RERA bans service charge hikes this year

A new system to calculate maintenance fees will be made mandatory in Dubai. 

Dubai's real estate regulatory agency has banned property developers from modifying their service rates this year without its permission, in the wake of accusations they were profiting from annual fee hikes, it was reported on Monday.

The Real Estate Regulatory Agency (RERA) said it would be developing a single system for calculating service charges that would be mandatory for developers to use in the future, according to UAE daily Khaleej Times.

“The services charges are no longer subject to the developers' calculations and their desire to turn them into a profit-making tool,' said CEO for RERA, Marwan bin Ghalita.

However, maintenance fees are normally required to be paid at the beginning of January every year, which in some developments have resulted in a more than doubling of service charges to owners and tenants.

It is not clear whether increases announced for this year will be forced back to last year’s rate, or whether the ruling is applicable from now.

“On the whole, this ruling is tremendous. However, there are several question marks remaining,” said Hamid Hamri, chairman of the Owners Association in Jumeirah Beach Resort, which has seen maintenance fee increases of 129 percent.

At the same time property developers defended themselves against the profiteering claims, stating that that maintenance rates were only set after consultation with property owners.

Furthermore, every property developer’s accounts were independently audited by outside firms to ensure all the figures were accurate and transparent, said Abdulrahman Kalantar, managing director of Nakheel asset management design and developments, according to UAE daily Emirates Business.

"Our service charges are based on projected costs with the accounts independently audited by a company to ensure accuracy and transparency," he said.

Other developers said that none or only minor increases had been made in maintenance charges this year.

Properties Investments, which owns and developed Green Community and Green Community West, said it had made small rises.

Meanwhile, ETA Star Properties said it had made no increases to its maintenance charges at the Belvedere project.

"We have kept the maintenance charge of AED8 per sqft, which was levied for the year 2008," reported Mohammed Ali, general manager, marketing at the firm.

However, some developers said they did see an increased role for Dubai’s governing agencies, such as RERA, to ensure property laws were enforced on a daily basis.

"Laws should be enacted to protect public interest by promoting a gradual development of the market. RERA has a key mandate in the planning and implementation of structured regulations within our market," said Hesham Al Qassim, CEO of Wasl and Dubai Real Estate Corporation.

Under the new regulation service charge increases will be calculated by RERA based on a formula that “will seek to strike a balance between the expenditure shouldered by the developers and the quality of services received by the owners”, according to state news agency WAM.

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Posted by: RRK

I think RERA is very late in addressing the issue of maintainance as greedy developers have already increased the maintainance charges to a very high level in 2008. The charges by Nakheel, Emaar and Dubai Properties are very very high when compared to other countries in the world. I think the master developers themselves are not responsible for increasing the maintainance charges. Everyone in Dubai had become greedy in 2008 as the rents were increasing. So these people also thought that if investors are getting more return, then even we should benefit from that return. So they increased the maintainance charges so that their pockets also get filled. And the happy investors had no option but to pay. But now as the rents are coming down, the tables have turned. I have a Jewellery Factory premises in DMCC. My maintainance in 2007 was 17Dhs a Sqft. In 2008 the maintainance charges was increased to 26Dhs per Sqft. This propert was sold for only Dhs 500 a Sqft and if the maintainance charges are 26Dhs a Sqft, it has almost become like renting it. I Think RERA is late, but is a good move to lower the charges as the rents are also falling daily, and these lower charges will keep the investors attracted towards investing in property. Which inturn is a major factor for economic growth of Dubai

Posted by: R

I too have a 1 br in JLT Saba , and have been sent a bill with similar charges. This is so crazy, we have to pay service charges to our developer as well to the Master Developer. And district cooling charges are to PDC as well as to DEWA!!!! This really needs to be investigated further.

Posted by: Serg

now I received new invoice for my studio of 500 sq ft: 2000 AED as developer service charge (4 AED/sq ft as per contract). but this is not all - in addition I have to pay 2000 AED as DMCC service charge, 2400 as PDC chilled water charge & 4100AED as PDC & DEWA annual consumption charge. Also now additional charge in DEWA bill appeared - housing fee - 2500 AED annual. 13000 AED total - & this is not for a villa, this is just small studio. I would appreciate if RERA will count all charges, not only developer's. Otherwise we will decrease one charge, but receive new, bigger.

Posted by: Peter Peter

As usual the authorities are waking up to the realities a few months late. Meanwhile hundreds and thousands may have suffered at the hands of greedy landlords. The problem in this country is that it is illegal to make an association of interested parties. A tenant's association would take a strong stand against such exploitative practices by property owners. What Christian says is absolutely true. But can any tenant dare ask to see the account books or contracts signed by the management companies ? Even if he did will his request be entertained ? I doubt it. Why can't tenants demand that a more reasonable supplier be found ? Or allowed to make a tenant's association which should rightfully manage the building they live or work in ? Most of the time the person appointed to positions of authority have no idea , experience or training in how to run the show but somehow blunder their way through . Are we than surprises by announcements followed by retractions or lame explanations ? This country desperately needs experienced professionals to run the services otherwise such problems will persist.

Posted by: Mohd Ahmed Khan

Nakheel has hiked service charges for International City by 10% this year. I recvd an invoice for the service charges on 07 feb and the same day it was reported in gulf news that Rera has ban the increase. I tried to call Nakheel and according to them it is in the contract that the fees will be hiked in a years time. I think looking at the present situation Nakheel should not increase the charges.

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