Dubai Court Clarifies Service Fee Obligations for Property Buyers

The Dubai Rental Disputes Centre (RDC) has recently issued a significant clarification on a recurring area of dispute in the real estate market—when property buyers become liable to pay service charges in jointly owned properties.

Background of the Dispute on Service Fee Obligations for Property Buyers

For years, developers and buyers have disagreed over who should bear service charges once a project is completed before the official handover of units. Developers frequently withheld delivery due to unpaid dues, while buyers argued that liability should only begin after transfer of final ownership. This left building management companies in a difficult position, with gaps in funding essential operations and maintenance.

A particular source of dispute arose for units sold via instalments that were completed but not yet registered under the buyer’s name. In these cases, it was unclear whether the buyer or the developer was responsible for service charges during the completion-to-handover period.

The Ruling

The RDC referred the matter to the General Authority for Unifying Principles, which has now issued a binding interpretation:

• Buyers listed in the preliminary property register are liable for service charges from the date of project completion particularly when the delay in handover is due to reasons attributed to the buyer.
• Liability also arises from the date of default on any payment obligations, even if formal handover or registration of ownership has not yet occurred.
• This ruling ensures continuous operation, management, and upkeep of common areas in accordance with Law No. (6) of 2019 on Jointly Owned Properties.
• Under the law, either the developer or the owner must cover charges for unsold units, ensuring that management companies can maintain uninterrupted services.

“The General Authority has addressed this legislative gap by interpreting the law’s underlying intent to secure the stability of jointly owned properties and guarantee the uninterrupted provision of essential services. Holding defaulting buyers accountable for service charges aligns with the spirit of the legislation,” said Judge Abdulqader Mousa Mohammed, President of the Rental Disputes Centre.

Legal and Practical Implications

• Closes a Legal Gap: Resolves disputes and removes uncertainty between developers and buyers.
• Protects Communities: Ensures uninterrupted building services, safeguarding compliant owners.
• Reinforces Market Confidence: Demonstrates Dubai’s commitment to transparent and stable property regulation.
• Sets Judicial Precedent: Provides a clear legal framework for future disputes regarding service fee liabilities.
• Operational Efficiency: In 2024, the Centre closed 49,817 execution files related to joint ownership disputes and introduced a self-execution service, streamlining claims and ensuring continuity of services.

Practical Implication for Buyers

Property purchasers should now be aware that liability for service charges arises as soon as the project is completed or upon default of any payment, not only after handover. Meeting payment obligations promptly is essential to avoid disputes, additional liabilities, or delays in possession. 

How Judicare Can Help

We provide expert guidance on jointly owned properties and service fee obligations:

• Reviewing contracts to clearly define service fee responsibilities.
• Advising on buyer obligations and payment timing.
• Representing clients in disputes before the Rental Disputes Centre.
• Ensuring compliance with Law No. (6) of 2019 and related regulations.
• Offering proactive strategies to prevent disputes and protect investments.

If you would like more information on the recent changes a member of our team will be happy to take your call on a confidential basis at 01438 840258 or via email to admin@judicaregroup.com

• We can also arrange a free no obligation teleconference via Zoom/Skype.

Getting in touch will allow us to understand your individual circumstances and discuss with you your concerns and objectives. Working with you we can then decide upon the correct strategy to approach and find the solution which is right for you.

The above article was provided by our Associate law firm in Dubai – Motei & Associates.