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The Rental Disputes Centre under Dubai Land Department will be hearing the cases related to non-payment of service charges. The first judgments are likely to be delivered in two to three weeks. Image Credit: Virendra Saklani/Gulf News

Dubai: The first cases related to non-payment of service charges by homeowners in Dubai are being registered with the Rental Disputes Centre under the Land Department. This means that these property owners will not be able to rent out or sell their units until a final verdict is passed.

Market sources say it could be two to three weeks before the first judgements are delivered by the Rental Disputes Centre, and will have a significant impact in resetting relations between property buyers and their OA (owners association) management companies.

“Only judgements passed by the RDC will resolve the service charge crisis in Dubai, which has dropped to 30 per cent of expected collections this year,” said the head of an OA management company. “There aren’t sufficient funds available any longer at most communities for their upkeep.

“This will have a telling impact on property values in the long run – this state of affairs cannot go on. Property owners need to pay the service charges they are contractually required to.”

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Not just about 2020

The cases before the RDC have been brought by OA companies on non-payment of service charges. In some instances, the non-payment relates to multiple years and not just the status this year.

It was recently that RERA (Real Estate Regulatory Authority) gave the go-ahead to OA companies to issue legal notices to those owners failing to keep up with their payments. It was spelt out clearly that continued non-payment will lead to cases being field, and which will, in turn, prevent the owners from letting out or selling the units.

Sources say there were some improvements in service charge collections once the notices were issued – but they are still way off the levels they should be. Now, with the initial cases being registered at RDC and verdicts expected shortly, OA companies are hopeful some pick up will happen.

OA company sources say they are willing to consider installment plans stretching up to six months for helping owners clear their arrears.

But will this work?

There are multiple instances of service charges not being paid across years, and with the property owners domiciled elsewhere. The big question is whether these owners – some of them with multiple units - will be paying up in full if the verdicts go against them. More so as rents keep dropping and, in some cases, will be barely enough to keep up with the service charges.

Drop the rates

For homeowners, their constant gripe is that current service charges will need to be looked into, and that their inputs should also be taken on board. Several owner representatives have been approaching RERA directly for such an intervention. And specifically, they want to exercise the rights to change OA companies.

“Costs have to come down in the current market environment - and yet they haven’t in the case of service fees,” said one homeowner. “At a time when cost cutting is the norm for every sector, why should service fees be exempted?

“We hope the RDC will hear the other side of the story before rendering verdicts. And, most important, allow for time needed such that annual OA budgets can be overhauled. Especially after RERA has invited everyone to be part of owners associations in Dubai.”

But, for now, all of the focus shifts to how the new set of disputes will be settled by the RDC panel. Will the panel come up with a middle path that could lead to some compromise being reached between homeowners and OA companies.

Where’s the justification?
At one upscale tower in Dubai, the service charge was raised to Dh36 a square foot last year.
“It used to Dh16 back in 2013 when the tower was handed over,” said an homeowner there. “How is it that they were able to operate at Dh16 in 2013 and they can’t do so now?
“This service charge is around 60 per cent of the rental income. The main problem is that buyers are escaping when they hear the service charges. Less demand will lead to further price drops in the real estate market.”