Dubai service charges and the reserve fund

How are Dubai service charges calculated and approved?

The rule

The service charge is the largest running cost on a Dubai apartment, the one input a listing never carries, and the only one a buyer can verify for free before making an offer. Almost nobody does.

Every guide to this subject prints a table of dirhams per square foot by community and stops there. None of them names the law. That is a shame, because the law is unusually specific about the things a buyer actually needs to know, and six of them are checkable in an afternoon.

What the law sets

Service charges in Dubai are governed by Law No. (6) of 2019, and the quotations below are its own official English.

Your share is your floor area, and the deed decides what that is. Article 25(a) calculates each owner's share "based on ratio of the area of the Owner's Unit to the total area of the Jointly Owned Real Property", using a method approved by the Director General. Article 25(b) then removes the ambiguity: the share is calculated "based on the area of his Unit as recorded in the Real Property Register". Not the brochure, not the marketing floor plan.

The developer pays for the units nobody has bought. The same article: "A Developer will pay his share of the annual Service Charges in respect of unsold Units", and for sold units where the sale contract makes them liable. An owner in a half-empty new tower is not quietly carrying the empty half.

Nothing can be charged without approval. Article 27(a) is a prohibition, not a guideline. A management entity "must not charge Owners, or collect from them, any amounts whatsoever" for managing, operating, maintaining or repairing the common parts, "or for any other reason, without first obtaining the relevant approval of RERA."

And the approval requires an audit first. Article 27(b): RERA may not approve or ratify the budget "unless it is approved by a certified audit firm recognised by RERA for this purpose." Article 27(c) allows for the gap between years: where necessary, "RERA may approve a temporary Service Charges budget" until the audited one is ratified. A provisional charge is a real thing with a rule behind it, which is worth knowing before assuming your building is doing something irregular.

The money goes into a bank account, quickly. Article 30(a) requires a dedicated service charge account with a bank licensed in the Emirate and recognised by RERA, and Article 30(b) requires collections to be deposited "within seven (7) working days from the date of collection". Article 30(c) puts those balances beyond the reach of the management company's own creditors. The Land Department's Mollak system monitors this, in its own description by "relying on the financial accounts operating according to the mechanism of the escrow account".

Where the money is allowed to go

Article 30(e) is a closed list. The funds in the service charge account "may not be disposed of, and may only be used for the following purposes", and then names ten: cleaning; security and safety; operating, maintaining, repairing and improving the common parts; insurance premiums; audit fees; the management company's fee as determined by RERA; the developer's approved administrative expenses on major projects; the cash reserve; RERA's own inspection and oversight fees; and anything else set out in the master community declaration and approved by RERA.

This is more useful than it looks. When you read a budget, you are not reading a list of things the manager decided to do. You are reading a list that has to map onto those ten headings. A line that does not obviously belong to one of them is a question worth asking, and the annual general meeting is where to ask it.

The reserve is a different bank account

Item eight on that list is the one that matters most to a buyer, and it is worth reading slowly. The service charge may fund

Three things follow. The reserve is not a line in a spreadsheet, it is a second bank account. It is ring-fenced by law from the operating money, so a manager cannot quietly spend next decade's chiller on this year's landscaping. And it cannot be released for anything short of a critical emergency without RERA signing it off.

Then Article 30(f) names the thing every buyer has heard rumours about and nobody can find a rule for. Where the reserve "is not sufficient to cover emergency expenses", the Land Department may, with RERA's prior approval, "request Owners to cover these expenses."

That is the special levy. It is not a market practice, a developer's habit or a horror story. It is Article 30(f), and the reserve balance is the only thing standing between an owner and it.

So how much is a low charge really worth?

Everyone writing about this says the same sensible thing: a building with a low charge and no reserve is deferring a bill, not saving you money. Nobody says by how much, which makes the warning impossible to act on.

It has a closed form, and it is simpler than it looks.

Take two genuinely comparable buildings, one charging gap dirhams a foot a year less than the other. Hold for n years. The saving is an area times a rate. A levy is also an area times a rate. So the area divides out, and what falls out is the levy rate at which the cheaper building's buyer is exactly back where they started:

break-even levy per sq ft = gap × ((1 + r)^n − 1) / r

That bracket is the future value of an ordinary annuity, and at a return of zero it collapses to gap × n. A four-dirham advantage held for ten years breaks even against a levy of AED 40 a foot, and that is true for a studio and for a penthouse.

At a 5% return on the money saved:

Every figure in dirhams per square foot, computed from the formula above and from nothing else.

Read the table and the conventional warning stops being a rule and becomes a hold-period question. At five years, a four-dirham advantage buys a cushion of AED 22.10 a foot, which is a little over one year's charge in a mid-range tower. That is thin, and the warning is right. At twenty years the same advantage carries AED 132.26 a foot, which is several times the annual charge and larger than most capital assessments an apartment will ever see. Over a long hold the cheaper building wins comfortably, and the advice to avoid it is simply wrong.

The honest caveat is the one that makes the arithmetic worth trusting: this compares two buildings that are otherwise the same. A tower with district cooling, a pool, a gym and a concierge should cost more per foot than a walk-up, and it is not deferring anything by doing so. The comparison only means something inside a set of buildings a tenant would treat as substitutes.

What a dirham a foot costs you

On the illustrative one bedroom used throughout this site, 900 sq ft at AED 1,500,000 with AED 105,000 of rent, one dirham per square foot per year is AED 900. That is 0.86% of the gross rent and 0.056 points of net yield on the full cash outlay.

At the illustrative rate of AED 18 a foot, the charge is AED 16,200, or 15.4% of the gross rent, before management, maintenance, insurance or vacancy. It is the single largest deduction between the gross yield and the net one, and the net rental yield page carries the full sensitivity table and the rate at which this property drops below 4% net. The calculator takes the rate as an input, which is the point: it is the number most worth getting right.

It is not, however, the whole of the fixed cost. In a building served by a district cooling plant the capacity charge is levied on contracted capacity rather than on consumption, which makes it a second standing cost on the same unit, measured in the same dirhams per square foot and sitting outside this budget entirely. District cooling and chiller charges traces it to the resolution that sets it, and the common-area cooling that may not be billed to a unit lands back here, in the budget RERA has to approve.

What to check before you make an offer

Four of these are free public lookups, and together they take about an hour.

The approved rate for the project and year. The Land Department's Service Charge Index exists so that anyone can "inquire about the approved service fees for Joint ownership properties from the Real Estate Regulatory Agency". You select the project, the usage and the year. If the figure you are quoted is not the approved figure, Article 27(a) is the article to cite.

Whether the management company is on RERA's list. Mollak publishes the register. A manager who is not on it cannot lawfully be collecting.

Whether the auditor is on RERA's list. Article 27(b) requires the budget to be approved by a recognised audit firm before RERA can ratify it, and Mollak publishes that register too. This is the check nobody makes, and it is the one that tests whether the approval process actually happened.

The area on the title deed, because that, and not the brochure, is what your share is calculated on.

Then ask the seller or the manager for three documents that exist by law and are therefore reasonable to request. The approved annual budget, which shows the line items against those ten permitted headings. The reserve fund balance, which is the balance of a specific separate account and can be stated as such. And the history of levies, because a building that has invoked Article 30(f) before has told you something about how the first two are being run. Article 34(b) also requires the manager to supply RERA, "every six (6) months, with a periodic report" on the management and maintenance of the property, so a manager who claims nothing is written down is describing a compliance failure rather than a filing system.

The part that bites on the way out

Article 32(a) gives the management entity a lien on every unit for unpaid charges, and then says plainly: "A Unit may not be disposed of unless these charges are paid to the Management Entity."

Arrears do not travel with the seller as a debt to be argued about later. They stop the transfer. Under Article 32(b) an owner who does not pay within thirty days of a RERA-approved written notice faces a claim enforceable by the execution judge at the Rental Disputes Settlement Centre; under Article 32(c) that judge may order the unit "sold by public auction to collect these charges"; and under Article 32(d) the defaulting owner pays the court fees and the advocates' fees on top.

For a buyer this is a due diligence item with a clean answer: get written confirmation from the management entity that the unit is clear before the transfer, not after. For a seller it belongs on the checklist alongside the mortgage release and the developer's no objection certificate in selling well, because it can hold up a completion just as effectively.

Every instrument cited on this page is listed, with what it sets in its own words and a link to its official text, on the Dubai property law register.

The arithmetic

Where it breaks

• Comparing charges across building types. A serviced tower and a walk-up are not comparable per square foot and never were, and the break-even arithmetic below is only meaningful inside a comparable set.
• Treating a low charge as a red flag without asking how long you intend to hold. Over five years the cushion is thin. Over twenty it is very large, and the warning is simply wrong.
• Using the brochure area rather than the deed area. Article 25(b) calculates your share based on the area of his Unit as recorded in the Real Property Register, and the two are not always the same.
• Paying an increase nobody approved. Article 27(a) forbids a management entity to collect any amount whatsoever without first obtaining the relevant approval of RERA, and the approved figure for a named project and year is a public lookup.
• Assuming a fully funded reserve is a sunk cost. You are buying a share of a separate bank account, and it is the only thing standing between you and Article 30(f).
• Forgetting that the charge is payable whether or not the unit is let, which is why it belongs in the fixed cost line of a break-even occupancy calculation.
• Leaving arrears to the closing table. Article 32(a) gives the management entity a lien and says a Unit may not be disposed of unless these charges are paid, so an unpaid balance is not a negotiating position, it is a stopped sale.

When to use it

Before making an offer on any apartment, and again every year, because the budget is approved annually and almost no owner reads it.

Sources

1. Law No. (6) of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai, Articles 25, 27, 30, 32 and 34
2. Dubai Land Department, Service Charge Index, e-service description
3. Dubai Land Department, Mollak, the service charge system for jointly owned property

Last reviewed 10 September 2026. Commercial relationship disclosure: the author works in Dubai real estate brokerage. See the disclosure standards. Disclosure standards.