Imagine as a property owner, you're paying steep property maintenance fees and then you suddenly see the bill shoot up to unbearable amounts. How do you explain to your tenants the reason for the rent increase? The goal is to shield yourself from difficult and sketchy tenants, without breaking any laws.
Understanding your rights and responsibilities as a landlord or tenant is an important factor when living in Dubai.
What to know before asking for a rent increase
Dubai’s Rental Market is primarily governed by two inseparable statutes that address Tenancy Laws. The decrees preside over the relationship between tenants and landlords for both residential and commercial property.
- Law No. 26 of 2007 which seeks to regulate landlord and tenant relationships in Dubai.
- Law No. 33 of 2008 which is an amendment to the provisions of Law No. 26 of 2007 regulating the association between the landlords & tenants in Dubai.
The major highlights of these laws are:
- Contractual obligations for both landlord and tenant
- Tenancy period and renewal
- Reasons why the landlord may terminate the contract before maturity
- Terms under which the landlord may refuse to renew the tenancy agreement
- General rules of resolving rent disputes and the remedies
Ever since 2007, the Dubai rental market has been fluctuating. This has culminated in a few decrees appraised to cap the rental prices. The Decree Number one of 2009 and Decree Number two of 2011 denote the maximum rental percentages up to which landlords can increase their prices. This is the rent index.
To prevent landlords from pegging their rental increments on the value appreciation, Dubai Decree No.43 of 2013 states the following:
- With no increase in the rental price of the property, if its rental price is less than 10% of the average market rental rate
- 5% increase if the earlier rental price is 11 to 20% lower than the average rental price for a similar property
- 10% increase if the rental price is 21 to 30% lower than the current rental price for the same property
- 15% if the rental price is as low as 31 to 40% than comparable ones
- 20% if a property’s rental price is more than 40% less than the average.
The RERA Rent Increase Calculator
Given the volatility of the property markets, Sheikh Mohammed bin Rashid Al Maktoum issued Decree No. 43 of 2013 meant to prevent the market from out-pricing itself. Also, to curb illegal rent increment.
The Real Estate Regulatory Authority (RERA) provides the rental increase calculator. Meaning, a tool meant to educate tenants and landlords in determining whether the increment is legal or not.
The rental increase calculator works in strict conformity with the RERA rental index which is annually updated to reflect the prevailing market conditions. As a landlord, it would be a great idea to first consult the rental calculator to ensure you are operating within the precincts of the law. As a tenant, you should check the calculator if you receive a rent increase notice.
To calculate the rate, you need to indicate the following details:
- Whether the property you own or stay in is residential, commercial, or industrial
- The expiry date of the tenancy contract
- Area of the property
- Property type
- Community or sub-community
- Number of bedrooms
- Annual rental amount for the current year
The following are not taken into consideration:
- Age of the unit or property
- Building condition
- Available facilities
- Floor level
In comparison with the average prices of similar properties, the rental calculator is able to appropriately show you the way.
How much of a rent increase?
From 2018, the RERA upgraded rental index structural approach states the following:
- If the rent of a property is 21 to 30 % less that of similar property, a 10% rent increment can be imposed.
- When the average rent is 31 to 40% less that of comparable properties, a 15% rent increment can be imposed.
- Less than 40% that of comparable properties means a 20% rental increase is appropriate
When is a rent increase allowed?
As a property owner, if your property qualifies for a rental increase, you must issue your tenants with a notarized rent increase letter 90 days before renewing the rental agreement.
This letter can be personally handed to them, left at the door or even sent via mail. The failure to do so means that the tenants are not compelled to succumb to the rental increase. Regrettably, in spite of the law and the existence of the rental increase calculator, some tenants will still object.
If the rental calculator allows you to adjust the rental price, but the tenant is insistent that it is illegal, you can have a one-on-one conversation with them and share your supporting evidence. Should this prove futile they can file a complaint with the Rental Dispute Settlement Center.
In conclusion
Just like any other place in the world, rental disputes happen in Dubai. The law provides remedies for both the tenant and the landlord.
As a landlord, you cannot raise the rent without notifying your tenants. As for the tenants, for many of the above-discussed issues to be binding, your tenancy must be registered with Ejari. Ensure you thoroughly vet the agents and carry out your due diligence before you even think of signing that check.
Staying abreast of laws and the market takes effort. At Blueground, we handle all aspects of rental pricing. As experts in the market, we handle payments from our senior executive tenants and payouts to our Dubai property owners. All of our landlords can trust they’re receiving the best possible rates.
