The new rental law in Dubai is PRO-TENANT, even though initial rents are freely determined. Rent increases are subject to government’s rent cap policies and strong security of tenure is given to the tenant.Rents: Can landlord and tenant freely agree rents in UAE?
Parties may freely agree on the initial rents. However, during the first two years of the tenancy contract, no rent increase is allowed.
At renewal of the tenancy contract, the landlord and the tenant were previously allowed to decide on a new rent level. However, with the new rental law in place (Decree No. 1 of 2009), rent increases for contracts renewing in 2009 were not allowed if existing rents are equal to or less than 25% of the new rental index set by the Real Estate Regulatory Agency (RERA). Where existing rent is below this threshold, rent caps apply.Deposits
Prior to occupancy, the tenant is required to remit a security deposit equivalent to 5% of the annual rent. The same amount is usually refunded to the tenant upon termination of the contract.
An additional deposit of AED1,000 (US$272) to AED2,000 (US$545) must be paid to the electricity and water provider (DEWA). Some emirates also expect tenants to pay municipal tax on the leased property.
Rents are normally paid in advance for the entire year, either in cash or cheques. If the tenancy contract does not explicitly state when rent payments are to be made, rents a year must be paid in four equal installments in advance.What rights do landlords and tenants have in UAE, especially as to duration of contract, and eviction?
The Tenancy Law of 2007 mandates that the tenancy relationship shall be stated in a written contract and registered with RERA. The law also states that a tenancy contract cannot be unilaterally terminated by one party without the consent of the other party.
If either party wishes to prematurely terminate the contract, three month’s notice must be given. And in the case of a landlord, a “just cause” of eviction must be included in the notice before he can be legally allowed to evict a tenant, including:
In a case when a tenant continues to occupy the property after the expiry date of the contract without the landlord’s objection, then the contract will be renewed (based on the same terms and conditions) either for a similar period or for one year, whichever is less.
How effective is the UAE legal system?
Landlord and tenant disputes are submitted to and executed by the Rent Committee. However, tenancy contracts not registered with the RERA cannot be referred to the Rent Committee or any government authority for dispute resolution.
The committee takes action on rent disputes only if a tenant or a landlord formally files a complaint. The complainant needs to pay 3.5% of the annual rent as a fee to the committee. If the complainant wins the case, he will be reimbursed with the amount he paid while the losing party will bear the expense.
Rent disputes rose sharply in the last few years due to severe shortage of rental accommodations in Dubai. Rent dispute cases rose by 53% from 4,700 cases in 2006 to 7,200 cases in 2007.
The Rent Committee is normally pro-tenant on its rulings, considering that a large number of landlords attempt to exploit tenants by charging unreasonable rents.Legislation
The “Law Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai No. 26 of 2007” known as the Tenancy Law came into effect on February 29, 2008. The law covers all rental properties in Dubai except for hotel establishments and properties provided by companies to its employees as free housing.
Then in early-2009, the “Decree No. 1 of 2009 Governing Rentals in the Emirate of Dubai” was issued to control rent increases for renewing rental contracts in 2009.Brief history: Recent changes in UAE’s landlord and tenant law
The UAE government introduced a rent cap of 15% in 2006, which was slashed to 7% in 2007. The rent cap was further reduced to 5% in 2008, in an effort to curb inflationary pressures.
In January 2009, Dubai’s Real Estate Regulating Agency (RERA) unveiled a new rental index to replace rent caps. Following this a new rental law was released, establishing the rental index as a benchmark for rent increases.Dubai Land Department Rental Increase Calculator