Dubai developers no longer allowed to collect service charges from property owners | SP Investment

New Law comes into effect removing developers from setting charges or collecting funds

Dubai: Developers in Dubai have only a month left to start invoicing all service charges on ready properties through the Dubai Land Department’s “Mollak” electronic records.

In other words, what this means is they can no longer collect any service charges on behalf of property owners. Property owners — or approved property management companies acting on their behalf — will assume all such collection responsibilities.

Common Properties Law No. 6 (2019)

This forms one of the key changes of the Common Properties Law, No. 6 of 2019, which comes into effect on Tuesday (November 19).

The collected funds will go into the service accounts of seven – so far – approved banks. “From now on, homeowners get to see the breakup of each fil they have paid for the upkeep of their building’s common areas,” said Marwan Bin Ghalita, CEO of RERA.

“And they will not have to pay for any hike in service charges unless it has been vetted by RERA or its approved financial auditor.

“We believe the increased transparency of an electronic system and the audits will bring service charges in Dubai down.”

As of now, 10 financial auditors have been approved to handle the books operated by property management companies.

The Law requires all “fractional ownership” properties in Dubai to have owners associations and property management companies acting on their behalf.

Developers can no longer dictate the setting up and running of these owners associations.

Signing up

The Rera and Dubai Land Department have had a busy two months since the Royal Decree announcing the updating of the freehold ownership law.

To date, 1,240 buildings have been added to the Mollak system, 89 property management companies “authenticated” to act on behalf of owners associations, and 45,000 invoiced.

“Earlier, developers would send in everything under their letterheads — that stops for good,” said Bin Ghalita. “Mollak tracks all details related to where did the fund collected go and who approved the owner association’s funds.”

Among master-developers, Emaar has already made the switch and RERA is working with the others to be in place before the cut-off date.

1,240 – Number of buildings added to Rera’s Mollak system

More importantly, private developers need to up their game and make themselves compliant.

The Director-General of Land Department, Sultan Butti bin Mejren, can give one-off exemptions to developers, but the intention is to bring all under the Mollak radar before year-end.

Dh 1.3 billion – The total amount of service fees audited under Mollak electronic system in the first phase

Transparency was a theme widely used at the Land Department event on Monday, where top officials updated property management companies and media on the set of changes.

The cycle of a developer’s association with a project would be about three years or so, but for the property management company, it will be 30 years or more. That is, as long as the project remains in exietence. Maximum transparency and sustainability is what we want for Dubai property.

– Sultan Butti bin Mejren, Director-General of Land Department

Dh4billion – What Rera expects to approve as service fee collections in the next phase

The stated aim is to get “investors to keep coming in, developers to hand over their projects, and owner associations to take on from that point onwards,” said Bin Mejren.

“The cycle of a developer’s association with a project would be about three years or so, but for the property management company, it will be 30 years or more.

“That is, as long as the project remains in exietence. Maximum transparency and sustainability is what we want for Dubai property.”

Fast facts on Service Charges in Dubai

Service charges for a property owner will apply to all of the registered area specified in the title deed.

According to Law No. (6) of 2019, a developer is required to submit all necessary documents of a freehold project to the Land Department within 60 days of completion date and receipt of completion certificate. The Department can extend the deadline for this by 30 days.

* The Land Department will prepare a register for all freehold properties. This will feature all information related to the land owned by developers and units meant for independent ownership.

The register will also feature names of owners, members of the committee of owners, and the building management chart outlining maintenance procedures in common areas created according to the laws and regulations of the Land Department.

In addition, the register will include details of the share of maintenance costs that each owner should pay, the facility management company responsible for the common areas, and information about the developers and operators of the project.

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