Who may levy a service charge, and under what authority
Authority to charge comes from the constitutive documents — the strata or community declaration, the by-laws, and where relevant the master community declaration sitting above them. Statute supplies the framework; the documents supply the power, and a charge is only as good as the document it is raised under.
Where an owners association has been properly constituted it levies in its own right. Where one has not — a common position in newer developments — the developer or its manager recovers under the sale documents instead, which is a different legal basis with different limits. Associations and managers frequently assume the statutory framework gives them powers the documents never conferred.
The first question in any dispute is therefore documentary: what does the declaration actually permit, and was the charge raised under it.
Budgets, approval and the reserve fund
A service charge is normally raised against an approved annual budget, with the approval process specified in the documents. Associations lose recoverability by approving late, approving without the required quorum, or varying a budget mid-year without the process the documents require.
The reserve or sinking fund is a separate and frequently mishandled account. It exists to fund major capital replacement — lifts, façades, chillers — and funding major works out of the annual charge instead, or borrowing from the reserve to cover an operating shortfall, is both a governance breach and an invitation to challenge.
Auditing and disclosure matter more than boards expect. An association that cannot produce audited accounts and a reconciliation of what was levied against what was spent is in a weak position when an owner asks, and asking is exactly what a defaulting owner's advisers will do first.
Apportionment, and why it generates so much of the litigation
Apportionment is usually by unit entitlement or area, as the declaration specifies. Disputes arise where the documents are ambiguous, where mixed-use developments share plant between residential and commercial components, or where a particular owner benefits from a service they are not charged for — or is charged for one they cannot use.
Retail and F&B units in residential towers are the classic flashpoint: they generate disproportionate wear on common areas, draw power and cooling differently, and are often apportioned on a basis that reflects area rather than use. Whether that is permissible depends entirely on what the declaration says.
Changing an apportionment is harder than boards expect and normally requires the amendment process in the documents. An association that simply starts charging on a new basis has created a defence for everyone affected.
Recovery against a defaulting owner
The escalation is ordinarily: demand, interest under the documents, formal notice, proceedings in the ADGM Courts, and enforcement — which may include a charge over the unit and ultimately a sale, where the documents and the statutory framework permit.
Two practical points decide most recoveries. The record must be complete: the budget, the approval, the demand, the apportionment basis and the statement of account. And the association must have applied its own rules consistently, because an owner who can show that others were not pursued has material for an argument about selective enforcement.
Where the default is large and the owner is overseas, enforcement planning belongs at the start. An ADGM judgment enforces onshore through the established channel, and identifying reachable assets early is the difference between a judgment and a recovery.
Challenging a service charge, for owners
The stronger challenges are procedural rather than about amount. Was the budget approved as the documents require? Was the charge raised under a power that exists? Does the apportionment match the declaration? Is the expenditure within the permitted categories at all — capital works funded from the annual charge, or management fees exceeding what the documents allow?
Challenges to reasonableness are available but harder. The association has discretion, and a court will not substitute its own judgement about whether a contractor was the best choice. What it will examine is whether the decision was made properly and within the powers conferred.
Timing matters. An owner who raises the challenge in writing when the demand arrives is in a much stronger position than one who says nothing, accumulates arrears, and raises it as a defence to enforcement.
Master community rules, alterations and enforcement
In a master-planned development a further layer applies: the master community declaration, administered by a master developer or master association, governing shared infrastructure, use restrictions, alterations and the appearance of the estate.
Disputes here concern unauthorised alterations, breaches of use restrictions and the enforcement of standards. The recurring question is whether the enforcing body followed its own procedure — notice, opportunity to remedy, and a decision within its powers — before imposing a sanction or self-executing a remedy.
Owners and sub-associations frequently discover the master layer only when it enforces against them. Reading the master declaration alongside the building's own documents, before a dispute, avoids the position where two sets of rules conflict and the owner is caught between them.
Where no owners association has been constituted
A significant number of ADGM and wider UAE developments operate without a formally constituted association, with the developer or its appointed manager collecting charges under the sale and purchase documentation instead.
That arrangement works until it is tested. The manager's authority derives from contract rather than from the statutory framework, which limits the enforcement tools available and leaves owners without the governance rights an association would confer. Owners frequently have no vote, no audited accounts and no route to change the manager.
The realistic options are to press for constitution of the association where the framework allows, to negotiate improved governance and transparency into the existing arrangement, or to challenge charges on the narrower contractual basis that actually applies. Which is right depends on the documents and on how many owners will act together.
A reported matter
A published decision of the ADGM Court of First Instance in which our team acted. The parties are anonymised; the judgment itself is public. Read the case note.
Primary sources
The law and rules this page relies on. Links go to the issuing court, tribunal or legislator.
Frequently asked questions
An owner is refusing to pay. What can the association actually do?
Demand, interest under the documents, formal notice, proceedings in the ADGM Courts, then enforcement — which may include a charge over the unit and ultimately a sale where the documents and framework permit. Recovery turns on a complete record and on having applied your own rules consistently, because selective enforcement is a real defence.
Can I withhold service charge while I dispute it?
Rarely a good idea. Non-payment typically triggers interest, enforcement and a charge over the unit, and your substantive complaint is then heard from a much weaker position. Pay under protest where the documents require it, or obtain relief before default — and put the challenge in writing early.
What is the strongest way to challenge a charge?
Procedure, not amount. Was the budget approved as the documents require? Was the charge raised under a power that exists? Does the apportionment match the declaration? Is the expenditure within permitted categories — capital works funded from the annual charge is a common defect.
Our building funded a lift replacement from the annual charge. Is that allowed?
Usually not. Major capital replacement is what the reserve or sinking fund exists for, and funding it from the annual charge — or borrowing from the reserve to cover an operating shortfall — is both a governance breach and an invitation to challenge.
The retail units use the common areas far more than we do. Can apportionment be changed?
Only through the amendment process in the documents. An association that simply starts charging on a new basis has created a defence for every owner affected. Whether the current basis is permissible depends entirely on what the declaration says.
We have no owners association — the developer collects. Is that lawful?
It is common. The manager's authority then comes from the sale documents rather than the statutory framework, which limits enforcement tools and leaves owners without governance rights — often no vote, no audited accounts, no route to change the manager.
What is a master community declaration and does it bind us?
A further layer above the building's own documents, governing shared infrastructure, use restrictions and alterations across a master-planned estate. It binds, and owners usually discover it only when it enforces against them. Read it alongside your own documents before a dispute.
Can the association refuse to give us the accounts?
An association that cannot produce audited accounts and a reconciliation of levies against spend is in a weak position the moment an owner asks — and asking is exactly what a defaulting owner's advisers do first.
Can we challenge the charge as simply too high?
Harder than a procedural challenge. The association has discretion and a court will not substitute its own view on whether a contractor was the best choice. What it will examine is whether the decision was made properly and within the powers conferred.
The defaulting owner is overseas. Is recovery realistic?
Often yes, but plan enforcement from the start. An ADGM judgment enforces onshore through the established channel, and identifying reachable assets early is what separates a judgment from a recovery.