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Service Charge Calculation Strategy MEFMA Focus Group 2. Index. Team members Group Objective Service Charge Definition Methodology Group Outcomes Exclusions and Boundaries Way Forward. Team Members. Roy Barrett – MAF Dalkia Jennifer Blackwell-Spencer Peter Crogan - CEO BCS LLC

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  • Team members
  • Group Objective
  • Service Charge Definition
  • Methodology
  • Group Outcomes
  • Exclusions and Boundaries
  • Way Forward
team members
Team Members
  • Roy Barrett – MAF Dalkia
  • Jennifer Blackwell-Spencer
  • Peter Crogan - CEO BCS LLC
  • Ryan Darnell-Senior Services Manager Khidmah
  • Ahmad Hamdani-OA Licensing & Registration RERA
  • Dilip Khatwani-CEO Reliance FM & MEFMA Board
  • Ian MacQuarrie-FM Consultant Mace Macro
  • Christiane Murray-Head Property Management Landmark Properties
mefma objectives
MEFMA Objectives
  • To identify and validate all service charges related components
  • Identify challenges and limitations to calculate various component process
  • Start a process for setting up an industry standard to calculate and benchmark Service Charges
focus group 2 objectives
Focus Group 2 Objectives
  • To conduct a Service Charge Survey for benchmarking purposes
  • Provide an industry wide Standard Chart of Accounts for budgeting, tendering for service providers, end users and to meet RERA reporting requirements
  • To develop a set of minimum service level agreements (SLAs) for each service provision category for the service providers and end users
  • Set a Standard Reserve Fund Forecasting Model for the industry
service charge a definition
Service Charge- A definition

Article 22 of the JOP Law No. 27 of 2007 states:-

“Each Unit Owner shall pay the Owners Association his share of the annual service fee to cover the cost of management, operation, maintenance and repair of the Common Areas. Such fee must be calculated in correspondence with the space of the Unit out of the total space of the jointly owned property. The Master or Sub Developer shall pay his share of the fee with respect of unsold Units.”

Article (2) Definitions in the Direction for Jointly Owned property Declarations defines Entitlement as :-

“ relations to a Unit, the number of shares of ownership in the Jointly Owned Property, as indicated in the Jointly Owned Property Declaration.”

service charge calculation
Service Charge- Calculation

Prior to the JOP Law & Regulations

  • Sales & Purchase Agreements list service charges payable on a per square foot basis
  • The developer and real estate sectors lists sale price on a per square foot basis
  • Per Sq. Ft calculation is often determined on ‘carpeted’ area

After the JOP Law & Regulations

  • Service charges are to be determined on a per entitlement basis
  • Unit boundaries are defined in the JOP Law to include total unit area (balconies & can include car spaces on title)
  • RERA will need to regulate the methodology with the real estate sector and other stakeholders
service charge survey
Service Charge Survey

The Survey Design Identified the following types of developments:-

  • Villa Communities
  • Residential Buildings (≤ 25% retail)
  • Mixed Use (≥ 25% retail, commercial, hotel units)
  • Commercial only
  • Master Communities

The survey included the RERA required master reporting codes and a range of sub codes from our standard chart of accounts:-

Maintenance & Services




Reserve Fund

Master Community

service charge survey benefits
Service Charge Survey Benefits

The Survey results would assist with the following:-

  • Assist Owners Associations in creating, reviewing & setting budgets
  • Assist developers in setting future budgets
  • Provide benchmarks for all essential services
  • Provide a benchmark for measurement of energy costs
  • Provide data for buildings of different ages & occupancy
  • Assist service providers in submitting commercial proposals in line with market expectation for service levels
  • The real benefit will be to do the same survey in 12 months to monitor the effect of the transfer from developer to owners association control
the survey results
The Survey Results
  • Over 100 surveys sent to developers and industry stakeholders

48 Budgets received so far for the following development types:-

  • Villa Communities 2
  • Residential Buildings (≤ 25% retail) 34
  • Mixed Use (≥ 25% retail, commercial, hotel units) 8
  • Commercial only 4
  • Master Communities 0

The problems

    • Poor response
    • Incomplete information and additional fields added
    • Data would not calculate correctly due to formula changes by survey recipients
our analysis of the results
Our Analysis of the Results

Chart Title - Villas

our analysis of the results1
Our Analysis of the Results

Chart Title - Residential

our analysis of the results2
Our Analysis of the Results

Chart Title – Mixed Use

our analysis of the results3
Our Analysis of the Results

Chart Title – Commercial

standard chart of accounts
Standard Chart of Accounts

Group Objective

  • Introduce consistency of expenditure coding and budgeting across the industry
  • Provide flexibility for the various types of developments
  • Set standard budgeting format for service providers, RFP process and end users
  • Must meet RERA master code reporting requirements as follows:-

Maintenance & Services




Reserve Fund

Master Community Charges

Thank you.

standard chart of accounts1
Standard Chart of Accounts

Group recommends the adoption of the MyStrata chart

  • International recognised industry chart
  • RICs representative had reviewed the chart and included local practices
  • Has over 1000 sub codes so can report down to the detailed expenditure
  • Provides the basis for accurate & consistent coding
  • Meets all best practice financial reporting requirements
  • Flexible to all users
  • Meets RERA requirements.
  • Forms the basis of a budgeting standard service provision by OA
  • Can be used in the RFP process
  • Used by majority of OA management companies
minimum service level agreements
Minimum Service Level Agreements

RERA requested that the Focus Group design a minimum set of SLAs for each service provision category

  • Ensure minimum maintenance standards are maintained by the Owners Associations
  • Ensure that service providers have a minimum level of performance
  • Introduction of key performance indicators for supervision
  • To be used as the basis for tendering for OA services
  • Ensure compliance with statutory authorities & industry standards
minimum service level agreements1
Minimum Service Level Agreements
  • Minimum recommendation of service levels for Owners Associations, Managers, Service Providers & all Property Stakeholders
  • Minimum levels are recommended to enhance and increase the asset value, lifecycle and services provided
  • Inform all stakeholders of industry benchmarks based on specialised services that form the basis of service agreements with specialised providers
  • End users should always contract to specialised, licensed providers using proper legally reviewed contracts
  • SLA need to be monitored, measured & reported by a qualified professional
  • Recommended SLA do not supersede local laws, regulations or mandates
minimum service level agreements2
Minimum Service Level Agreements
  • Service levels were split into separate categories
    • HVAC
    • Mechanical
    • Electrical
    • Plumbing
    • Specialised Services (Fire, lifeguards, swimming pool maintenance etc)
    • Civil Works
    • Cleaning
    • Waste Management
    • Landscaping
    • Pest Control
    • Security
minimum service level agreements3
Minimum Service Level Agreements
  • Each SLA category has 5 Sections
    • Task Name
    • Frequency of the maintenance service
    • Detailed description of the tasks required
    • Service level – What is the minimum threshold the tasks need to be maintained
    • Measurement method – How the service level will be measured
minimum service level agreements4
Minimum Service Level Agreements
  • Service levels originate from a number of best practices from global codes
  • Service levels have instructions for use and should be in conjunction with other KPI’s such as appearance of staff, customer satisfaction, environmental savings and safety. All form part of a balanced approach to contract management.
  • Service levels are a guide and do not supersede local laws, regulations or recommendations by the manufacturer.
  • The Service levels will only have the desired results if implemented and monitored diligently.
  • Service levels still allow for differentiation by service providers. E.g. there is no provision in the SLA’s for thermo-graphic surveys.
  • Service levels make note of local use of codes by Civil Defence, DEWA, Dubai Municipality and Dubai Police.
  • Recommendation that Service levels now be open to review for MEFMA members for discussion.
standard reserve fund forecasting
Standard Reserve Fund Forecasting

Article No. 62 of Part 8 of the Direction for Association Constitution says :-

“ the reserve fund must be based on a study of the costs of renewing and replacing the Common Areas and Assets over a minimum ten year period.”

Group concluded that a standard was difficult to introduce due to the variety of building types

  • The complexity & size of the Dubai assets requires forecasts of a longer period
  • Developers should be made provide Asset Registers at handover as per Part 10 (78j)of the Directions for Owners Associations
  • Developers should provide life cycle costing of assets at handover
  • Forecasts should be reviewed annually to consider inflationary affects such as material price escalations and movements in the inflation rate & labour costs
success constraints
Success & Constraints


  • Owners Associations will have a greater understanding of three key areas of service charges, service levels & reserve fund forecasting
  • Service providers will have minimum standards to meet
  • Able to meet customer expectations
  • Will disqualify some companies


  • Many authorities are creating new regulations so service level requirements and qualifications may change
  • Many regulators in the sector
the way forward
The Way Forward
  • Service Charge Survey conducted annually & regulate the annual reporting to RERA
  • RERA approve the Standard Chart of Accounts & budgeting model
  • Recommend that SLA’s have an industry review period for MEFMA members before RERA approve and mandate it for all service provision contracts in the Owners Association sector
  • RERA to regulate for provision of Asset Registers from developers at handover
  • RERA to regulate for developer supplied life cycle costing at handover
  • RERA to regulate annual reviews of the Reserve Fund Forecast