Dubai developers now need agency approval for fee hikes

Dubai property developers seeking to increase service charges must now seek approval from the Real Estate Regulatory Agency.

Dubai property developers seeking to increase service charges for their projects must now seek approval from the Real Estate Regulatory Agency. Rera, the regulatory arm of Dubai Land Department, said yesterday that the new rule follows pressure from homeowners over recent service charge rises at housing projects and a lack of transparency in the way that the fee was calculated. "The agency received a lot of complaints regarding master developers increasing services charges and not being transparent about the amounts and the budget for service charges," said Marwan Bin Ghalita, the chief executive of Rera.

In a statement issued yesterday, Rera said it had "directed all development companies in Dubai to stop raising the services charges in their building and prevented them from forcing property owners from paying extra charges for the new services for 2009 without getting Rera permission". Service charges, for which the owner of a property is liable, are used to pay the day-to-day operational costs of a building's common areas. These include air-conditioning units, roads, garden landscaping, lifts and swimming pools. A percentage of the fee is used to insure the building, while some is set aside in a reserve fund to finance maintenance work, such as the replacement of lifts.

The property developer, or a facilities management company employed by the developer, calculates an annual maintenance budget and sets a fee, which owners pay per square foot of the apartment or villa they own. The fee can range from about Dh10 per square foot for a low-cost development to Dh25 per square foot at some luxury projects in Dubai Marina. The fee can be as high as Dh30,000 a year for a two-bedroom apartment.

At Jumeirah Beach Residence in Dubai Marina, residents complained bitterly last November about an increase in the charge from Dh9.5 per square foot to Dh21.75 per square foot. Owners said the quality of maintenance did not justify the steep rise and that they were not told how the fee had been calculated. Salwan Property Management, which manages and maintains the project, said the revised fee was needed to cover the project's insurance and reserve fund, which were previously paid for by the developer.