FAQ 21

We have summarized our Dubai real estate experience and answered the most commonly asked by our clients property related questions. Use the search line to find the appropriate. If you do not see what you are looking for, you can always contact our Dubai realty specialists to get a professional advice.

How to evict the tenant prior to expiry of tenancy period?

There are some cases when landlord can demand eviction of tenant prior to expiry of tenancy period, for instance, if tenant fails to pay rent or uses the property for illegal activities and so on. Usually, most of these cases stipulated in the tenancy agreement and are common sense.

BUT. Landlord has to be aware that if tenant refuses to vacate the property voluntarily, the eviction procedure could take from 3 to 6 months. Owner of the leased property can not just change the locks or even enter into the property without consent of the tenant (it would be considered a crime). Moreover, owner can not disconnect the utilities or in any other way prevent tenant from using the rented property.

All the disputes should be referred to the Rental Dispute Settlement Centre. The filing fee for a claim is 3.5% of the rental and cannot be less than AED 500 or more than AED 20,000. And forced eviction is possible only after judgement came into force.

Can landlord refuse to renew the tenancy contract with the tenant?

Broadly speaking: NO.

As per the law No.26 of 2007 (as amended by Law 33 of 2008), landlord may demand eviction of tenant upon expiry of tenancy contract only in four cases, particularly:

  • If the owner wishes to demolish the property for reconstruction or to add new constructions that prevent tenant from benefiting from the leased property, provided that necessary licences are obtained.
  • If the property requires renovation or comprehensive maintenance which cannot be executed while tenant is occupying the property, provided that a technical report issued by Dubai Municipality or accredited by it is to be submitted to this effect.
  • If the owner of the property wishes to recover the property for use by him personally or by his next of kin of first degree provided that he proves that he does not own a suitable alternative property for that purpose.
  • If the owner of the property wishes to sell the leased property.

And in any of the above cases landlord must notify tenant with reasons for eviction at least twelve months prior to the determined date of eviction subject that such notice be sent through the Notary Public or by registered mail.

All above-said are valid even in case when the tenancy contract has the non-renewal condition. Such condition is considered null and void as it contradicts the law.

What landlord has to do to increase the rent?

First of all, rent increase is permitted unilaterally only on lease renewal.

IMPORTANT: As per Article 14 of Law No. 33 of 2008, if landlord wishes to amend any of the tenancy contract’s terms or review the rent, then he must notify the tenant not less than 90 days prior to expiry date, unless both parties agreed otherwise.

To duly notify tenant, the landlord should serve the notice in writing through registered mail or by any other way agreed in the contract.

It is recommended to make a comparative market analysis in order to understand the current market rent value and price trends for the property and also to check official RERA Rental increase calculator before notifying the tenant. Often, reasonable rent increase proposal from the landlord could be accepted by the tenant even if it is higher than allowed by law.

Can landlord increase the rent upon renewal of the tenancy contract?

YES, but only to the extent regulated by rent cap law.

The fact is, that most landlord and tenant relationships in Dubai are regulated by Law No. 26 of 2007 (as amended by Law No. 33 of 2008), also known as “Tenancy Law”. When the law was introduced in 2007, it contained an absolute restriction on rental increase for the first two years of the tenancy. This protection for tenants (or restriction on landlords) was removed with the introduction of Law No. 33 of 2008. With the removal of the two-year rent increase restriction, landlords have been permitted to increase rent annually but only to the extent regulated by some later rent cap laws, being Decree No. 62 of 2009 and Decree No. 2 of 2011.

On 18 December 2013 the new Decree No. 43 of 2013 came into effect. It provides a rent cap layered structure setting out the maximum percentage increase in rent permitted when a lease is renewed. The application of the rent cap is dependent on the variance between the property rental value and the average market rental rate for properties in a specific area in Dubai. The average market rental rate is set according to the rent index produced and regularly updated by the Real Estate Regulatory Agency (RERA).

The layered structure of the new rent cap is summarised below.

If the existing rent is:

  • Less than 10% below the average market rental rate – no rent increase is permitted.
  • Between 11% and 20% below the average market rental rate – maximum 5% rent increase is permitted.
  • Between 21% and 30% below the average market rental rate – maximum 10% rent increase is permitted.
  • Between 31% and 40% below the average market rental rate – maximum 15% rent increase is permitted.
  • More than 40% below the average market rental rate – maximum 20% rent increase is permitted.

To ease the implementation of the rent cap, RERA introduced a Rental increase calculator, which is a good tool to determine if rent increase is permitted and by how much.

And, of course, there is always a chance, that the tenant will agree to the rent increase proposed by the landlord, even if this increase is higher than allowed by law.

What kind of taxes does the property owner need to pay?

The United Arab Emirates is a tax-less country so there are no taxes on property or on any income generated off it. However, the property owner is responsible for the annual maintenance fee and service charge payments, which need to be made to the management company hired by the owner’s association. Payments are made from between one to four times a year at an average price of AED10-AED30 per sq.ft, depending on the project and services included.

Could you describe the sales and purchase process?

In most instances, the transaction process goes as follows:

  • Buyer chooses the property.
  • Buyer and seller sign the sales and purchase agreement, where all the terms and conditions of the deal are mentioned: the purchase price, additional expenses (agency fee, transfer fee at the DLD, developer’s fee, service charge refund, etc), the transfer date of the deal at the DLD, terms of payment and clearly-defined responsibilities and penalties for both parties in case they fail to uphold the conditions set out in the agreement.
  • On signing the agreement, the buyer pays the deposit. This is usually 10% of the purchase price.
  • The seller applies for a no-objection certificate (NOC) from the developer in order to sell the property. The NOC is required for the transfer process at the DLD.
  • Once the NOC is ready, the buyer and seller can transfer the property and register it on the buyer’s name. Usually, payments need to be made at the time of registration.
Can the property owner rent out the unit?

The regulations, governing the relationship between the landlord and the tenant, are defined in Law No. 26 of 2007. As per the law, any property owner in Dubai can rent out their unit. Usually, the rental period is one year (extensions are possible).

A property owner can appoint a licensed management company to manage his/her property, in which case the firm bears all responsibility of communicating with the tenant.

What rental income can a homeowner expect to collect?

The average net income (after paying the service charge) is 5%-10% per year, depending on the type of property, geographical location or service charge price. The more exclusive and expensive properties usually bring in less rental income in percentage even though the rent is higher.

Are there any restricting in determining rental value in Dubai?

There are no strict limits on the conditions of the rental agreement between landlord and tenant (as well as on the rental price) on signing the tenancy contract. However, at times of renewal, there are restrictions. The landlord needs to refer to the Real Estate Regulatory Agency’s (RERA) rental index if he/she has plans on increasing the rental value. The index acts as a guiding tool to determine rentals for properties in the various areas of Dubai and is referred to in cases of disputes between tenants and landlords, regarding rent increase caps. RERA’s online rent calculator helps determine how much the rent can be hiked up by.

What requirements does a tenant need to meet?

In cases of long-term rentals, the tenant needs to be either a resident of the UAE or if it is a company, it needs to be one that is registered in the UAE. When it comes to individuals, the tenancy contract can be drafted for both GCC nationals as well as UAE residents.

Is tenancy contract registration a requirement in Dubai and how do I go about doing this?

As per Article 4 of Law No. 33 of 2008, tenancy contracts should be registered with RERA. The Ejari system was set up to ease this process for both tenants and owners. Licensed management companies can register contracts online while individuals can visit specialised service centres in order to complete their Ejari registration.

Required documents to initiate Ejari registration include:

  • Copy of the title deed
  • Copy of the tenancy contract
  • Copy of the landlord’s passport
  • Copy of the tenant’s passport and visa page
  • RERA charges per registration of tenancy contract is AED 200. Once the documents are submitted and the payment is made, registration will usually be completed at the same time.

    How can one rent out property in Dubai?

    The following steps are usually involved in the process of renting out a property in Dubai:

    • 1. The owner, either on his own or with the help of a real estate agency, begins looking for a tenant.
    • 2. When a tenant is found, the owner signs a tenancy contract with all the terms and conditions mentioned clearly, including: rental price, rental period, additional expenses (clearly defining which parties are responsible for these payments) and responsibilities and penalties both parties face if they fail to uphold these terms.
    • 3. Upon signing the contract, the tenant needs to pay the rent in advance through post-dated cheques in addition to leaving a security deposit (which is usually 5% of the rental amount).
    • 4. On receiving the payment, the landlord hands over to the tenant keys, access cards, copies of ownership documents, his/her passport copy and utility account numbers.
    How does the tenant pay for the rent?

    In the Dubai market, rent is paid in advance through post-dated bank cheques for the year as per the conditions mentioned in the tenancy contract. For example, the rent can be paid in four cheques, with quarterly payments spread out across the year.

    Cheques may not be a 100% guaranteed method of receiving payment but in the UAE, issuing a cheque with insufficient funds in the account is a criminal offence.

    Who pays the commission to the real estate agency?

    If a deal was negotiated through a real estate agency, the tenant usually pays 5% commission to the agency. However, if the landlord requires additional services from the agency (for example, to represent him/her as a property owner in the UAE), additional agency fees can be discussed between the two parties.

    Who pays the utility bills for the rented property?

    Utility bills such as DEWA, air conditioning, internet, TV and housing fees (a municipality fee in the amount of 5% of the rental price is divided across the year and included as part of the DEWA bill) are paid by the tenant. These services are usually registered under the tenant’s name. The landlord is responsible for major maintenance and service charges for the property.

    Is it possible to conduct a deal without involving real estate agents?

    For the most part, real estate deals are made through agencies in Dubai (like everywhere else in the world). Realty agents are market experts and have up-to-date information on the industry and can help both property owners and buyers or tenants find a deal that suits them best. That being said, it is possible to negotiate a deal without an agency.

    What are the requirements that Dubai property agents need to meet?

    As per Law No. 85 of 2006 regarding the regulation of real estate brokers, these are some of the requirements for brokerages in the emirate:

    • Have an appropriate trade license from the Dubai Department of Economic Development;
    • The brokerage company and all its brokers must be registered with the RERA. Upon registration, agency is given an Office Registration Number (ORN) and its agents are given a Broker Registration Numbers (BRN);
    • In order to be registered with the RERA, all agents of a brokerage company need a certificate from the Dubai Real Estate Institute (DREI) and have to pass a professional test, administered by the RERA.
    • Brokers are required to comply with a Code of Ethics, published by the RERA.
    Why is it important that an agent is duly registered?

    The Dubai market is a melting pot of cultures and it can be a daunting task to those new to the country. It is difficult to trace down who is responsible in the event that something goes wrong in a property deal. Real estate agencies act as intermediaries between buyers and sellers and as such, there is a clear account of who is responsible and both buyer and seller knows where to turn when something goes wrong. Not all agents in the market are registered and it is essential that homeowners and tenants make sure that they are dealing with a registered agent to safeguard their own assets.

    As intermediaries, agencies are ethically obliged to work out a deal that is in the best interest of both parties. For example, the agency is responsible for collecting a deposit from the buyer and holding on to it until final payments are made to the seller. The buyer can be assured that he/she will receive the deposit back if something goes wrong with the deal on the part of the seller. Meanwhile, the seller is assured that they will be compensated if the deal is cancelled on the buyer’s part.

    Do I have to register the property to claim ownership? Can anyone go in for the registration?

    Once a property has been handed over to the purchaser, it must be registered in the name of the purchaser at the Dubai Land Department (DLD). The property owner can appoint someone with a notarised Power of Attorney to register their property and receive a title deed if they are unable to do it themselves.

    Off-plan property needs to be registered in the interim register through the Oqood system on receiving the initial sale contract. When the property is ready, a title deed will be issued in the name of the homeowner.

    A registration fee of 4% of the property value needs to be paid along with a fixed amount for document preparation.

    Are foreigners permitted to have 100% ownership of property in Dubai?

    Earlier, ownership of property in Dubai was restricted to citizens of the UAE. However, in 2006, the government passed Regulation No. 3, determining designated areas where non-citizens can own property. In these areas, foreigners are permitted to buy property on freehold ownership. Major freehold properties are available in most parts of ‘new Dubai,’ such as in Dubai Marina, Palm Jumeirah, Jumeirah Lakes Towers and Emirates Hills.

    What I have to Do before Moving out from Rented Apartment?

    In Dubai, there are some specifics associated with moving in/out from a rented premise. Here are some tips how to get your deposit back in full, and move out easy and fast:

    1. In Dubai, all relations between the tenant and the landlord are regulated by registered lease contract. Thus, a tenant is officially informed in advance about when he/she should prepare to move out. And the first thing to do is booking a moving service in order to do everything in time.
    2.  The other thing of high importance is transferring your internet and satellite television accounts to a new place of residence. Put a visit to your provider’s office in your schedule beforehand, in order to make a request to transfer your account to your new address, or cancel your current account in time.
    3.  A very important and specific moment for Dubai is also a timely disconnection of your DEWA account, which applies to water and electricity services. If you fail to notify the company of your moving out, you can face new DEWA bills for your old apartment even after vacating it.
    4. Another practice casual for Dubai is requiring moving permits for tenants who are moving in and out in some buildings and residential communities. So be prepared to get it in advance if needed.
    5. Under the terms of the lease contract, the tenant is obliged to vacate a premise leaving it in the same condition he found it when moving in. Few renovations and repairs (like painting the walls, filling in the holes and taking care of other damages and marks) would cost you less, if you do them yourself. Otherwise, the landlord may deduct the amount of repairs from your deposit, and this can be much more expensive.

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