RERA: the fees recorded a decrease of 12% in some areas
Dubai, United Arab Emirates, 26th November 2018: Dubai Land Department (DLD) confirmed that the lowered service fees for co-owned properties in Dubai’s freehold areas contributed to the attraction of real estate projects by encouraging buyers to invest in the short- and long-term, and those who want to buy residential units to live in.
This is due to the regulatory laws for this activity, notably Law No. 27 of 2007 on co-ownership, and the circulars issued by DLD and the Real Estate Regulatory Agency (RERA) that underpinned the importance of service fees. Also, RERA required service management companies in these projects to provide full disclosure of the financial statements for service fees and submit them to it for an audit prior to going to the owners and demanding payment.
HE Marwan bin Ghalita, CEO of RERA, stressed RERA’s regulatory and supervisory role in ensuring transparency and avoiding the existence of clauses not previously known to buyers, adding: “RERA requires management companies to present all their financial statements to the owners' associations for pre-approval. Companies are also required to submit their budgets for audit by a financial audit company registered with RERA, and then submit it to RERA for an audit review so that it may be applied should the budget check out.”
When comparing the rate of services between 2017 and 2018, a survey conducted by RERA reveals that fees decreased in 11 areas across different regions of Dubai, reaching up to 12% in some areas.
Bin Ghalita stressed the need to obtain RERA’s approval for the collection of service fees — available through www.mollak.ae — and the need for cooperation between owners in reducing the use of energy. This will result in a rationalisation of expenditures, significantly contributing to the reduction of service fees, especially as combined energy charges (electricity and central cooling) amount to 45 – 65% of the total service fees.
RERA requires management companies and owners’ associations to provide all financial details to a certified financial auditor registered at RERA to conduct an audit of service fees, followed by the preparation of financial reports at the end of each fiscal year. Service fees normally include several clauses that are calculated for a full fiscal year. These include service and maintenance charges, Dubai Electricity and Water Authority (DEWA) fees, central cooling fees, main complex fees, management fees, and backup charges. In some projects, air conditioning fees are added within the real estate unit’s service fees.
Mohammed bin Hammad, Senior Director of Real Estate Relations Regulatory Department at RERA, commented: “By auditing service fees through RERA to enhance the attractiveness of real estate investment in the Emirate, we launched a number of initiatives to reduce service fees, benefitting the investment horizon and strengthening Dubai’s position in the lists of global competitiveness indicators to remain one of the most prominent investment options in the world.”
As part of its launched initiatives, RERA encourages the use of modern systems that help save energy within green initiatives, the renting of spaces in communal areas, and the use of rental income to reduce service fees. RERA also launched an initiative to install meters and central cooling in real estate units.
RERA disclosed the summary of service fee data for all co-owned properties within the ‘Service Charges’ service on DLD’s website. RERA also required all management companies’ employees to pass the required training through specialised courses offered by Dubai Real Estate Institute (DREI), the educational arm of DLD, to deal with owners and financial and maintenance issues.
RERA granted owners the right to apply for all necessary clarifications on service fees by reviewing the project’s management company and its owners’ association. If neither cooperated in this matter or failed to provide adequate responses to owners’ queries, owners may file a complaint at RERA.
If the management company prevents the owners from using facilities in communal areas, the owner has the right to file a complaint with RERA, which in turn fines the non-compliant company.