Rents are going up in Dubai and are likely to go up
further by the end of the year. Many residents in Dubai, who were breathing
easy as rents came down, fear a repeat of 2008, when greedy landlords would
jack up the rents arbitrarily.
However, this should not be the case as there are legal
clauses in place for rent hikes in the city. According to legal experts with
top firms in Dubai, landlords are allowed hikes which are set out as per
government guidelines.
For those tenants who can foresee rent hikes on the
property they are living in, this is what they should consider. First, they
need to look at the time when they signed the lease of the property.
According to Andrew Thomson, Senior Associate at Clyde
& Co, the hikes will depend on when the tenant moved into the property and
there are two slabs for this.
“For properties leased prior to January 2011, no
increases will be permitted if the rent is less than 25 per cent of the average
rent for similar property in the same area. If it is more than 25 per cent,
then there is a staggered permitted increase ranging from 5 per cent to 15 per
cent.
“For those leased after January 2011, if a landlord wants
to increase the rent, he has to inform the tenant at least 90 days before
expiry of the current tenancy period (unless the parties agree otherwise).
“The increase of rent in Dubai is governed by Amiri
Decree 2 of 2011,” Mohammed Kawasmi, Head of Property, Northern Emirates at Al
Tamimi & Company told this website.
However, in case of a dispute, the parties should
approach the Rent Committee, which has been set up to resolve such cases.
“If the landlord requests an increase in violation to the
said Decree, then the tenant has the right to file a case at the Rent Committee
which will decide on this based on the said Decree,” added Kawasmi.
“If the parties do not reach agreement on this, the Rent
Committee may decide a fair rent and have consideration to the RERA rental
index calculator. The RERA rental index
calculator currently states that no increases will be permitted if the rent is
less than 25 per cent of average rent for similar property in the same area. If
it is more than 25 per cent, then there is a staggered permitted increase
ranging from 5 per cent to 15 per cent. Ultimately, however, the Rent Committee
is not bound by the RERA rental index, and can make awards on the basis of the
particular circumstances of each case,” said the Clyde & Co expert.
Rent hike slabs as per law
According to Decree No. 2 of 2011 on rentals in the
Emirate of Dubai, the landlords can increase the rent as below.
Article (1)
The maximum rent increase percentage of property units in
the Emirate of Dubai leased before the enforcement of this Decree shall be as
follows:
A - There should not be any rent increase, if the rent
for the real estate unit is up to 25% below the average similar rent.
B - If the rent value was 26% to 35% less than the
average similar rent; the maximum rent increase shall be equal to 5% of such
value.
C -If the rent value was 36% to 45% less than the average
similar rent; the maximum rent increase shall be equal to 10% of such value.
D - If the rent value was 46% to 55% less than the
average similar rent; the maximum rent increase shall be equal to 15% of such
value.
E - If the rent value was less than 55% of the average
similar rent; the maximum rent increase shall be equal to 20% of such value.
Article (2)
For the purpose of this Decree the similar rent value of
the property unit means pursuant to “The Rent Index of the Emirate of Dubai”
approved by RERA.
Article (3)
This Decree shall be enforced from the date of its
issuance and shall be published in the Gazette.
Issued in Dubai on 10 January 2011.
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