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Property Management Companies Desire Service Fee Defaults to Appear On Credit Reports.
Failure by homeowners to pay their properties’ service charges could result in significant future financial hardship. Similar to how late payments for credit card balances or recurring utility bills affect credit score ratings; these defaults may be reported in the person’s credit report.
Leading homeowners associations and property management firms are asking for the inclusion of service charge defaults in credit ratings. These rankings, which are kept up to date by the Al Etihad Credit Bureau, provide a quick update on how well people and businesses are doing when it comes to making payments. Banks and other lenders use these ratings to determine if it is worthwhile to have exposures with them.
Al Etihad Credit Bureau began include unpaid water and power bills in credit reports earlier this year. Due to complete transparency, it was stated that the scope of these scores would be expanded to include additional factors.
Having Poor Credit Will Hurt
“If consumers are affected by what’s on their credit ratings, there will be a tremendous incentive for them to be current on service fee payments,” says Saeed Al Fahim, CEO of Stratum. To maintain the integrity of the building/community, we think this would be ideal for all homeowners. It is never acceptable for those who are paying to suffer because of others who are not.
The local real estate market is once again on edge over the problem of unpaid service costs. According to sources at the OA firm, they are being forced to complete same responsibilities for which they were hired. Despite having access to much less funds than was anticipated when the contract was signed. Service fee receipts in some buildings only scrape the 50–60% threshold.
The general manager of a property management company stated, “We had to reduce maintenance employees due to a lack of finances for a building’s care.” This is not good scenario for managing a 20-story building. We are running on a very tight budget, and inflation has really started to pick up.
Payment of service fees must be enforced. It will be beneficial if defaults are shown on credit reports to force consumers to make payments.
Increase In Collecting, Followed By…
Such collections have significantly increased at the beginning of the year. Due to higher rentals, property owners who rented out their properties received fast service fee payments.
The OA companies had improved in their efforts to collect debts, using the Dubai Land Department‘s Rental Disputes Settlement Centre to obtain favorable rulings. However, there has been a noticeable decline in recent weeks, and Al Fahim and other stakeholders are attempting to reverse this.
Service charge collections have typically been weak during the summer. Property owners tend to priorities other needs over spending. “It could be a holiday trip, and they will take away what’s been set aside on property fees,” said an OA company owner. “Then the defaults keep happening repeatedly, and getting those owners to get back to paying is laborious. It costs us money too.”
Al Fahim contends that every property owner needs to consider the big picture. According to him, “Quality maintenance of all assets will be essential to Dubai’s booming real estate sector.” “OA companies play a crucial role in that, with the help of the regulators.”
