Non-Payment Of Service Charges In Dubai And Abu Dhabi - Landlord & Tenant - Leases - United Arab Emirates (2023)

The Real Estate Regulatory Agency ("RERA") issued anotice in April 2020, stating that the homeowners in Dubai whodefaulted on 2019 service charge payments will have their fineswaived. But did this mean that the waiver would extend to 2020payments? Well, that is at least what many homeowners believedwhich has been the prime reason why there has been a delay in thepayments.

"What is a service charge?" holds no link to the rentor the occupation of part of an area of land, but instead is usedfor the maintenance and upkeep of the property and the servicesoffered to cover up the expenses for security staff, cleaningservices, landscaping etc. Service charges can also fund luxuryfacilities for residents, such as communal leisure facilities.

A tenant might come across in their lease or tenancy agreementthe way in which a service charge is organized and details of whatthe landlord can and can't charge and the proportion of thecharge which is to be paid by the individual leaseholder. Thelandlord (or sometimes a management company that is a party to thelease) provides the services, while the leaseholders pay forthem.

Typically, the old leases still provide services at a fixedrate, regardless of the actual costs incurred by the landlord.However, most service charges are calculated on the actual orestimated cost of the services and thus vary from year to year.These are known as variable service charges.

Dubai

Law Number 6 of 2019 on Ownership of Jointly Owned Property inthe Emirate of Dubai (the "Dubai Law") clearly lays downthat the Owner shall pay the Service Charge and Master CommunityService Charge unless the Unit lease stipulates otherwise. In allcases, the Owner shall remain liable to pay the Service Charge andMaster Community Service Charge if the tenant fails to pay them asprescribed by the Dubai Law.

Article 25 of the Dubai Law lays down that the Owner shall paythe share of the Service Charge to the Management to cover theexpenses of the Management, operation, maintenance and repair ofthe Common Areas. Services Charge for unsold Units, as well as forUnits sold in which the Developer is obliged to pay the ServiceCharge for the buyer in the contract of sale or attachment inaccordance with the provisions agreed in the contract. The area ofthe Unit registered in the Land Registry shall be relied upon whencalculating the Owner's share of the Service Charge.

It is forbidden for the Management to impose or collect anyamount whatsoever from the Owner for the operation, management,maintenance and repair of common areas or common facilities exceptafter obtaining the prior approval of the RERA, and in accordancewith the directions issued by the Directors General. Moreover, theDeveloper or the Management cannot take action against the Ownerwhich prevents him from benefiting from the Unit or the CommonAreas or Common Facilities, solely to oblige him to pay the ServiceCharge or Master Community Service Charge in contravention of theprocedures stipulated in the Dubai Law.

Article 32 of the Dubai Law states that the Management has alien on each Unit in respect of unpaid Service Charge. The Unitshall not be disposed of until after the paying of allowance to theManagement. However, if the Owner fails to pay their share of theService Charge or any part thereof, the Management shall demandthem to pay this charge within thirty days from the date ofnotifying them thereof by a written notice approved by the RERA. Ifthis time limit elapses, the financial claim issued by theManagement to the Owner shall be enforceable before the executionjudge in the Centre, in accordance with the rules and procedures inforce in this regard. The competent execution judge may whennecessary, sell the Unit whose Owner has not paid his share of theService Charge, through public auction to recover the due ServiceCharge. The Owner who fails to pay his share of the Service Chargeshall pay the legal fees, expenses and attorneys' feesdetermined by the competent execution judge.

RERA has recently issued a "Need to pay up" noticeinsisting the homeowners need to come up with their share. Toupkeep the properties, it is important that the payments towardsthe community's service fees are paid on time and in full. Asthe Owners Association Management Companies are required to getprior RERA approval as per the Dubai Law to send legal notices tohomeowners who have repeatedly defaulted on service chargepayments, the latest notice to pay up has cleared the possiblelegal option to pursue the defaulters.

Abu Dhabi

Law Number 3 of 2015 concerning the Regulation of the RealEstate Sector in the Emirate of Abu Dhabi (the "Abu DhabiLaw") applies to real property within the Emirate of Abu Dhabiwith the exception of the Abu Dhabi Global Market. The Abu DhabiLaw covers a wide range of subjects including the development andregulation of strata title, the registration and enforcement ofmortgages and the licensing of real estate agents, brokers andother entities.

As per Article 68 of the Abu Dhabi Law, the Owners' Unionmay collect the service fees from the owners to finance itsactivities, as per the contribution percentage of each real estateunit. The service fees shall be paid by the Owner of each realestate unit to the Owners' Union on the due date, provided thatthe Developer pays his share in the fees with respect to unsoldunits. The Union's Articles of Association shall mention thetype of service fees, how to collect them, and the records thatshould be kept.

Upon the failure of the Owner to settle its service fees, apreferential right for the Owners' Union shall arise on therespective real estate unit. The Owners' Union shall, accordingto the resolution of its Board of Directors, notify the Owner ofthe real estate unit by the registered mail with acknowledgmentreceipt to settle the overdue service fees within three months fromthe date of notification. Should the Owner of the real estate unitfail to pay within the specified period of the notification,without expressing an acceptable excuse, the Owners' Union maysubmit an application before the judge of urgent matters to issuean order to sell the real estate unit for the settlement of the dueservice fees according to the provisions of the Civil ProcedureLaw.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

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