Dubai: The Dubai decree on rental increases issued at the end of last year has significant implications for the current practice of landlords in the DIFC. Previously, there was no rent cap law in the DIFC.
Now, Decree No. 43 of 2013 — on ‘Determining the Increase in the Real Estate Rentals in the Emirate of Dubai’ — also determines the extent to which rents may be increased in the free zones, and expressly refers to its applicability in the DIFC. As a whole, the decree applies to landlords in all of Dubai.
The decree provides a mechanism for calculating the maximum rent increase permitted, if at all, upon renewing a lease. The calculation is determined by reference to the average rental value in the area where the property is located and the percentage to which the rent pre-renewal falls short of that.
Article 1 of the decree sets out the maximum increase in rent allowed, depending on the difference between the rental amount and the average rent paid in the area. No rent increase is permitted where the rental amount is up to 10 per cent less than the average rental in the same area.
The decree also stipulates that the average rent is determined by the Rera (Real Estate Regulatory Agency) rent index for which the Rental Increase Calculator is available online. The Rental Increase Calculator allows a landlord or tenant to enter the current annual rent paid for the type of property in a particular area and calculate the permitted rent increase.
The Rental Increase Calculator has just this month been adjusted for rental prices and now also includes properties in the DIFC.
Further, it should be noted that the Rental Disputes Settlement Centre of the Dubai Land Department will handle all rental disputes arising between landlords and tenants in the emirate of Dubai (including the free zones). However, this does not apply in respect of rental disputes arising inside free zones that have courts competent to settle rental disputes arising within their boundaries.
Therefore, the DIFC Courts would have jurisdiction over any rental dispute in the DIFC. Moreover, in this regard the DIFC Small Claims Tribunal (Resolution of Rental Disputes) Order No.2 of 2014 directs and expressly provides that the Small Claims Tribunal will hear and determine all rental disputes where the amount of the claim does not exceed Dh500,000.
Credit: The writer is a counsel at the law firm of Afridi & Angell.