Issues about landlord rights to increase the rent value are most burning for tenancy relationships in Dubai. As it always comes when the interests of two parts are conflicting, one's benefits cause losses for another part. So, the information we provide in this post may be useful both for landlords and tenants as it contributes to better understanding their opportunities and rights.
The first issue we will discuss concerns permissible frequency of rent increase.
First of all, in Dubai, having fixed the rent in a tenancy contract, landlords are not entitled to raise it whenever they want. Instead, they may increase the rent not often than once a year. Moreover, the only legal opportunity to set higher charges comes along with contract renewal. In other words, a tenant can enjoy the rent value fixed in his tenancy contract for the whole period. Any landlord's decisions to change the rates during the contract period you can regard as against the law. Hence, tenants can file a complaint to protect their rights.
Second, a landlord must pre-notify about his intentions to raise the rent. By law, a landlord shall issue a notice for his tenant about rent increase not less than 90 days prior to the contract expiry date. To clarify, if he fails to do this in time, he can't claim rent revision when renewing the tenancy agreement upon the current expiry date. Instead, he shall wait till the next contract renewal date comes.
How much can a landlord increase the rent in Dubai
The second issue arises here is about a rent increase cap allowed in Dubai. And again, there is no much freedom for a landlord concerning rent increase rate. To clarify, any rent increase shall comply with local legislation. The legislation prescribes the following top rental escalation in percentage depending on the current rental-benchmarking rate:
0% – if the rental is less than 10% of the average market rental rate;
5% – if the rental is less than 11%–20% of the average market rental rate;
10% – if the rental is less than 21%–30% of the average market rental rate;
15% – if the rental is less than 31%–40% of the average market rental rate;
20% – if the rental is less than 41% and more of the average market rental rate.
So, a rental index seems to be quite clear and simple. The only question that can arise concerns the average market rental rate. How to calculate it? Well, you don't need to calculate it at all as the Real Estate Regulatory Agency (RERA), a local authority, has already done it. To clarify, RERA specifies the average market rent value for every property type and every area in Dubai. So, any landlord shall use the specified rent for benchmarking and increase his rent within the rental index.
You can always visit Dubai Land Department's webpage and check the rental index to understand your options.
Is my building rent controlled?
In short, the answer is “Yes”. However, let's make it clear, in Dubai no one regulates the rent level targeted for an initial tenancy contract. In other words, a landlord can price his rental property as much as he assumes to be appropriate while trying to rent it out. For example, if he manages to find a tenant who is willing to pay twice above the market price, he can fix this rent value in his contract. Instead, existing tenancy relationships are subject to rent control. To clarify, the authorities govern rent increase cap and its periodicity within an already signed tenancy contract that is going to be reviewed.
For your convenience, let's list legislation related to rent control:
Law No. 26 of 2007 – states Real Estate Regulatory Agency's rights to regulate a rental index;
Law No. 33 of 2008 – specifies the landlord obligation to pre-notify his tenants about his intentions to increase the rent and set minimum notice period prior to the contract expiry date;
Decree No. 43 of 2013 – specifies permissible rental increase cap.
If you have an assured shorthold or assured tenancy
First of all, let's clarify the terms “assured tenancy” and “assured shorthold tenancy”. Assured tenancy is a long-term lease with a contract of at least 6 months. In Dubai, it is mandatory to sign such a contract and verify it with EJARI, a local tenancy contract registration system. Assured shorthold tenancy is a short-term rental. The main difference here is the rental period here can start from just one day or be up to 6 months. In addition, there are no requirements to register such tenancy agreement with EJARI.
Earlier in this post, we discussed rent increase regulation in Dubai. However, it is important to mention this regulation covers only assured tenancy relationships. On the contrary, assured shorthold tenancy is not regulated at all. It means a landlord has a free hand in reviewing the rent and can increase it as much as he desires. Moreover, when it comes to assured shorthold tenancy, a landlord can raise his rental whenever he wants without any prior notice. Thus, as you can see, this tenancy type provides less tenure security but more freedom for a landlord.
To sum up, at BSO, we strictly recommend both landlords and tenants to read these laws carefully to understand their rights, liabilities, and options. For our part, we guarantee acting within the law when we manage your property and deal with your tenants. So, sign a property management contract with us to secure your interests and enjoy hassle-free landlordship.
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