Service Charge Agreement (UAE — Jointly Owned Property)

A Service Charge Agreement in the United Arab Emirates is the document that formalises the annual financial obligation of a unit owner in a jointly owned development to the Owners Association (OA), setting out the RERA-approved service charge rate, the payment schedule, the scope of services funded by the charge, the reserve fund contribution, and the consequences of late payment. In Dubai, this agreement operates within the framework established by Law No. 6 of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai, administered by the Real Estate Regulatory Agency (RERA) under the Dubai Land Department (DLD), with the UAE Civil Code (Federal Law No. 5 of 1985) providing the federal law of obligations underlying the payment duty.

Service charges are mandatory for all unit owners in Dubai's jointly owned developments. Ownership of a unit — registered by the DLD and referenced by a title deed — automatically creates the obligation to pay service charges levied by the OA. The service charge funds the maintenance and operation of the development's common areas: the lobby, corridors, elevators, parking structure, swimming pool, gym, landscaped areas, building security, and all shared mechanical, electrical, and plumbing services. Without service charge income, an OA cannot maintain the development to the standard required by RERA and Law No. 6 of 2019.

RERA regulates the service charge closely. Every year, the licensed Owners Association Manager (OAM) prepares an annual budget and submits it to RERA for approval. RERA reviews the proposed rate against market benchmarks and the development's specific maintenance requirements, and may reduce or reject budget items that are excessive. A charge levied without a valid RERA budget approval is unenforceable. Once approved, the budget becomes the basis for the per-square-foot rate applied to each unit proportional to its built-up area (BUA).

Collection of service charges in Dubai is conducted exclusively through the Mollak system — the RERA-regulated escrow platform — under Ministerial Resolution No. 33 of 2020. Mollak ensures that funds paid by unit owners are held in a protected escrow account, used only for approved budget purposes, and fully transparent to RERA, the OA Board, and unit owners. This system protects owners from misappropriation of service charge funds and gives RERA real-time visibility over the financial health of each development.

For commercial developments, and for residential developments in Dubai's designated free zones including the Dubai International Financial Centre (DIFC) where DIFC Courts apply English common law, service charge arrangements may follow different rules. The ADGM in Abu Dhabi applies its own property management framework. Where the property is not in Dubai or a federally regulated free zone, the UAE Civil Code and the relevant Emirate's municipal rules govern the service charge obligation.

A Service Charge Agreement in the United Arab Emirates is needed in several specific circumstances in the management of jointly owned developments, and by both OA Managers and unit owners who wish to document their respective obligations precisely.

When a new OA is established or a new OAM is appointed, a formal Service Charge Agreement documents the approved rate, the payment schedule, the Mollak account details, and the scope of services for the coming year. This provides a clear reference point for both the OA and each unit owner at the start of the service charge year, reducing the risk of disputes about what is included, what the rate covers, and when payment is due.

Unit owners who let their property to residential or commercial tenants need a Service Charge Agreement to understand and document their own obligation before deciding whether to include the service charge in the rent or pass it to the tenant as a separate identified item. In a market where service charges for premium developments can exceed AED 30 per square foot per year — representing tens of thousands of dirhams annually for larger units — the allocation of this cost between landlord and tenant is a significant commercial issue.

Buyers in the secondary market, particularly buyers of investment properties or units in buildings where the OA's financial health is uncertain, need to understand the service charge before completing the purchase. A Service Charge Agreement or a formal statement of the RERA-approved rate, together with a Mollak statement showing any outstanding arrears, is part of the due diligence package for a secondary market transaction processed through the Dubai Land Department.

Commercial tenants in mixed-use developments who are contractually required to pay service charges to the OA — either directly or through the landlord — need a formal agreement to understand their liability. This is particularly relevant in commercial towers in central business districts such as Downtown Dubai, Business Bay, the Dubai International Financial Centre (DIFC), and Jumeirah Lake Towers (JLT), where service charges are a material operational cost.

Finally, any existing Service Charge Agreement should be reviewed annually to reflect the new RERA-approved budget. An agreement that carries a rate from a previous year without update may cause confusion about the current obligation and should be renewed each service charge year.

A Service Charge Agreement in the United Arab Emirates that is RERA-compliant, enforceable, and a practical reference document for both the Owners Association and the unit owner must contain several specific elements. The forms-legal.com Service Charge Agreement template captures all of these.

OA identification must state the full name of the Owners Association, its RERA registration number, and the name and RERA licence number of the OAM. Identifying both the OA and the OAM confirms that the entity levying the charge is properly registered and licensed, which is a prerequisite for enforcement.

Unit owner identification must state the owner's full legal name and the unit details: unit number, tower or building, development name, BUA in square feet, and the DLD title deed number. Service charges are calculated by multiplying the per-square-foot rate by the unit BUA, so accurate BUA is critical to the charge calculation.

Approved charge rates must state the General Service Charge (GSC) rate per square foot, the Reserve Fund (RF) rate per square foot, and the total annual charge for the specific unit in dirhams (AED). The RERA budget approval reference should be cited so that the owner can verify the approved rate against the RERA portal.

Payment schedule must specify how the annual charge is divided — lump sum, semi-annual, or quarterly — the first payment due date, and the accepted payment method, which in Dubai must be the Mollak platform. The Mollak account details — IBAN and account name — should be provided or referenced.

Late payment terms must state the interest or penalty rate for overdue charges, consistent with the OA's Community Rules and RERA guidelines. The right of the OA to restrict amenity access and to commence recovery proceedings under Law No. 6 of 2019 should be referenced.

Scope of services must describe what the service charge covers: common area maintenance, security, cleaning, landscaping, utilities for common areas, building insurance, OAM fee, and any amenity operation costs. Exclusions — individual unit maintenance, private utility accounts, and fit-out works — should also be listed to prevent misunderstanding.

Completing a Service Charge Agreement for a UAE jointly owned development requires the RERA-approved budget, the OA's RERA registration certificate, the OAM's RERA licence, and the unit owner's DLD title deed. The OAM typically prepares the Agreement as part of the annual budget cycle, following RERA's approval of the service charge rate.

Begin with the OA identification. Enter the OA's full registered name, its RERA registration number (which appears on the RERA registration certificate), and the full name and RERA licence number of the OAM. Enter the unit owner's full legal name. If the unit is jointly owned — for example, as a married couple under a DLD joint ownership registration — enter all owners' names.

In the unit section, enter the unit number and building or tower name, the BUA in square feet as recorded on the DLD title deed, the total number of units in the development, and the DLD title deed number. Check that the BUA matches the title deed exactly, as any discrepancy will affect the charge calculation.

In the service charge section, enter the RERA-approved GSC rate and the RF rate, both expressed as AED per square foot per year. Multiply each rate by the unit BUA to arrive at the component charge for this unit, then add them to produce the total annual charge in AED. This is the figure the owner is obliged to pay for the service charge year.

Select the payment schedule — annual, semi-annual, or quarterly — and enter the first payment due date. Add the Mollak payment details: the escrow account IBAN and account name. Describe the services covered and the exclusions clearly, and add the late payment charge in accordance with the OA's Community Rules.

Enter the RERA budget approval reference — this is the RERA document reference for the approved budget, which should be provided by the OAM. Set the effective date. Both the OAM or OA representative and the unit owner should sign and date the Agreement. The OAM should provide each unit owner with a copy, and the Agreement should be retained as part of the OA's financial records for audit purposes.

Legal requirements for service charges in UAE jointly owned developments flow from Law No. 6 of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai, the associated RERA regulations, Ministerial Resolution No. 33 of 2020 on the Mollak system, and the UAE Civil Code (Federal Law No. 5 of 1985).

Law No. 6 of 2019 establishes the mandatory framework: every unit owner in a Dubai jointly owned development must pay service charges levied by the registered OA. The obligation is a first charge on the unit, ranking ahead of the owner's unsecured debts in enforcement proceedings. The OA may restrict amenity access for non-payment and may pursue recovery through RERA or the Dubai Courts.

RERA budget approval is a condition for the validity and enforceability of every service charge levy in Dubai. An OA that levies a charge without a valid RERA budget approval cannot enforce it against a unit owner who challenges it. RERA reviews the proposed budget against market benchmarks and the development's actual maintenance needs. The approved rate is published and accessible to unit owners through the RERA portal and the Dubai REST app.

Mollak compliance is mandatory under Ministerial Resolution No. 33 of 2020. Service charges must be collected through the Mollak escrow platform. An OAM that collects service charges outside the Mollak system is in breach of the resolution and may face regulatory action by RERA, including suspension of the OAM licence. Unit owners who are asked to pay service charges directly to an OAM's own bank account rather than through Mollak should report this to RERA.

For commercial developments, free zone properties, and properties outside Dubai, the applicable framework differs: DIFC Courts and the DIFC regulations apply to DIFC property; ADGM regulations apply to ADGM; and each of the other Emirates applies its own municipal framework, with the UAE Civil Code as the federal background law. Buyers of commercial or free zone units should confirm the applicable service charge regime with the relevant authority before completing a purchase.

Common mistakes in Service Charge Agreements in the United Arab Emirates lead to financial disputes, non-payment enforcement actions, and regulatory breaches that affect both the development's maintenance and the unit owners' financial exposure. The most significant error is levying a service charge without RERA budget approval. An OA or OAM that demands payment before the RERA budget approval for the year has been obtained has no legal basis for the levy, and any unit owner who refuses to pay on this basis is in a strong position before RERA or the Dubai Courts.

A second major error is collecting service charges outside the Mollak system. Some OAMs, particularly smaller operations, may attempt to collect directly into the OAM's own account for administrative convenience. This is a breach of Ministerial Resolution No. 33 of 2020 and creates financial transparency and security risks. Owners should insist on paying through Mollak and should report non-Mollak collection demands to RERA.

Failing to cite the RERA budget approval reference in the Service Charge Agreement or in the demand letter prevents the unit owner from verifying the charge against the approved rate. Transparency in service charge documentation builds trust between the OA and owners and reduces the likelihood of disputes. Every demand for payment should cite the RERA approval reference.

Overcharging by using a BUA figure higher than the one on the DLD title deed is an error that either results from a genuine administrative mistake or, occasionally, from deliberate inflation. Unit owners should verify that the BUA used to calculate their charge matches the title deed, and should raise any discrepancy with the OAM immediately.

For landlords who let their units, failing to keep service charge payments current is a mistake that compounds rapidly due to late payment interest and the risk of amenity restrictions affecting the tenant's enjoyment of the property. A landlord should budget for the service charge as a cost of ownership and ensure it is paid even in periods between tenancies. A unit owner who allows service charges to fall into arrears may find their unit subject to a DLD caveat that prevents a sale or mortgage until the arrears are cleared.