWA utility won't be launched.
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