Understanding service charge budgets

Where the budget comes from

In a jointly owned property, the owners collectively pay for shared services and the upkeep of common areas. The management company prepares an annual budget, the owners association reviews it, and it is processed through DLD's systems. Service charges are governed by Law No. 6 of 2019 and administered through Mollak, where owners can see the budget and their account.

Our service charges explained page covers what service charges are. This page is about reading the budget itself.

General fund and reserve fund

General fund

The general fund pays for running the property this year: security, cleaning, landscaping, utilities for common areas, routine maintenance of lifts, pools and plant, insurance of the structure and common areas, and management fees.

Reserve fund

The reserve fund, sometimes called a sinking fund, saves for future major works such as replacing lifts, chillers, façade elements or roof waterproofing. A healthy reserve means owners are less likely to face a large one-off demand later. A buyer should look at the reserve's level, not just the annual charge.

Your contribution is usually calculated by your unit's share of the property as recorded in the jointly owned property documents.

Reading the line items

Ask the management company or check Mollak for the budget breakdown. Look at:

• Security, cleaning and concierge: often the largest service contracts.
• MEP and lift maintenance: mechanical, electrical and plumbing contracts.
• Utilities for common areas, including cooling for shared spaces.
• Insurance: building structure and common-area cover; see home insurance in Dubai.
• Management fee: what the management company charges.
• Reserve fund contribution.
• Any one-off projects or deficit recovery from a previous year.

Compare the budget with the previous year. A sharp increase usually has a reason: a new contract, a lift replacement, higher insurance or a shortfall being recovered.

Questions owners should ask

• Was the budget reviewed by the owners association, and can I see the minutes?
• Were major contracts tendered competitively?
• What does the reserve fund study say about future works?
• Are there arrears from other owners affecting the budget?
• How does this building's charge compare with similar buildings in the community?

If you believe charges are wrong, the route for challenge runs through the owners association, the management company and RERA. Our Mollak and service charge disputes guide explains the process.

Service charges and buying decisions

Two similar apartments can carry very different charges because of amenities, building age and how well the property is run. Before buying, get the current figure from Mollak, ask for the budget and reserve position, and factor the charge into your yield; see rental yield in Dubai explained. A buyer should also confirm the seller's account is clear, as a service-charge clearance is part of the transfer process.

Managing service charges as a landlord

Service charges are a fixed cost of owning, whether or not the home is let. Set up payment reminders on Mollak, budget for increases, and attend or follow owners association meetings, which is where budgets are shaped. If you live abroad, a property manager can monitor charges and represent your interests.