Service fees and complex fees in real estate development projects recorded a decrease of 9% in 2021
Total reductions in service fees for 2020/21 so far amount to more than AED138 million
In a move aimed at ensuring continued regulation and transparency of service charges in Abu Dhabi, DMT has revealed that the total reduction in service fees for real estate unit owners and development project investors since the introduction of the Department approval mechanism is 22.5%, of which 13.5% was in 2020, and 9% in 2021.
DMT confirmed that developers and companies must ensure that prior approval is sought from the Department of Municipalities and Transport before determining and increasing service charges for residential and commercial properties, DMT officials have reaffirmed. It is prohibited to increase or impose new service charges to owners of real estate units without this prior consent from the DMT, in accordance with the real estate laws and regulatory standards in Abu Dhabi Emirate.
The Department noted that it began granting approvals for related service charges in the first quarter of 2020 with a package of new procedures and a clear and transparent operational mechanism to ensure compliance with legal requirements in this regard and to enhance the protection of the rights of real estate unit owners or investors through disclosure and scrutiny of financial statements in accordance with international standards, prior to the issuance of service charges to owners, and that the approval of such fees by the DMT should be attached to each bill issued to real estate unit owners.
H.E. Dr. Adeeb Al Afifi, Executive Director of the Real Estate Sector at DMT, said: “These procedures come within the framework of DMT’s commitment to establish and maintain clear regulatory and supervisory mechanisms to uphold 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 the 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 the returns on their investments, as well as reducing the cost of owning a home in Abu Dhabi, keeping costs at competitive levels locally and regionally.”
H. E. explained that prior to the application of these new regulations, service fees were decided and applied by the developer or the property and facilities management company, and that these establishments estimated the charges according to their own perceptions. He noted that the system is now more precise and detailed and is based on clearer and more transparent criteria, saying that every owner always has the right to know the details and purpose of the fees he pays.
The DMT went on to reveal that 241 of the total development project service and maintenance charges have been approved to date in 2021, and the total sum of these service charge budgets approved as at 1st August, 2021, amounted to AED567.7 million, which represents a 9% cut compared to 2020 with budgets decreasing by AED55.8 million.
The Department reaffirmed that developers and real-estate management companies have no right to approve the annual budgets for service and maintenance charges for joint ownership real estate units and property complex facilities until they have acquired the necessary approval and certification of the DMT.
The Department confirmed that it is continuously developing and updating the mechanisms, controls and criteria for the adoption of service fee budgets. It ensures that they are fairly calculated in accordance with the legislations in force, adhering to best practices in administrative procedures concerning jointly owned real estate. This also ensures the highest levels of transparency, governance and trust between developers and investors’ target customers or end-users.
Service fees are used to cover the expenses of managing, operating, maintaining and repairing common areas in order to preserve the quality, cleanliness and security of the real estate units and the long-term value of the assets. The owner's share of the fee is determined by the unit's percentage of the total area of the common property, with the developer bearing his share of the fee for unsold units. No unit owner may relinquish his/her share in the common areas to avoid payment of his/her share of the service fee, nor may the owner be charged for the management, operation, maintenance and repair of the common areas until they have been approved by the Department of Municipalities and Transport, while the Department maintains the right to modify such fees from time to time.