Stock aerial Dubai skyline
Summer months have see another drop in service fee collections from Dubai homeowners. OA companies say this further pushes them into a corner, more so as inflation costs keep rising. Image Credit: AFP

Dubai: Homeowners in Dubai failing to meet service charge payments on their properties may find this will cost them quite dearly going forward. These defaults could be reflected in the individual’s credit score ratings, in the same way delays in settling credit card dues or monthly utility bills are.

Some of the leading OA (homeowners association) and property management companies are pushing for service charge defaults to be included in the credit ratings. These ratings are maintained by the Al Etihad Credit Bureau and offer an instant update on the standings of individuals and businesses when it comes to paying up. These ratings are then used by banks and others lenders to decide whether it’s worthwhile to have exposures with them.

It was in earlier this year that Al Etihad Credit Bureau added non-payment of electricity and water bills within the credit scores. It was said at the time that the ambit of these scores would be widened to include other parameters, in the interests of maintaining full transparency.

Service charges remain the same
In Dubai, 2022 service charges have been broadly in line with rates recorded last year. The Dubai Land Department has been particular about stability on charges where possible.

Currently, buildings in Dubai Marina have service fees of Dh18-Dh20 per square foot, while those at JLT are around the Dh14-Dh15 psf mark. At a community such as the Greens, it would be about Dh22 psf.

The Land Department sign-off is mandatory before any changes in fees can be implemented by OA companies.

Bad credit scores will hurt

According to Saeed Al Fahim, CEO of Stratum, one of the biggest privately owned OA management companies in the UAE, “If individuals are hit by what’s on their credit scores, it will be a major incentive for them to be up to date on service fee payments. We believe this would be in the best interests of all homeowners to preserve the integrity of the building/community.

“Under no circumstances should those who are paying suffer for those who are not.”

The issue of non-payment of service charges has again become a livewire issue in the local property market. OA company sources say this is forcing them to do the same tasks they have been signed up for, but with far less funding than was expected at the time of the contract. In some buildings, service fee collections are barely crossing the 50-60 per cent mark.

“Because of shortage of funds for a building’s upkeep, we had to bring down maintenance staff,” said the general manager at a property management company. “This is not an ideal situation to be when handling a 20-storey structure. And inflation has really kicked in, and we are operating on a bare budget.

“Payment of service fees need to be enforced – if by adding defaults to the credit score makes people pay up, then it will be good.”

If individuals are hit by what’s on their credit scores, it will be a major incentive for them to be up to date on service fee payment

- Saeed Al Fahim of Stratum

Spike in collections and then...

At the start of the year, such collections had improved considerably. Owners who had properties rented out were getting prompt on serve fee payments, because they were getting more by way of rents.

OA companies too had gotten better at trying to secure dues, going through the Rental Disputes Settlement Centre of Dubai Land Department in winning verdicts in their favour. But in recent weeks, there’s been a noticeable dip, and this is what stakeholders like Al Fahim and others are trying to stop.

Summer months typically have been dry when it comes to service charge collections. Property owners’ mindset veers towards spending on other needs. “It could be a holiday trip, and they will take away what’s been set aside on property fees,” said an OA company owner. “Then the defaults keep happening repeatedly, and getting those owners to get back to paying is laborious. It costs us money too.”

Al Fahim argues that each property owner should look to the bigger picture. “Dubai’s booming real estate sector will depend on quality maintenance of all assets,” he said. “OA companies with the assistance of the regulators play an integral role in that.”