Here is a new request for Property Weekly., DLD has lowered service fees of co-owned properties to increase the attractiveness of Dubai’s real estate.
What are the co-owned properties and how this impacts the real estate sector?
The Co-owned properties are properties in Freehold areas that the developer has transferred the responsibility for the management and maintenance of common areas in developments to the owners of the individual units within the development.
This provides greater transparency, investor confidence, and alignment of interest as the owners will best serve their interest in keeping the service fees low but at the same time providing the best services as they have a common interest to optimize their asset potential.
As per the new regulations, 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.
Why is this essential and how this benefits the industry?
The new regulation creates much more accountability and safeguards the investors to ensure they are paying a ‘fair price’ for the services and not being exploited and excessively charged. As this could have a detrimental impact on the investor returns and the general confidence and investor appetite in the Dubai market.
Before this regulation, management companies would often take advantage of investors and profiteer from the service charges. Investors were obliged to contribute to the costs as they had no recourse and couldn’t question and hold the management companies accountable for the expenses.
What are the challenges co-owned properties owners and management company have been facing and how the lowered service charges will enhance the market and appeal investors?
The problems that management companies have been facing are three:
- Non-payment of service charge across various developments, which creates undue tensions between unit owners, developers, and owners’ associations.
- The low recovery rates of service fees due to cultural considerations of not expecting on-going additional expenses on the asset after its purchase.
- Difficulties of enforcing a lien as the general principles of UAE law (and of the UAE Constitution and Sharia Law) is to establish the importance of a person’s home and that someone should not be deprived of it without due process.
What are the elements included in the service fees of a co-owned property?
The elements generally included in the service fees are the services that each unit owner receives from the owners’ association that relate to the common areas. This would range from the use of the shared swimming pool, the collection of rubbish from the units, security services and lighting of the corridors.