How Owner Association Firms Can Reduce Service Charges
As Covid-19 has an increasing impact on the job market, payments and enterprises, property owners in the United Arab Emirates request reduced service prices. A substantial backlog of service costs has already been achieved, and owner association management companies are navigating the approaches of overcoming the situation.
- Massive 75% decrease in service charge collection
According to Gulf News, the biggest daily newspaper in Dubay, the payment of service costs has decreased by over 75% since February 2020, with the majority of renters holding Coronavirus in the responsibility of non-payment. According to the Dubai Immobilien Regulator (RERA) notification, all such payments should be made by renters to ensure the well-being of the neighbourhood. However, residents have very different ideas.
Several people contacted by Gulf News indicated that service prices should be cut because Covid closed down most of its services fees, for example, gymnasium, swimming pools, tennis or squash courts, saunas, clubs, etc. They should not thus pay for them. Other renters argued that due to an exponential drop in property value, the service payments should be cut.
- Can OAs reduce the cost of service?
Technically, reducing service rates is not conceivable for OAs (association of owners). They are in trouble when the payment backlog stacks up. Service charges are operating charges that have nothing to do with fluctuations in property or rental prices. The top leaders of OA companies feel that service costs cannot be reduced or waived as that cash goes towards the maintenance of properties and cannot be avoided. For example, swimming pool maintenance costs are the same and chemicals, cleaning, day-to-day care, work costs etc., remain standard prices. The same applies to other installations. The Coronavirus pandemic increased operational costs for the AO’s due to increased demand from residents for additional sanitation and disinfection in buildings. In addition, their utility bills climbed many times.
OA, therefore, have the feeling that they have the right to collect service charges even if they do not use the services as maintenance and operational costs for residents.
- Best Practices OAs Can Adopt Service Charges Reduction
Here are the best approaches for association companies to reduce their service charges
- Sustainability focus
The association owner companies must make substantial investments in introducing new sustainability and energy efficiency measures to minimize the overall cost of business. They can also conduct a formal evaluation of the real estate portfolio each year to uncover unique cost reduction solutions.
- Govt Leveraging Schemes
The UAE government has launched a list of plans and economic incentives for new amenities, spatial renewal and capital investment. The organisation of owners should make the most of these arrangements to decrease the overall running costs.
- Vendor Release Guidelines
OA companies should establish and publish guidelines for all suppliers that are aligned with their procurement strategy. This reduces not just the cost but also adds value to the operational process.
- ‘Dark Space’ Identifying
Owner association firms should identify and eliminate spaces in their current portfolio, which are not used or under-used, commonly known as “black space.” This reduces operating costs for OAs by several times and can benefit residents by cutting their service costs. To do this, owners’ association firms must carry out an energy audit of each site and identify the areas for efficiency improvement.
- Taking best advantage of technology
Owner association companies can use computer-based and predictive maintenance facilities to prevent damage to equipment that entails expensive repairs. In addition, they can use new tools and dashboards to analyse the current use of existing lights and retrofitting lights to save energy costs. Dashboard automation will allow OA to control the birds-eye expenses incurred and committed and eliminate the need for human reporting.
- Benchmarking Effective
The owner’s association must measure its operating costs against the nearest competitors to determine areas of improvement. They must also apply cost benchmarking and competitive bidding procedures to reduce refurbishment or fit-out expenses.
- Service Reduction Initiatives
The government of the UAE has adopted a list of steps to lessen the financial strain on tenants and homeowners owing to the severe coronavirus scenario. The following are the initiatives:
- Service fee reduction
The Department of Land of Dubai (DLD) has asked the Owner Association (OA) to examine all costs rigorously and slash service charges in Dubai to reduce the cost of housing in the UAE. The DLD has also announced that fines on overdue unpaid service charges in Dubai will be abolished as part of the plan between 2019 and 2020. Property owners would also be eligible for instalments to pay their service expenses.
- DEWA Utility Bills Reduction
In addition, the Crown Prince, His Highness Sheik Hamdan bin Mohammed Al Maktoum has initiated an initiative to lower DEWA expenses in Dubai in connection with the AED 1.5 billion stimulus package for enterprises amid the Covid 19 pandemic. The Dubai Supreme Energy Council has issued a directive under this programme to minimize energy and water fuel surcharges. The reductions shall apply with effect from 1 December 2020 on electricity and water bills. The electrical fuel supplement will be decreased by 23%, and the water supplement will be reduced by roughly 33%.
- Dubai Rental Relief
Dubai’s developers and property owners have offered rental relief packages for their business and residential tenants, which are badly affected by the Covid-19 outbreak limitations. With several UAE sites shut down owing to the pandemic, retail and commercial tenants throughout Dubai have announced an allocation of rents for qualified residents for up to three months. Meraas led the programme with an AED 1 billion package for business owners, including City Walk, Bluewaters Island and La Mer. This plan was also implemented, and rent assistance for retailers for up to three months was presented in the Dubai Festival City Mall.