New Rental Index: Service Charge must be Cleared

Service Charges must be cleared by Property Owners ahead of the New Dubai Rental Index

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.)

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 increases, quality upkeep is going to be a decisive factor to justify the building’s rating.”

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Source: Gulf News. Edited by Gareth Davies - Award Winning Broker and Property Consultant