What are service charges in Dubai?

Service charges are the yearly fees every owner in a Dubai building pays for its shared parts: cleaning, security, maintenance and repair, insurance and the management company. The owner pays them, even when the home is rented out, and your share is set by the area of your unit. No one may charge them without the Real Estate Regulatory Agency (RERA) first approving an audited budget, and you can look up a building's approved rate in the Dubai Land Department's (DLD) Service Charge Index before you buy. The rules are in Dubai's Law No. 6 of 2019 on jointly owned property.

This is a summary to help you budget before you buy, not legal, tax or financial advice. Service charges change every year, so check the current figure for the building you are looking at.

Which law sets the rules?

Law No. 6 of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai. It was issued on Sep 4, 2019, came into force 60 days after it was published in the Official Gazette, and repealed the old Law No. 27 of 2007. It applies across the emirate, free zones included. Under its Article 49, the rights and obligations of the old owners associations passed to "Management Entities": the developer, a management company or a hotel management company, depending on the building. Every rule below is from this law unless another source is named. Its English text says the Arabic original prevails if the two differ.

The law sorts buildings into three groups (Article 18), and the group decides who runs the shared parts:

In major projects the developer may hand the work to a management company, with RERA's approval, and the committee is chosen from owners who live there.

What do service charges pay for?

The law defines service charges as "the annual charges collected from Owners" for the management, operation, maintenance and repair of the jointly owned property. Article 30 lists everything the money may be spent on, and nothing else:

• cleaning the shared parts
• security and safety
• running, maintaining, repairing and improving the shared parts and their equipment
• the building's insurance
• auditing the service charge accounts
• the management company's fees, as RERA sets them
• the developer's administrative costs on major projects, as RERA approves
• a cash reserve for emergencies and for replacing equipment, kept in a separate account
• RERA's fees for inspecting and overseeing the building
• other costs in the master community declaration that RERA approves

In a master community (Dubai Hills Estate, for example, where the image above is set), the master developer may also collect usage charges for the community's shared facilities, under Article 26. These apply to completed buildings, buildings under construction and vacant land alike. Your yearly bill may therefore have two parts: the building's service charges and the community's usage charges.

How is your share worked out?

By area. Under Article 25, your share of the yearly budget is the area of your unit divided by the total area of the jointly owned property, using the method the DLD's Director General approves, and the area used is the one recorded for your unit in the Real Property Register. A larger home in the same building pays proportionally more.

Many buyers and brokers quote the result as a rate per square foot a year. That is a handy way to compare buildings, but the legal basis is your registered area times the building's approved budget.

Who decides how much you pay?

RERA. Article 27 says a management entity may not charge owners anything for the shared parts, "or for any other reason", without RERA's approval first, and RERA may not approve a budget unless an audit firm it recognizes has approved it. Where needed, RERA can approve a temporary budget until the audited one is ready.

The money is also protected once you have paid it (Article 30):

• each building has its own service charge account at a bank licensed in Dubai and recognized by RERA
• the management entity must deposit what it collects within seven working days
• the account cannot be seized by the management entity's creditors
• the emergency reserve sits in a separate account and may be spent only in a critical emergency, or with RERA's approval

If the reserve is not enough for an emergency, the DLD may, with RERA's prior approval, ask owners to cover the cost.

How do you check a building's charges before buying?

Use the DLD's Service Charge Index. The DLD describes it as a way to look up "the approved service fees" for jointly owned properties: you choose the project, its use and the year, and the approved figure appears straight away. It is open to residents and non-residents alike, and available on the DLD website, through Mollak (the DLD's service charge system, where owners also pay their charges) and in the Dubai REST app.

For an off-plan home, the building has no approved budget yet, so there is nothing to look up. Ask the developer for its estimate in writing, and look up finished buildings by the same developer in the same community to see what owners there pay today.

Then put the figure into your numbers. The rental yield calculator on our tools page has a field for yearly service charges, so you can see how much of the rent they take, and the purchase costs calculator beside it adds the 4% DLD registration fee to the price.

Do you still pay if you rent the home out?

Yes. Article 16 says that unless the lease says otherwise, the owner pays the service and usage charges, and that even when a lease puts them on the tenant, the owner stays liable if the tenant does not pay. So count them as a cost of letting, unless your lease clearly moves them to the tenant.

Do you pay before handover?

Usually not while the developer still owns the unit. Article 25 makes the developer pay the service charges on unsold units, and on any sold units where the sale contract or reservation agreement says the developer will pay them for the buyer. That is what a "service charge waiver" in a launch offer means: read how many years it covers and from when.

There is one exception to know about. The Rental Disputes Center has set a new principle, reported by Gulf News: where handover is delayed by the buyer's own actions, such as missed payments, a buyer recorded in the interim register pays service charges from the date the project is completed or from the date of the default, whichever comes first. If your handover is delayed, ask the developer in writing from when it will bill you, and confirm with a lawyer if you disagree.

What happens if you do not pay?

The law leaves little room (Articles 28 and 32):

1. You cannot refuse to pay charges RERA has approved, and you cannot give up your share of the shared parts to avoid them.
2. The management entity has a lien on your unit. The unit cannot be sold until the charges are paid.
3. You get 30 days' written notice to pay, in a form RERA approves.
4. After that, the claim goes to the execution judge at the Rental Disputes Settlement Center, who can enforce it and, where necessary, order the unit sold at public auction. The owner also pays the court and lawyers' costs.

The same steps apply to unpaid usage charges owed to a master developer. There is a limit on the other side too: under Article 29, a developer or management entity may not stop you taking possession of your home, or using it or the shared facilities, to force you to pay outside these procedures.

Do owners have a say?

Yes, through an owners committee. Under Articles 22 to 24, one is formed once at least 10% of a building's units are registered in their owners' names. It has at most nine members appointed by RERA, who must be owners living in the building and up to date with their charges, and it meets every three months. It reviews the yearly maintenance budgets and can ask for the building's financial reports, and it passes owners' complaints to the management entity, then on to RERA if they are not dealt with within 14 days. Each member has one vote, however many units they own.

What should you do before buying?

• Look up the building in the Service Charge Index and note the year of the figure you see.
• Ask about usage charges for the master community as well as the building's own charges.
• For off-plan, get the developer's estimate in writing, and any service charge waiver, with its start date and length, in the sale agreement.
• Check for unpaid charges on a resale home: the unit cannot be transferred until they are cleared.
• Add them to your yearly costs with the rental yield calculator on the tools page, along with upkeep inside the home, which service charges do not cover.

To compare projects in Dubai, or in a community such as Dubai Hills Estate, browse the catalog or ask our AI advisor. For the rest of the buying process, read Can foreigners buy off-plan property in Dubai?