In a move aimed at ensuring continued regulation and transparency of service charges in Abu Dhabi, developers and companies must ensure approval is sought from the Department of Municipalities and Transport (DMT) before determining and increasing service charges for residential and commercial properties.
It is now prohibited to increase or impose new service charges to owners of real estate units without prior consent from the DMT, in accordance with the real estate laws and regulatory standards in Abu Dhabi Emirate.
Service charges, which are determined by developers and/or community management companies, are allocated to real estate owners to cover the cost of the property services, such as maintenance, cleaning and structural repairs.
In the first quarter of 2020, the DMT audited 185 service charges, of which 171 projects were reviewed, 141 were granted approval and 44 are currently under review and being re-evaluated. Each review adhered to new procedures and transparent working methodologies to ensure compliance and alignment with relevant legal requirements. Since the reviews were initiated by the DMT, service charges decreased by an overall average of 13% for residential projects and 8% for commercial spaces in the same period.
The aim is to protect and strengthen the rights of real estate owners, ensuring financial data for joint ownership of real estate complexes and facilities, are disclosed to the DMT for auditing, before service charges are issued to real estate owners.
Financial data includes annual revenue and expense budgets, which are estimated by developers and community management companies, and include service charges and cost expenditures.
H.E. Dr. Adeeb Al Afifi, Executive Director of the Real Estate Sector at DMT, said: “The new procedures are within the framework of DMT’s commitment to establish clear regulatory and supervisory mechanisms to establish a transparent investment environment in the real estate sector.
The new regulation on service charges guarantees the rights of real estate owners, including potential investors, who may wish to buy real estate units for the purpose of residence or investment. This will work towards enhancing attractiveness of real estate investment in the Emirate.
It will also contribute to a more competitive and globally open economy in Abu Dhabi Emirate, helping owners manage their real estate in a more effective and efficient manner, while lowering their operating costs and increasing a higher return on their investments, as well as reducing the cost of owning a home in the Emirate.”
The DMT revealed service charges for jointly owned real estate complexes have witnessed a decrease in the first quarter of 2020, compared to the same period last year, by a rate ranging from 6% to 60% for residential projects and 5% to 25% for commercial and office spaces.
H.E. Dr Adeeb said: “This new system will ensure more accurate and detailed service charges based on more detailed criteria with every owner knowing the precise information of the fees they pay and their purpose.”
In keeping with providing a more attractive investment environment, the DMT will be working on providing an indicator for service changes, ensuring any potential investor or real estate owner can check service charge rates before buying a property in any building or area of Abu Dhabi Emirate.
H.E. Dr Adeeb added: “This will help boost confidence in the real estate sector, while providing the highest levels of transparency, governance and trust between developers and buyers, under the supervision of DMT and followed by the highest regulatory practices in the sector.”
Abu Dhabi