Dubai homeowner fees: Collections improve as property sales, rental deals pick up

Dubai: Annual service fee collections from property owners in Dubai have “improved significantly” since September in yet another sign that the real estate market is nearing full recovery mode. Even the backlog on service fee collections have seen re-payments touch the 50-60 per cent levels from around 30 per cent all through 2020, according to industry sources.

The increased – and on-time – payments reflect the surge in secondary market deals for existing apartments and villas in the city. So, when a new owner comes in, the chances are that the deal would also have seen much of the dues on service fees being cleared as well.

Service fees are set and collected on an annual basis by homeowner associations (HOA) after getting clearance from Dubai Land Department. The actual collections are then made by HOA management companies, who then spend these funds on the upkeep of properties within the building or community.

“Yes, service charge collections are seeing marked improvements from what’s been the situation in recent years,” said Saeed Al Fahim, CEO of Stratum, one of the biggest OA property management companies in the country. “There is plenty of cause for optimism now that property prices have rebounded. We believe 2022 will see all outstanding issues between property owners and OA companies being resolved to the satisfaction of all parties.”

Picking up across the board

Most of the OA management companies representing some of the bigger communities and towers in Dubai say they managed to “secure their budgets” for this year. “The optimism is there that rents too will start picking up in 2022 the way that sales improved this year,” said an industry source. “There will be no reason why property owners should delay or not pay their dues. These payments are going for the upkeep of their properties – and that means better value for them in the future.”

OA management companies also put in place installment schemes to get owners to pay off their dues. This too helped improve the collections, sources add.

RERA’s help

Getting property owners to pay up also involved direct help from the Land Department and RERA (Real Estate Regulatory Agency). It was last year that non-payment of service charges was brought under the purview of the Rental Dispute Settlement Centre. Earlier, only direct negotiations were the only recourse when it came to settling such issues, or the local courts.

RERA also made it mandatory that on repeated non-payments, the property owner will not be able to register his apartment or villa for ‘Ejari’ (which is the rental contract) or for sale. The other method has been to put the properties where payments have not been made for years to be auctioned. (In extreme cases, power and water services to the offending unit have also been cut off to make the owner pay up.)

“In the auction process, we have been working with the authorities to ensure that there is some mechanism where service fees are also recovered from the sale,” said Al Fahim. “We are confident that the authorities will weigh in favourably on this issue soon.

“From the service fee collections’ standpoint, the argument property owners have used is that rents have fallen. But that’s never been the factual position as the service provided – which is the upkeep of the property and building - is not linked to rents.”

Turned the corner?

Heading into the New Year, the mood in the Dubai property management business is one of optimism. Non-payment issues has had a domino effect on the industry in these two to three years. It meant there was less funds to use for property upkeep and that meant cutting down on all non-essential work.

For 2022, the initial feedback is that service charges will remain at current levels. The authorities have made repeated calls on OAs not to go for unilateral increases. So far, the planned rates for next year seem well in line with that mood.

As long as collections keep improving, OA companies should not have an issue.