Dubai: Tenants in Dubai unaware of their rights and faced with illegal rent increases are increasingly inquiring about the law or filing complaints, property lawyers and consultants say.
“It’s a common feature of the market at the moment. A lot of landlords are trying to recoup rental losses when the market was less effective and make up some of the rental lost in the last few years,” said Brent Baldwin, a partner at law firm Hadef and Partners.
The number of complaints against illegal rent increases seem to have increased over the last six months, said Alexis Waller, partner at Clyde and Co.
Rents in select areas across Dubai are rising by 20 per cent on average as the market begins to recover. However, the Real Estate Regulatory Agency (Rera) has strict laws regulating increases.
So how do tenants determine if the increase demanded by their landlord is legal?
According to the law regulating rentals in Dubai, the landlord can increase rents by a minimum of five per cent to a maximum of 20 per cent — only if the existing rent is below the average market rate stated in Rera’s geographic rent index.
This works according to a stepped rental cap. It allows a rent increase of five per cent where the existing rent is 26 per cent to 35 per cent below the average rents for property in that area, by 10 per cent where the property is 36 to 45 per cent below market rent, by 15 per cent where it is 46 to 55 per cent below the market rate and by a maximum of 20 per cent where it is more than 55 per cent below.
However, rents that are less than 25 per cent of the index rates cannot be raised.
To find out the market rents for their property, tenants can use the Rera rental index calculator on the regulator’s website. The index compares rents for properties in different areas and is updated four times a year.
“The law protects both sides… Rera regulates the relationship between landlord and tenant,” said Mohammad Khalifa Bin Hammad, head of the real estate relations management department at Rera.
When faced with a rent increase that violates the rent cap, tenants should begin by talking and negotiating with their landlords first, real estate lawyers and government officials say.
“The tenants has to communicate in the beginning with the landlord and say ‘this is what the law stipulates,’ show them the Rental Index Calculator and try to negotiate with the landlord,” Bin Hammad said.
“It depends on how much stomach you have to take on the landlord. Some are spoiling for a fight and others want an easy life,” Baldwin said, adding that tenants can stand firm and tell landlords they are not entitled to this increase legally or negotiate a reasonable increase within the rent cap.
If the landlord and tenant reach a deadlock, they can settle the rental dispute at the Rent Committee in Dubai Municipality, the authority with jurisdiction to resolve tenant-landlord issues in Dubai, experts say.
“A hearing date is usually given within two weeks of filing a claim and the matter is usually dealt with in one hearing where the case is straightforward, such as rent increase dispute. There is no requirement for the tenant to be legally represented although we would usually recommend that they speak with a local advocate experienced in Rent Committee disputes,” said Waller.
The fee for filing a claim is 3.5 per cent of the claim amount, subject to a maximum of Dh15,000, she added.
The Rent Committee’s decision is legally binding for both parties. “The tenant could be prepared with knowledge of what similar property is going for at that area in that time,” said Lindsey Naylor, senior Associate with Hadef and Partners.
To stay or not to stay
If you decide to stand firm and refuse to pay an illegal rent hike, you can still remain in your apartment or villa, depending on the terms of the contract, but the landlord has the right to challenge your stay, experts say.
The landlord could seek an eviction order from the Rent Committee but can only evict the tenant after the order has been issued, lawyers say.
In any case, the law requires a landlord to give 90 days notice prior to renewal for any change in rental terms. “So if a tenant has not had 90 days notice of any intended rent hike they can also argue this provision,” said Waller.
Rising rents could drive tenants to relocate to other areas where there is more supply such as Jumeirah Lake Towers or less mature areas in Dubai, said Helen Tatham, head of residential at Knight Frank.
“For apartments JLT has a lot of empty units and suffers hindrance from road works at present but will improve over time, Tecom is another ‘value for money’ area with no particular landscaping to speak of,” she said.
Experts suggest the rental increases are not the beginning of a repeat of the property boom in 2006 but that it signals an increase in activity in the market.
“There’s a feeling that people are a lot more educated this time around in terms of legal positions on their rights, as tenants or landlords or property investors. Whereas in 2007, the tenant may have taken the landlord’s request for an increase, now they are questioning whether or not its legal. We are finding that tenants nowadays are a lot more aware of their rights and landlords are aware that tenants are aware of their rights,” said Naylor.