Stock JBR Jumeirah beach residence Dubai property
Dubai real estate authorities have made their first intervention to tackle the issue of unpaid service charges. The Rental Disputes Centre is the entity handling these disputes. (Image used for illustrative purposes.) Image Credit: Stefan Lindeque/Gulf News

Dubai: Property owners in Dubai who haven’t paid their service charge dues cannot get their ‘Ejari’ rental contracts renewed, as the first verdicts get delivered by Rental Disputes Centre. This comes as more cases pile up before RDC on unpaid service fees, with multiple instances of non-payment over several years.

Without an Ejari certificate, the property cannot be leased and, by extension, it cannot have access to electricity and water connections.

At this stage, the verdicts do not stipulate a seizure of the property if the dues remain unpaid. But by not being able to get their rental contracts renewed, the authorities expect to pile on enough pressure to get the property owners to pay up… at the earliest.

“These are the first judgements passed by RDC after they started taking on service charge related disputes,” said a property owner in Dubai. “Based on what’s been passed, the authorities are taking a lenient approach by giving some time for owners to clear their dues.”

The Rental Disputes Centre was assigned the responsibility of settling service fee disputes after a massive spike in unpaid claims all through this year. Property management companies have been repeating the claim that all these dues get in the way of ensuring quality services are delivered and that this is hurting the property market.  

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Get tougher

OA management companies, however, want tougher judgements to be passed, reckoning this is the only way that most property investors will pay sufficient notice. “Not allowing the property to be rented may hurt a lot of investors, but there could be some who would think that’s still OK because the rental market is down and they won’t make enough out of renting,” said one OA industry source.

“Same would be the case for those property owners who are based abroad – they may think they are better off not paying because of the rental situation. The authorities need to get tougher – service charge non-payments are not isolated instances.

“The UAE has tougher sanctions on individuals who do not pay government fees. These should be applied to service charge verdicts as well.”

No rush to clear

Even with the added pressure of legal sanctions against them, a sizeable number of property owners in Dubai had not made the move to clear their dues. They were, most likely, waiting for RDC to pass their verdicts and then take their cue from them.

Multiple homeowner association (OA) companies – who oversee the service charge collection and upkeep of properties/communities – say that 2020 payments are still at, or even below, 50 per cent of what they should be. Even after the first verdicts got passed, there was no rush by homeowners to clear the backlog.

“Many homeowners keep hoping that the problems will just vanish if they don’t pay attention to it,” said the CEO of an OA management company. “Now that RDC has shown the way, each and every dispute on service fees will be brought before it.

“Property owners will have to pay up – in a lot of cases, these unpaid amounts run well into the tens of thousands.”

No discounts

Some OA industry sources say property owners had approached them to work out some discounts on what’s owed by them. But these conversations don’t seem to have yielded any results, according to sources. The best offers relate to waiving off penalties on late payments, but beyond that OA companies are not in to the mood.

Pay by instalments?

The best option OA companies are offering would be to allow owners to pay their dues in instalments over six months or so.

Red hot issue

On one point, property owners and OA companies agree - service charge related issues will continue to dog the property market for some time to come. Non-payment is one sticking point, and homeowners always bring up the issue of high service charges imposed through OA companies.

Property investors keep citing the fact that only service charges remain at elevated levels while property values and rents are dropping. And OA companies counter that by saying these are needed to ensure the property upkeep of those properties, and that costs have inflated across the board.

The RDC verdicts will thus be a marker on what’s likely to be an interesting few weeks as 2021 service charges are decided.