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Landlord’s Guide: Questions & Answers

We have summarized our Dubai real estate experience and answered four most commonly asked yet tricky questions. If you do not see what you are looking for, you can always contact our specialists to get professional advice.

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 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 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.

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.

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