Dubai service charges: who approves them and what sellers must clear

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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Most owners of an apartment, a townhouse in a gated community or an office in a tower in Dubai receive a service charge invoice every year. It is easy to treat it as one more bill. It becomes a different matter on the day the owner decides to sell, because Dubai's law on jointly owned property ties unpaid charges to the unit itself, and says the unit cannot change hands until they are settled.

This guide follows the charge from start to finish, using the text of Law No. (6) of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai as published on the Dubai Legislation Portal, and the service pages of the Dubai Land Department (DLD). It covers what a service charge is, who manages the building, how an owner's share is worked out, who approves the budget, where the money is kept, how an owner can look up the approved figure, and what the law provides when an owner does not pay, including before a sale. It describes the general rule in Dubai. How it applies to one unit depends on that unit's documents and on the bodies named below.

Law No. (6) of 2019, Articles 32, 30 and 22, as published on the Dubai Legislation Portal.

What the law means by a service charge

Law No. (6) of 2019 was issued on 4 September 2019. Its Article 52 brought it into force 60 days after publication, and its Article 51, as published on the Dubai Legislation Portal and read in October 2026, repealed the earlier Law No. (27) of 2007, along with any provision of other legislation that conflicts with the new law. It is the law that governs buildings and communities in Dubai where units are individually owned and other parts are shared.

Article 2 of the law defines the terms the rest of this guide relies on. Service charges are the annual charges collected from owners to cover the cost of the management, operation, maintenance and repair of the jointly owned real property. The definition contains three ideas worth separating. The charge is annual. It is collected from owners, which is the party the law looks to. And it is a contribution to costs: management, operation, maintenance and repair.

The law also defines a second, separate charge. Usage charges are the annual charges collected from owners or sub-developers in return for the management, maintenance and repair of the common facilities. The difference between the two charges follows from the difference between two kinds of shared space.

Common parts are the parts of a jointly owned property, as shown on its site plan, that are designated for common use by the owners and occupants of the units. Common facilities are the areas and spaces marked on a master plan as common facilities, owned by the developer, that serve the wider master project. The law's own examples of common facilities include gardens, pools and streets.

Put simply, the service charge belongs to the building or the plot the unit sits in, and the usage charge belongs to the larger community around it. An owner in a tower inside a master-planned community may therefore meet both. The law treats them together when it comes to approval and to non-payment, and keeps them apart when it comes to the accounts they are paid into.

Who manages the building

The party that prepares the budget and sends the invoice is what the law calls the management entity: the entity in charge of managing common facilities, a jointly owned property or its common parts. According to Article 2, the term includes developers, management companies and hotel project management companies. Which of the three applies to a given unit depends on the category of the project, set out in Article 18.

RERA is the Real Estate Regulatory Agency, the regulatory arm of the Dubai Land Department. In the third category, which the law describes simply as projects other than major and hotel projects, the regulator itself chooses the management company and contracts with it. Article 30 adds a transitional rule for that case: until RERA appoints a management company, the developer manages the property and keeps the service charges in the dedicated account described further on.

For a seller, the category matters for a practical reason. The management entity is the party that holds the claim for any unpaid charge, and so it is the party whose records show whether a unit is clear. The DLD's directory of services lists two public look-ups, named "JOP Companies" and "Management Companies", that relate to the firms working in this field. The DLD's licensing page also treats administrative supervision for owners' associations as a licensable activity whose staff must hold RERA registration cards.

How each owner's share is worked out

Article 25 sets the method. An owner pays the management entity a share of the annual service charges, and that share is based on the ratio of the unit's area to the total area. A larger unit pays more than a smaller one in the same building, in proportion to size. The law does not weight the share by floor, by view or by the price the unit sold for.

The same article deals with units that have not yet been sold. The developer pays the share of service charges for unsold units. An owner in a building that is only partly sold does not carry the cost of the developer's unsold stock.

A worked example shows the arithmetic. The figures are illustrative assumptions and are not market data. Assume a building with a total area of 200,000 square feet and an approved annual service charge budget of AED 3,000,000.

• A unit of 1,000 square feet is 0.5 per cent of the total area. Its share of the budget is 0.5 per cent of AED 3,000,000, which is AED 15,000 for the year.
• A unit of 1,500 square feet is 0.75 per cent of the total area. Its share is AED 22,500 for the year.
• If the developer still holds 20 unsold units of 1,000 square feet each, they total 20,000 square feet, or 10 per cent of the total area. Under Article 25 the developer's share for them is 10 per cent of the budget, which is AED 300,000.

The example leaves aside usage charges for the surrounding community, which are a separate charge with their own budget. It also shows why two neighbours can receive different invoices in the same year without either being wrong: the budget is one figure, and the split follows area.

Who approves the charge

The management entity proposes. It does not decide alone. Article 27 says a management entity must not charge owners, or collect from them, any amounts whatsoever without the prior approval of RERA. The rule covers both service charges and usage charges.

The approval is itself conditional. Under the same article, RERA may not approve or ratify a service charges or usage charges budget unless that budget has first been approved by a certified audit firm recognised by RERA. Two reviews therefore stand between a draft budget and an invoice: an independent audit firm from a list the regulator recognises, then the regulator.

Audits take time, and buildings need cleaning and security in the meantime. Article 27 provides for this. Where necessary, RERA may approve a temporary service charges budget until the audited budget is approved. An owner may therefore see charges collected on a temporary budget, with the audited budget following later.

The DLD's list of rules and regulations shows that the department has added circulars on these points. It lists Circular No. 1 of 2020 on fees for services or use fees for jointly owned real estate, and a Circular No. 3 on annual budgets, both dated 18 October 2020. The texts of those circulars were not read for this guide, so their detail is not described here.

Where the money is kept

Once collected, service charges do not sit with the management entity's own funds. Article 30 requires the management entity to open a service charges account for each jointly owned property, at a bank licensed in Dubai and recognised by RERA. Collected charges must be deposited in that account within seven working days of collection.

The account is protected. Article 30 says the amounts in it cannot be attached by the creditors of the management entity, for any reason. If the company managing a building runs into financial trouble of its own, the owners' contributions are not available to its creditors.

The same article limits what the money may be spent on. The purposes it lists include cleaning, security, maintenance, insurance and audit fees. It also provides for a cash reserve held in a separate account. As read for this guide, the law ties the use of that reserve to RERA's approval, with critical emergencies as the exception. The exact conditions are a matter for the text of Article 30 itself.

Usage charges follow a parallel track. Under Article 31, a master developer opens a usage charges account for each major project. Where common facilities are used commercially, the net profits from that use are deposited in the account within ten days. The effect is that income earned from shared spaces in a master community goes back into the account that pays for them.

How to look up the approved figure

An owner, a buyer or a broker does not have to rely on an invoice to know what has been approved. The Dubai Land Department runs a Service Charge Index, which its service page describes as a way to inquire about the approved service fees for jointly owned properties from RERA. The page lists the processing time as immediate, lists no fee and no required documents, and says the service is open to all residency statuses.

The index is useful on both sides of a sale. A seller can check that the figure billed matches the figure approved for the year. A buyer can see the approved charge of the building before agreeing a price, and compare one year with another. No approved rates were retrieved from the index for this guide, so it quotes none.

The DLD's page for Dubai REST, the department's app, says owners can see their service charges there and pay them from the app's wallet. The same app has a second role in a sale, covered below.

What the owners committee can do

Owners are not left without a voice. Article 22 provides for an owners committee of up to nine members, appointed by RERA. A committee is formed once at least 10 per cent of the units are registered in owners' names. In a new building that threshold is reached as handovers and registrations progress, so a committee does not exist from the first day.

Article 23 sets the rhythm. The committee holds its first meeting within 30 days of being formed, and meets quarterly after that.

Article 24 lists what the committee does. It verifies that the management entity is managing the property, reviews budgets, and receives complaints from owners. Where a complaint is not resolved, the committee escalates it to RERA after 14 days. In Category 3 projects, where RERA contracts the management company, the committee may also request that the company be replaced.

The limits of the role are as clear as the role. The committee reviews the budget; under Article 27 it is the audit firm and then RERA that approve it. An owner who believes a charge is wrong therefore has a defined route: the committee first, then the regulator through the committee. That route matters for the next section, because the law does not treat withholding payment as a way of pursuing a complaint.

Why an owner cannot simply withhold payment

Article 28 is short. An owner or sub-developer may not refrain from paying the service charges or usage charges approved by RERA. Nor may an owner give up an interest in the common parts in order to avoid them. An owner who never uses the gym or the pool, or who leaves a unit empty for the year, owes the same share as before.

The logic follows from how the share is set. Because Article 25 divides one budget by area, an unpaid share does not disappear. The building's costs are still incurred, and the shortfall falls on the account that all owners fund.

Letting the unit does not move the obligation. Article 16 allows an owner to lease out a unit, with owner and tenant both bound by the rules of the building and the community. It then says that, unless the lease agreement provides otherwise, the owner is liable for the service charges. The law's position is that the owner remains liable even where a tenant fails to pay. A landlord who has agreed with a tenant that the tenant will cover the charge still answers to the management entity if the money does not arrive.

What happens when charges go unpaid

Article 32 sets out the consequences in four paragraphs, and each adds a step.

1. The lien. The management entity has a lien on each unit for unpaid service charges. The unit cannot be disposed of until those charges are paid. This is the provision that connects arrears to a sale.
2. The notice. Where an owner fails to pay a share of the service charges, or any part of it, the owner is served a written notice approved by RERA. The owner then has 30 days from being served to pay.
3. Enforcement. If the 30 days pass without payment, the claim becomes enforceable by the execution judge at the Rental Disputes Settlement Centre. The judge may order that the unit be sold by public auction.
4. Costs. The defaulting owner bears the court fees and costs, or advocates' fees, as the execution judge decides.

Two features stand out. The notice must be approved by RERA, so the regulator is involved before a claim reaches a judge. And the law sends the claim directly to an execution judge at the Rental Disputes Settlement Centre once the notice period has run.

The DLD has published a further text on the stage before the centre. Its list of rules and regulations includes Circular No. (3) of 2021 on the mechanism of collecting service fees and the procedures to follow before resorting to the Rental Disputes Center, dated 25 November 2021 and listed again on 1 July 2022. The circular's text was not read for this guide. Its title indicates that steps are set down for management entities before a case is filed. What those steps are should be taken from the circular.

The law also contains a general penalty clause. Article 44 provides for fines for a person who violates the law or the resolutions issued under it, with the acts and the fines to be set by a resolution of the Chairman of the Executive Council, and a doubled fine where the same violation is repeated within one year. The amounts could not be confirmed with confidence from the English text consulted, and they are left out here.

Selling a unit with charges outstanding

For a seller, the consequence of Article 32 is direct: while service charges are unpaid, the law says the unit cannot be disposed of. Arrears are therefore not a debt that follows the seller after completion. They stand in the way of the transfer itself.

The transfer documents show where this bites. According to the DLD's page on property sale registration, a sale in a freehold area requires a no-objection e-certificate, the e-NOC, from the developer, obtained through the Dubai REST app. It sits alongside the Emirates IDs of the seller and the buyer, or a valid passport for a non-resident foreigner. The DLD page does not say on what conditions a developer issues the e-NOC, what it costs, or how a clearance of service charges is recorded. None of the pages read for this guide state those points, so they remain open. The developer or management entity of the building is the party able to answer them.

The DLD also offers a digital sale through the Dubai Now app. Its page for that service says the unit must be free of restrictions and mortgages.

A mortgage is a separate matter from the service charge lien, with its own step. Executive Council Resolution No. (30) of 2013, which approves the fees of the Land Department, sets the fee for discharging a mortgage at AED 1,000. The procedure for selling a unit that still carries a loan is not described on the pages read for this guide.

The seller's costs at the registration itself are set out on the DLD's sale registration page. It lists a fee of 2 per cent of the sale value for the seller and 2 per cent for the buyer. It also lists the fee of the service partner, the Real Estate Registration Trustee office where the transfer is carried out: AED 4,000 plus VAT where the sale value is AED 500,000 or more, and AED 2,000 plus VAT where it is less. The page gives a processing time of 25 minutes.

As a worked example with an assumed sale value of AED 2,000,000, the seller's 2 per cent comes to AED 40,000 and the buyer's 2 per cent to the same amount. Because the assumed value is above AED 500,000, the trustee office's fee is AED 4,000 plus VAT. The DLD page does not say which party pays the trustee's fee. Any unpaid service charge is in addition to these sums, and under Article 32 it has to be settled for the sale to proceed.

Where a unit is sold by auction, the terms of the auction decide who pays what and from when. The published real estate auction terms of Emirates Auction say that the buyer pays the developer's service fees from the date ownership is registered in the buyer's name.

What service charges do not cover

One provision of the law marks a boundary that owners and buyers often ask about. Article 40 makes the developer liable for structural defects in a jointly owned property for 10 years, and for defective installations for 1 year. Any agreement to the contrary is void.

That liability is the developer's own and is separate from the charge defined in Article 2, which pays for management, operation, maintenance and repair. Whether a particular repair falls on the developer under Article 40 or on the service charge budget depends on the defect and on when it appears. It is the kind of question an owners committee can raise with the management entity and, if unresolved, with RERA.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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