200318 service charges
Soon, the 2023 service charges will be finalised, and property management companies want to mop up as much of dues from property owners before end of this year. Image Credit: Shutterstock

Dubai: Homeowners in Dubai are once again getting prompts to clear their service charge dues before year-end, with property management companies saying strict action will need to be taken for further delays.

Some owners who have properties rented out have been receiving updates saying they will no longer be allowed to conduct ‘any repair work’ on their units if dues are not cleared by the extension date provided. “I was baffled to receive the memo, because I was late only by seven days or so,” said one homeowner. “I have registered a complaint with the Dubai Land Department, saying such denial of service should not be allowed.

“Imagine if my tenant had a water leak issue to be dealt with – and me being prevented from doing any repair work.” (On this particular to and fro, the property owner managed to win an apology from the concerned company.) 

The mail to the property owner states the service provider would ‘deny all your request/permits like delivery of material as well permission for any repair work inside your unit. Which can create operational issues for the occupant - for continuity of smooth operation please pay your dues immediately."

Other measures that property management companies have taken include not allowing a sale or rental contract on the property until service charges are cleared, either in full or a sizeable percentage of it. According to sources, these companies are upping the ante because there’s been a dip in service charge collections after summer. (There are also proposals to place non-payment of service charges to be included in the individual’s credit score, much like it is on bank loans or, more recently, delays happening on electricity and phone bills.)

It's a big issue as most property service providers are struggling with delayed receivables. In our context, the average on DSO days are above 150 to 180 days. RERA needs to step in to regularize the situation as we have stopped providing services to owner associations

- Tariq Chauhan of EFS Group

Rating power

Property management companies are also raising the stakes because of the much anticipated rollout of the ‘star rating’ system being the benchmark to set rentals for buildings in Dubai. Such a proposal is being looked into by the authorities and, if passed, would mean age and upkeep of a particular building will be the main factors in deciding how rents are set.

“The proposal by Dubai Land Department would exert pressure on service charge non-payers,” said a source. “Because if service charges are not sufficient to ensure a proper upkeep of the building, they cannot command a higher rental.

“In the planned changes to calculate rent hikes, quality upkeep is going to be a decisive factor to justify the building’s rating.”

Will service charges rise?

Now is the time when RERA and its audit committees will sign off on service charges that freehold buildings and communities in Dubai can charge in 2023. In the last year or so, these service charges have more or less remained stable across major residential locations.

Property management companies say that as long as they can collect 70-75 per cent of the service charge payments at any time, they can manage the situation even though operational costs have increased significantly. It’s when annual collections drop to under 50 per cent that problems quickly escalate.

“Even without a star rating system for buildings, upkeep is an absolute must,” said the owner of an FM business. “When upkeep standards suffer, it gets even more difficult to bring that building back in order.

“Property owners need to pay off their dues – there’s no other outcome that can help.”