Arabian Gulf Properties: the service charge, and what to do when you disagree with it

Dubai has no annual property tax. What it has instead is the service charge, and over a ten-year hold that charge is frequently the largest number in the whole ownership. It is also the one buyers investigate least. Here is how it works and what you can do about it.

How it is set

• It is a budget, not a price. The building's management prepares an annual budget — maintenance, cleaning, security, insurance, cooling infrastructure, management fee and a reserve contribution — and it is divided among owners by unit area.
• Budgets are submitted for approval and administered through a regulated system, with charges collected into a dedicated account for the building rather than into a manager's general funds.
• The reserve contribution is the part that matters most in the long run. It funds lifts, chillers, facade and roof works years ahead. A building with a thin reserve is not cheap — it is deferring.

What to check before buying

• The figure per square foot per year, and the trend over three to five years rather than the current number alone.
• The budget breakdown, not the total. Which lines are large, and why.
• The reserve fund balance against the building's age.
• Arrears. In a small building, a handful of non-paying owners materially affects what everyone else must fund. Ask what proportion is collected.
• Comparables. The same size unit in a plainer building nearby, to see what the amenities are costing you annually.

If you think it is wrong

• Attend the general meeting. Most owners do not, and most decisions are made by the few who do. This is the cheapest and most effective step available and almost nobody takes it.
• Ask for the audited accounts and the budget detail. Owners are entitled to see how their money is spent.
• Question specific lines with comparables rather than complaining about the total. A management contract or a cleaning contract can be re-tendered; a total cannot be argued with.
• Escalate to the regulator if the process itself is not being followed — budgets approved without disclosure, or funds not properly accounted for.
• Do not simply stop paying. Arrears attract enforcement and block the no-objection certificate you will need to sell. Challenge through the process, not by withholding.

Why this matters more in a small building

In a five-storey project the costs are divided among few owners, so each fixed cost weighs more per unit, one defaulter matters more, and a single large repair lands harder. The compensation is that governance is easier: with few owners, meetings actually reach quorum and decisions get made. That is a real advantage if you use it.

Based on the Dubai owners' association and service-charge framework. Confirm current procedure with the regulator or your building's management.