The decision to move the existing rents committee from Dubai Municipality to the Dubai Land Department (DLD) has come as a surprise as many felt it worked well where it was.
“I am not sure why they needed another rent dispute committee unless they were so busy that they needed to branch it out. I think, though, the timeline is going to be reduced to around 30 days to get a judgement, which is very good. Perhaps it will also help to streamline the process,” says Mario Volpi, Managing Director of Prestige Real Estate Dubai.
It certainly makes sense, considering that it is the Dubai Real Estate Regulatory Agency (Rera) that handles the rent index calculator and it is the DLD that acts as the judiciary arm together with the Dubai Courts for real estate disputes, not Dubai Municipality.
Sultan Butti Bin Mejren, Director General of the DLD, explains that the move is not about cancelling a committee nor creating another. “It is rather a continuation of what’s been done and moving forward from there and improving all the services,” he says.
Indeed, Dubai Municipality has been coping with loads of work. Ludmila Yamalova, Founder and Managing Partner at HPL Yamalova and Plewka JLT, a legal consultancy, says queues were so long at Dubai Municipality that at times one had to go back three or five times to file a case. “We have litigated a couple of rent disputes under the rents committee, and I have to say that the Dubai Municipality judgements are predictable, which is great. However, from a logistics point of view, they are overloaded,” says Yamalova.
The new Rent Disputes Settlement Centre will be able to handle 250 cases a week, while the existing committee handles about 100. “By moving to the new centre, we’ll more than double the capacity. Hopefully, in the future we can increase the number of cases per committee from five to ten, and then the centre can even take 600 cases per week,” Bin Mejren adds.
The centre will have 10 committees; eight of them related to first instance and two to appeal. It will also have a secretary-general and a judge. “There are already about 48 skilled legal employees in the existing rents committee who will move over [to the new committee],” says Bin Mejren.
This partly answers the question posed by Michael Lunjevich, Partner at Hadef and Partners, whether the new centre will look at disputes the same way as the former rents committee did. “The DLD has some very experienced people, so hopefully this new centre will be a good thing for the market,” he says.
According to Decree No 26, the Rent Disputes Settlement Centre, also known as the Rental Dispute Settlement Centre, will open 60 days from being published in the official gazette. “We would normally expect these to be published in October,” says Lunjevich.
This would mean the centre will open in December, which Bin Mejren confirms. The centre’s headquarters will be at the DLD building with branches to open across the emirate. Meanwhile, Dubai Municipality’s rents committee will continue to function until the decree comes into force.
The new centre will not entertain cases filed prior to the implementation of the law creating the new committee. There is one exception: decisions that hadn’t been executed when the decree came into force may be appealed within 30 days from the date of the implementation of the decree.
The general aim is to support sustainable development in the emirate by creating a specialised judicial system that resolves real estate disputes speedily, efficiently and fairly. “We’ll be using new procedures and mechanisms to expedite the settlement process for the purpose of achieving social and economic stability for all concerned,” says Bin Mejren.
The presence of an appeal system distinguishes the way the new centre will handle disputes. At present, Yamalova explains an appeal is not possible at the rents committee and to get a ruling enforced, one has to go to Dubai Courts.
“What is new is that there will be a judge and lawyers sitting on the committee. Presently, business people sit on the Dubai Municipality’s rent committee. So now, it will have more of the nature of a court proceeding, which is good. The committees in the rent dispute centre will now have their own execution powers,” she says.
The centre will hear all rent disputes pertaining to typical rental contracts registered with Ejari. Properties located in free zones are also within the jurisdiction of the centre, except in areas where there are special judicial committees or courts competent to settle rental disputes. As such, rent disputes in Dubai International Financial Centre (DIFC) will be heard at the DIFC Courts.
The centre will have a reconciliation, first instance, and appeal department. “Before, a rent case went through only one stage. Now, we have three stages: the mediation council, the trial and the appeal,” says Yamalova, adding that the mediation stage will only be effective if it has teeth.
“We’ll have to see how it will be put in place. If they make it a mandatory step, it has the potential of causing a delay in the decision process,” she says, pointing out that this would fail to achieve one of the objectives of the new committee. “Decisions don’t take too long at the Dubai Municipality. We had some cases resolved within 30 days.”
According to the Decree, mediation shouldn’t take more than 15 days for parties appearing for the first time before the reconciliation department, although the supervising judge could extend the time by about the same number of days. Furthermore, the resulting agreement, signed by both parties and the judge, will have the power of an executive instrument. The department also has its team of legal experts to provide technical expertise.
In general, the decree expects decisions to be forthcoming 30 days after they have been filed. In theory, this implies that if mediation didn’t work and the case gets referred to the First Instance department, it only has 15 days to come up with a ruling. However, urgent orders, requests and lawsuits are excluded from mediation and all lawsuits can be extended if the chairman of the centre so decides.
If the case goes on to the appeal stage, it would naturally take a little longer. Cases need to be appealed within 15 days from the First Instance ruling.
“I like the appeal stage, which we don’t have right now, as the onus to prove certain qualities is on the one filing the appeal, such as the right to evict. To appeal, one will have to pay 50 per cent of the amount of whatever is at stake, which could deter people from filing an appeal to simply try their luck as is currently the case at the Dubai Courts, where it only costs Dh750 to file an appeal and cases get dragged on forever,” Yamalova explains.
According to the Decree, however, the centre’s chairman may accept an appeal without the deposit or after collecting a percentage thereof.
Who can appeal?
Appeals can only be made if the amount disputed is over Dh100,000, unless an eviction judgement has been issued, or one can prove that the judgment of the First Instance was built upon counterfeited documents, hidden documents, false testimony, a violation of the jurisdiction rules, or something not requested by the parties or those that exclude their explicit orders.
It can also be appealed if it is made against any party who is not well represented in the lawsuit, or if there is any mistake in the legal notification.
The centre can also use the Dubai Courts to execute judgements and the police if needed.
The fees to file a rental dispute may be less than the 3.5 per cent of the rent value, the amount charged by Dubai Municipality. The new centre expects fees to be up to 2.5 per cent of the rent value, covering the necessary audits, communication and follow-up of the parties’ cases.
“For now, we will apply the same fees than the existing ones, but when the new centre is officially up and running, then we’re going to take another look at the fees, and revise if need be,” says Bin Mejren, adding that it is the losing party who pays the fees, in line with the Federal Law.
However, in mediation cases, only half of the charges will be refunded if an amicable settlement is reached.
While the centre settles disputes, the DLD also wants to reduce the number of disputes. Usually, conflicts arise from rent increases and the rents committee currently refers to Rera’s rental calculator index.
“Rera’s rental calculator needs to be updated, as the tenant tends to look at the average price based on the rental calculator, while the owner often refers to the market price. The gap is too wide, creating a lot of conflict,” says Volpi.
“The index is updated quarterly, but this is not enough in a rapidly rising market. Maybe they should adjust it monthly, instead,” he suggests.
Index to be revised
The DLD, on the other hand, is planning to revise the index. “We’re going to look at whether the rental index is actually feasible, such as, is the mechanism right? Then we’ll decide what to do to improve it,” says Bin Mejren.
“We want to stabilise the rental market and will therefore look at its laws and add or change regulations if needed, and will benchmark certain procedures against those in other countries,” he adds.
Volpi welcomes the news: “The property market is forever evolving, so the authorities implement changes to adapt. If they work, good, if they don’t, they can change it.
“This is normal. One has to take into account that the Dubai property market is still young. It started only 11 years ago in 2002, so the government looks to more mature markets, like the UK, which has been around for hundreds of years, or Australia and so on to benchmark against Dubai and implement what works.”