Regulation: Check your property maintenance fees

RegulationServices charges at MAG 214 (pictured) are higher at Dh16.24 per square foot compared with Dh12.04 for Gold Crest Views, despite both buildings being located in JLT l Image Credit: Courtesy of Better Homes

Property ownership seemed like a distant dream for many people when prices peaked at the end of 2013. However, with deceleration in growth and correction of prices in recent quarters, the market now offers realistic options for mid-income buyers to invest in property.

Tighter regulations by the Dubai Land Department (DLD) and more stringent lending norms imposed by the UAE Central Bank have played key roles in making the property market more attractive for purchase. In line with this, the Real Estate Regulatory Agency (Rera), the regulatory arm of the DLD, unveiled the service and maintenance charge index for properties in freehold areas at last year’s Gitex Technology Week. With this in place, property owners, occupiers and potential buyers now have convenient access to information about the property maintenance fees for different projects.

What is it?

Mujtaba Virani, Residential Consultant of Better Homes Real Estate’s Business Bay Branch, says, “Service and maintenance charges are fees that the owner of a property pays on a yearly basis and are calculated per square foot of the net area of the property.”

These charges cover the upkeep of common areas such as pool, gym, sauna, corridors, reception, landscaped areas and parking. It is also inclusive of the utilities capacity charge paid to the Dubai Electricity and Water Authority, district cooling fees, building security, common area insurance and sinking fund contributions.

As good return on investment (ROI) is the objective of all investors, Laura Adams, Managing Director of Carlton Real Estate, says having the index creates greater transparency in calculating the income potential of a property.

“Most investors look for about 8 per cent ROI and if the service charge is unreasonably high, then the gain will be considerably lower,” says Adams. “Therefore, when the service charges are well explained, buyers will not question them.”

Clearing confusion

Ashirwad Somani, Chairman of Candour Properties, adds that the fees are important factors property buyers must consider before making a purchase, since they can influence the cash flow of the investment asset.

He says in the past property management firms and unit owners often did not agree on the amount to be charged for maintenance and other services. “The index clears confusion and provides a ready guide for owners to know whether the charges they are paying are reasonable.”

Rera has been able to audit the service charges and property maintenance fees of 420 projects, although the current index provides details of 300 projects in 22 master developments, including Business Bay, Dubai Marina, Jumeirah Lakes Towers (JLT), International City, Dubai Motor City, Dubai Silicon Oasis and Jumeirah Beach Residence. The information is based on data audited by Rera, with the information verified by owners associations (OAs) and real estate developers.

The index is updated automatically through Mollak, a system developed specifically to assist property developers and OAs in complying with all Rera registration and management requirements. It has been divided into four main categories: apartments, offices, shops and villas.

“The developer initially sets each property’s service charges and maintenance fees, which vary from one property to another,” says Virani. “Here is an example from JLT: according to the Rera index the service charge per square foot for an apartment in MAG 214 is Dh16.24, whereas for Gold Crest Views it’s Dh12.04.”

Vital information

Anyone can access the user-friendly index on the DLD website. Virani says that the index only covers rates up to 2013. “Visitors can search by master community or by villa plot number to find the service charges for a particular tower, with a breakdown.”

In the past, Virani says it was very difficult to find service charges information, although it is often one of the first questions buyers ask agents. “Developers were normally able to provide the rate. However, in most cases they would only release the details to the property owner, so potential buyers didn’t know the service charges and maintenance fees to expect,” says Virani. “Property owners had no official benchmark to guide them when developers wanted to increase service charges.”

Furthermore, the idea of the index is to streamline service charges and bring them under the supervision of Rera, which has prevented dramatic and irregular rises in the fees.

Source: Hina Navin, Special to Property Weekly

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