10.3 Service Charges, Usage Charges, Mollak and the Service Charges Account
Key Takeaways
Each owner pays service charges in proportion to the unit's registered area, and the developer pays for unsold units (Article 25 of Law No. 6 of 2019).
No charge may be collected without RERA approval, and RERA approves a budget only after a certified audit firm recognised by RERA approves it (Article 27).
Service charges must be deposited within 7 working days into a separate account for each property, which the management entity's creditors cannot attach (Article 30).
A cash reserve for emergencies and equipment replacement is kept in a separate account and used only in critical emergencies or with RERA approval.
A developer or management entity may not stop an owner using the unit or common parts to force payment (Article 29).
10.3 Service Charges, Usage Charges, Mollak and the Service Charges Account
Service charges are the running cost of owning in a jointly owned building, and they appear in almost every resale (clearance before NOC) and every investor yield calculation. Law No. 6 of 2019 sets strict rules on how they are approved, collected and spent, and DLD runs the Mollak system through which budgets and owners' accounts are managed.
1. Two kinds of charge
| Charge | Paid by | To cover | Basis |
|---|---|---|---|
| Service charges (Article 25) | Owners (and the developer for unsold units, or where it agreed to pay for a buyer) | Managing, operating, maintaining and repairing the common parts | Share calculated by a method approved by the DLD Director General, based on the unit's registered area relative to the property's total area |
| Usage charges (Article 26) | Owners or sub-developers in a master project | Managing and maintaining the master developer's common facilities | Method set by Director General resolution, consistent with the master community declaration; payable for completed and under-construction buildings and vacant land |
2. Approval: RERA and the auditor (Article 27)
- A management entity must not charge or collect any amount for managing, operating, maintaining or repairing common parts or facilities, or for any other reason, without RERA's approval.
- RERA may not approve a service or usage charge budget unless a certified audit firm recognised by RERA has approved it.
- Where needed, RERA may approve a temporary budget until the audited budget is approved.
- The owners committee reviews and makes recommendations on the annual budget (Article 24(2)).
DLD also publishes a service charge index so buyers and brokers can see the approved charge rates for buildings.
3. Owners must pay, and must not be blocked
- No refusal (Article 28): an owner or sub-developer may not refuse to pay approved charges, and an owner cannot give up its share of the common parts to avoid paying.
- No pressure tactics (Article 29): a developer or management entity must not prevent an owner from taking possession of or using the unit, the common parts or common facilities to force payment outside the legal procedure.
- Lien and collection (Article 32): unpaid service charges give the management entity a lien on the unit, and the unit may not be disposed of until they are paid. Collection goes through a RERA-approved notice and the RDC execution judge (see 10.4).
4. The service charges account (Article 30)
| Rule | Detail |
|---|---|
| Separate account | The management entity opens a service charges account for each jointly owned property with a bank licensed in Dubai and recognised by RERA |
| Deposit deadline | Collected charges are deposited within 7 working days |
| Protection | Amounts in the account may not be attached by the management entity's creditors |
| Permitted uses | Cleaning; security and safety; operating, maintaining, repairing and improving common parts; insurance premiums; audit fees; the management company's fee as set by RERA; the developer's approved administrative expenses for major projects; RERA inspection costs; other RERA-approved costs |
| Cash reserve | A reserve for emergencies or for replacing equipment in common parts, kept in a separate account, used only in critical emergencies or with RERA's approval |
| Shortfall | If the reserve is not enough for emergency expenses, DLD may, with RERA's prior approval, ask owners to cover them |
For master projects, the master developer keeps a usage charges account for each major project under similar rules, also protected from the master developer's creditors (Article 31).
5. Oversight
- RERA audit and inspection (Article 33): RERA inspects the property, records violations, audits the accounts, considers complaints and audits the management entity's contracts.
- Reporting (Article 34): the management entity reports to RERA every six months on management and maintenance.
- Bank guarantee (Article 36): each management entity provides DLD with a bank guarantee used to repair damage caused by its negligence.
- Insurance (Article 41): the management entity insures the property against fire, damage or destruction and against liability to occupants and third parties; premiums are included in service charges.
6. Mollak in practice
Mollak is DLD's platform for jointly owned property: approved budgets, owners' service charge accounts and statements, invoices and management-company information sit in one system. For a broker this means:
- Ask the seller for the Mollak statement before signing Form F, because an unpaid balance blocks the NOC and the sale.
- Use DLD's service charge index and the approved budget when estimating a buyer's net yield.
- Treat any request to pay charges into a management company's own trading account, outside the property's service charges account, as a warning sign.
A management company emails an owner a "maintenance invoice" for AED 15,000 and asks for payment to the company's general business account. No RERA-approved budget has been shown. What should the owner do?
Pay at once to avoid interest
Pay half to the company and half to Dubai Municipality
Deduct 10% and pay the developer
Ask for the RERA-approved charges and pay into the property's service charges account, because charges need RERA approval (Article 27) and must be deposited in a separate service charges account (Article 30)
After ten years, two compressors in a tower's central chiller plant must be replaced at a cost of AED 650,000. Which fund is designed for this kind of expense under Law No. 6 of 2019?
The developer's ten-year structural warranty
The cash reserve for replacing equipment in common parts, held in a separate account and used with RERA approval or in critical emergencies
A one-off charge on tenants occupying the building
The management company's own operating budget
Which sequence must a Category 3 building's annual service charge budget follow before owners can lawfully be charged?
The developer approves it and posts paper invoices
The owners committee votes it and collects the money into a trust company
The management company debits owners' accounts directly without review
The management entity prepares it, the owners committee reviews and recommends, a certified audit firm recognised by RERA approves it, and RERA approves it
Sections you finish are checked off in the contents.