Structuring financial rights and obligations in Jointly Owned Properties (JOP) serves as the cornerstone for ensuring real estate investment sustainability and safeguarding the rights of both unit owners and developers in Dubai. Sterling Legal Services & Consultancy presents a comprehensive legal guide highlighting the governing rules for Service Charges and Usage Fees pursuant to Law No. (6) of 2019 Concerning Jointly Owned Property Ownership in the Emirate of Dubai, alongside regulatory circulars issued by the Real Estate Regulatory Agency (RERA).
1. Legal Definition of Service Charges
The Service Charge is the annual financial contribution levied from a real estate unit owner to cover the expenses of managing, operating, maintaining, and repairing the jointly owned property. This encompasses the building, its common components, appurtenances designated for joint use, and the underlying land upon which the property is constructed.
Pursuant to Article (25) of Law No. (6) of 2019:
-
An owner’s share in the Service Charge is calculated proportionally based on the area of their unit relative to the total area of the jointly owned property.
-
Service Charges are computed on a per-square-meter or per-square-foot basis (e.g., AED 5 per square foot in Dubai Marina) in accordance with the approved evaluation for each specific zone.
2. Legal Definition of Usage Fees
The Usage Fee is the annual financial contribution collected for the management, operation, and maintenance of Master Community common facilities. These include master parks, fountains, internal roads, parking facilities, swimming pools, sports courts, beaches, and other shared spaces that service the broader real estate development.
3. Regulations for Approving Service Charge and Usage Fee Budgets
The imposition and approval of financial fees are subject to rigorous oversight by competent real estate authorities:
-
Management entities (whether the Developer or the Jointly Owned Property Management Company) are strictly prohibited from imposing any fees or charges on unit owners without prior, explicit approval from RERA.
-
Service Charge and Usage Fee budgets cannot be formally adopted until they are fully audited and reviewed by an accredited legal accounting firm approved by RERA.
-
In cases of necessity and for substantiated reasons, RERA may approve a provisional budget pending the completion of final budget approval procedures.
4. Payment Obligations and Consequences of Non-Payment
Dubai real estate legislation enforces a strict statutory obligation regarding the settlement of Service Charges and Usage Fees:
-
Unit owners and sub-developers are strictly prohibited from withholding approved fees for any reason whatsoever.
-
An owner remains obligated to pay the Service Charge even if they refrain from using common parts or leave their private real estate unit vacant.
-
Charges are typically collected on a periodic (quarterly) basis, with possibilities for payment scheduling based on approved agreements.
-
Non-payment empowers the management entity to initiate all legal and preservation measures, culminating in the public auction sale of the real estate unit to recover outstanding amounts.
5. Deposition and Expenditure Rules for Service Charge Funds
To guarantee financial governance and operational transparency, the law mandates opening dedicated bank accounts for each jointly owned property:
-
Management entities are legally required to open a dedicated bank account for Service Charges for each jointly owned property with an approved bank operating in the Emirate.
-
Collected fees must be deposited into the account within no more than seven (7) business days from the date of collection.
-
Withdrawals and expenditures from these funds are strictly limited to the following statutory purposes:
-
Cleaning and maintaining jointly owned real estate components.
-
Security, safety services, and building risk management.
-
Operating and maintaining common systems, fixtures, and amenities.
-
Settling insurance premiums underwritten for the jointly owned property.
-
Fees for certified financial audits and accounting services.
-
Remuneration and fees due to the Jointly Owned Property Management Company.
-
Approved administrative expenses for the developer.
-
Cash reserves designated for contingencies and capital renewals.
-
Expenses and costs incurred for real estate inspection and supervision.
-
Any other expenses or costs officially approved by RERA.
-
6. Deposition and Utilization of Usage Fees
-
A dedicated bank account must be opened for each Master Project to deposit funds collected as Usage Fees.
-
Fees must be deposited within seven (7) business days from collection, and these funds cannot be utilized for purposes other than managing and maintaining the common facilities of the Master Project.
-
If the developer exploits any common facilities for commercial or investment purposes, they are legally required to deposit a percentage of the realized net profits into the designated Usage Fee account within ten (10) days of realization.
7. Legal Collection Mechanisms and Judicial Execution for Non-Payment
Dubai real estate legislation confers robust procedural protection to guarantee the recovery of outstanding fees:
-
Service Charges and Usage Fees enjoy a statutory legal lien over the respective real estate unit for unpaid dues.
-
If an owner fails to pay the outstanding fee within thirty (30) days from the date of serving a formal notarized legal notice, the financial claim transitions into an Executive Instrument (Executory Writ) directly enforceable before the Execution Judge.
-
The Execution Judge is authorized to attach the real estate unit and order its sale via public auction to satisfy all outstanding dues.
-
The defaulting owner is legally bound to bear all court fees, procedural costs, and legal fees arising from the debt recovery lawsuit and execution proceedings.
8. Circular No. (9) of 2024 – Segregation of Disputed Amounts
In line with procedural fairness and real estate market stability, Regulatory Circular No. (9) of 2024 mandates that management companies segregate disputed financial amounts within the Owners System, specifically under the following circumstances:
-
Purchase of a real estate unit from a developer prior to actual handover while an active dispute regarding Service Charges remains pending.
-
Disposition or transfer of unit title ownership prior to the official approval of Service Charges for the relevant period.
-
Existence of special contractual agreements between the developer and owner granting fee waivers or free service charge periods.
-
Unit acquisition via public auction or through a final court judgment barring the new owner from being burdened with historical fee liabilities.
RERA imposes deterrent legal and administrative measures against management companies that fail to comply with instructions regarding the segregation of disputed amounts.
Sterling’s Services in Real Estate Disputes and Service Charges
Sterling Legal Services & Consultancy provides specialized advisory and judicial representation for property owners, developers, and management entities in Dubai, including:
-
Auditing and verifying the legal legitimacy of Service Charge and Usage Fee claims to ensure compliance with RERA approvals.
-
Judicial representation and advocacy in lawsuits for real estate fee recovery, execution proceedings, and public auction enforcement.
-
Managing and resolving real estate disputes regarding the segregation of disputed funds pursuant to Circular No. (9) of 2024.
-
Drafting and auditing real estate investment contracts and structuring financial liabilities for real estate units.
Contact Sterling Legal Services & Consultancy today to evaluate your real estate file and secure your legal standing with absolute professionalism and confidentiality.