Dubai: Can landlords raise rents in the first three years?
Dubai’s residential real estate market relies heavily on the rental segment, with industry executives estimating that around 80% of residents in the emirate live in rented accommodation.
Therefore, rentals are a hot topic and one of the most discussed topics among residents. Any drop in rent is always welcomed by tenants and vice versa. Additionally, tenants and landlords face a number of issues such as rent calculation, apartment maintenance, security deposit deduction, and most importantly, increased rents.
Phillip Caraiscos, director of asset management at real estate consultancy CORE, answers questions from the Khaleej Times on these highly controversial topics. See excerpts below.
Questions: What is the RERA rent calculator? How is it calculated? And how can tenants use it?
Answer: The RERA Rent Index acts as a tool that helps users know the average market rent (by unit type) of any area and calculate potential rent changes. It is calculated from data available from Ejari for different types of goods and is periodically updated. Tenants can use it to check if the landlord’s asking rent is within the rental index range for that area.
Question: If a tenant has been offered an apartment at a rent above the average rent, how can he challenge it?
Answer: In the case of a new lease, rents are generally market based and the tenant can negotiate the rent and come to an agreement with the landlord. However, during renewals, rent increases should be in line with the rent index. For any other disagreement, the tenant can contact the Rental Dispute Resolution Center for dispute resolution.
Question: Can you explain the process of the Tenant Dispute Resolution Center? If a tenant has a dispute with the landlord about something, what happens? How long does it take for its settlement?
Answer: If the tenant has a dispute with the landlord, it is suggested that the tenant first communicate and resolve the issue with the landlord. In case of disagreement, the tenant can then contact the Rental Dispute Resolution Center. It has a streamlined process for disputes such as unpaid rent and security deposits that usually takes a few weeks to resolve.
Question: What does the law say about the maintenance of a rented apartment? For example, painting or other minor repair work?
Answer: Whether major or minor, maintenance work on a rented apartment is the responsibility of the landlord, unless both parties agree otherwise. However, generally, rental contracts mention that minor maintenance costs (usually less than 500 Dh) must be borne by the tenant. The repainting at the end of the lease is also a form of maintenance work and is the responsibility of the owner unless the agreement provides otherwise.
Question: When and how often can rents be increased in Dubai? Is it true that landlords cannot raise rents for the first three years?
Answer: Rent increases can be applied at the end of each lease period if an increase is applicable according to the RERA rent index. Although lease terms can vary, typical residential lease terms are one year, while commercial lease terms are one year and longer. In the event that a rent increase is applicable according to the RERA rental index, it is at the landlord’s discretion whether or not to increase the rent and he must inform the tenant 90 days before the expiry of the term of the lease or unless otherwise agreed. .
According to the laws in force, no. It is not true that landlords cannot increase the rent in the first three years.
Question: When should a tenant be notified of a rent increase? Can tenants challenge the rent increase? If so, how and under what circumstances?
Answer: The tenant must receive a 90-day notice in the event of an applicable rent increase according to the RERA rental index. Tenants can contest the rent increase if the requested rent is not within the range of the rental index.
Question: How much can be deducted from security deposits? We often hear tenants complain that landlords deduct huge sums from their deposits given in good faith. Can landlords, for example, deduct from the deposit the deep cleaning or painting of an apartment?
Answer: The landlord can deduct from the security deposit in case of unpaid rents and the deductions agreed in the rental agreement, such as the standard cost for repainting and deep cleaning, etc.
Question: If a landlord wants a tenant to leave, what is the procedure? Can the landlord ask the tenant to move before the end of the contract?
Answer: The landlord must give 12 months notice if they want the tenant to vacate the property. Below are excerpts from Law 26 of 2007 on conditions of eviction.
1. The landlord may demand the eviction of the tenant before the expiry of the rental period in the following cases:
a. If the tenant fails to pay the value of the rent, or part thereof, within thirty (30) days of notifying the landlord for payment.
b. If the tenant sublets the property, or part of it, without the landlord’s written consent and in such case, eviction will apply to the subtenant, and his right to refer to the tenant for compensation will be reserve.
vs. If the tenant uses, or allows others to use, the property for illegal or immoral activities.
D. If a tenant causes changes that endanger the security of the property in such a way that it cannot be restored to its original condition or if he causes damage to the property intentionally or because of his gross negligence in taking proper precautions or allowing others to cause such damage.
e. If the tenant uses the property for purposes other than those for which it was rented or if he uses the property in a way that violates planning, building and land use regulations.
F. If the property is in danger of collapsing, provided that the owner must prove this condition by a technical report attested by the Dubai Municipality.
g. If the renter does not comply with the legal obligations or the conditions of the rental agreement within (30) days from the date of notification by the owner to comply with these obligations or conditions.
2. The landlord can demand the eviction of the tenant at the end of the tenancy agreement in the following cases:
a. If development requirements in the Emirate require demolition and reconstruction of the property as directed by government authorities.
b. If the property requires extensive renovation or maintenance which cannot be executed while the tenant occupies the property, provided that a technical report attested by Dubai Municipality is submitted to that effect.
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vs. If the landlord wishes to demolish the property for reconstruction or to add new construction which prevents the tenant from benefiting from the rented property, provided that the necessary licenses are obtained.
D. If the lessor wishes to recover the property for his personal use or that of his close relatives.
However, in the four cases mentioned above, the landlord must inform the tenant of the reasons for the eviction at least ninety (90) days before the expiry date of the rental agreement.