Glossary / Property

Service charge

A service charge is the annual fee an apartment owner pays the owners association for maintaining shared parts of the building, quoted in Dubai as dirhams per square foot per year and levied whether or not the unit is occupied.

It covers the lifts, the chillers, the lobby, security, insurance of the structure, and the reserve fund for large future works. It is the single largest deduction between gross and net yield on most apartments.

It is also the cost most buyers never see before they buy, because it does not appear on the listing and is quoted per square foot rather than as a total.

Where people get it wrong

Assuming it is fixed. Owners associations raise charges, and an ageing chiller or a disputed handover can produce a step change that removes a full point of net yield.

The framework behind it Net rental yield sets out the rule, the arithmetic and where it breaks.

Read the framework

Related terms

Owners association An owners association is the body of unit owners responsible for managing and maintaining the shared parts of a building, and it is the body that sets and collects the service charge. Net rental yield Net rental yield is annual rent minus every running cost, divided by the purchase price plus every acquisition cost, which makes it the only yield figure that describes money actually reaching the owner. Chiller free Chiller free means the cost of district cooling is included in the rent or the service charge rather than billed separately to the occupier, which materially changes what a headline rent is worth.

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