New Dubai law on leasing has benefits for everyone

The Dubai Land Department recently announced plans to increase regulation in the leasing market with a new law expected by the end of the year.

The law will tighten up the rules and regulations related to tenancy agreements and as a result of this, the number of loopholes that are currently being exploited should be reduced, thus protecting the rights of both tenants and landlords.

Any law that adds further credibility to the industry and protects consumers is welcomed. The leasing market has faced many challenges in recent years, mainly due to the lack of available properties to rent. The situation has provided landlords with an opportunity to increase rental rates beyond their wildest dreams and in some cases even double them. As a result of such hikes, tenants have faced numerous problems and difficulties.

The rent cap was introduced to help the situation, and while in the long term I don't think it's appropriate to control the market, as a short-term fix I do believe it has achieved most of what it set out to do.

Creative

However, some landlords have become more and more creative in finding ways to get around the cap, with tales of moving family members in or having to redecorate the property being used to remove existing tenants in order to release the property at a higher market value. Similarly, landlords have faced problems when they genuinely want to sell their property, but tenants want to renew their leases and in some instances, tenants have refused to let landlords inside the property to check for repairs.

The Dubai Rent Committee has stepped up its efforts to reduce the occurrence of such incidents. But the high level of demand for intervention coupled with the irregularities in tenancy agreements has made it difficult to effectively resolve all situations.

The new law requires landlords and tenants to have tenancy agreements approved by the Land Department. The contracts will include details such as rental rates and planned increases, length of contract, deposit, compensation for damages or ending the contract early, and it will also state when the landlord can end the tenancy. This means that from the outset both parties know exactly where they stand and there will be no nasty shocks along the way for either side. In the event of a dispute, everything will be clearly defined, making the rent committee's job much easier and issue resolution should become swift and straightforward.

There have been whispers from some that the new regulation is a further barrier for investors looking to capitalise on the leasing market, but I have to say I disagree with this. Having clarity on all elements of the lease is good for everyone - landlords as well as tenants.

Let's not forget that over the last few years landlords have achieved, and continue to achieve, very good returns in Dubai. In addition to the increase in rental rates, there have been huge increases in property values.

The rent cap has helped to stabilise rates in the short-term while still giving landlords good annual returns. As the new stock that we can all see under construction across the city is delivered, the need for such a mechanism will be removed because the market will even itself out naturally.

Thanks to the continued efforts of the Land Department, Dubai's residents can sleep a little easier, safe in the knowledge that their tenancy agreement is legitimate and fair; helping safeguard landlords investments while at the same time making tenants feel more at home in their homes.

The writer is managing director of Better Homes.