Tim Elliot
This is Lawgical, the UAE’s first and still only regular legal podcast. Welcome. My name’s Tim Elliot. Lawgical comes to you from the Dubai-based legal firm, Yamalova & Plewka, and as ever, here is the Managing Partner, Ludmila Yamalova. Good to see you.
Ludmila Yamalova
Good to see you too, Tim.
Tim Elliot
Here’s part two of four podcasts, and we’re looking at the cost of renting property here in Dubai specifically. We’re actually looking at the rent valuation certificate here in Dubai. Now this time, increasing rent based on that certificate. Once again, Ludmila, we’re back to one of the UAE’s hottest topics. Property is dinner party conversation wherever you go. Everybody talks about it. It’s also very often everybody’s least favorite topic as well because for me, in my own life, it’s that time of year again and I’ve been playing that age-old game of just how high is my landlord going to try to raise my rent. You know the story well.
Ludmila Yamalova
Indeed. It has been a story that’s been on a lot of people’s minds and in a lot of people’s lives, and one that is hot on the one hand, and very sensitive and painful on the other hand. For the same reasons as we had discussed before, in the last year, property prices in the UAE and in Dubai in particular, have gone up and shot through the roof, in many cases doubled and maybe even tripled.
Certainly, with regards to rent in particular because, if you recall, during COVID, we experienced quite a bit of relief—almost like a holiday. They called it, remember, rent holidays, the payment holidays, and that was the term used during COVID where landlords, for example, particularly for office space, provided commercial tenants with what was called a payment holiday or rent holiday. Since then, things have changed dramatically and for some quite favorably, that is, for owners of properties. For tenants, it is a little less favorable.
Yes, the prices are going up, on the one hand. On the other hand, both tenants and landlords—though I have to say tenants perhaps more so than owners of properties—have become a lot more educated and better informed about the laws in the UAE and in Dubai, especially with regards to the rental and the real estate market. In the past, eight or nine years ago, whenever the landlord would send you an eviction notice as a tenant, in most cases, people would just take it at face value and move out.
In the last several years, and I’d like to credit perhaps even us for this podcast and other social media outreach, people have become a lot better informed about their rights and they are less scared because, don’t forget, that is a fairly significant factor as well in people’s decision-making. Even if they know that the law is on their side, what does that mean? I tell my landlord that no, you cannot increase rent, but he disagrees with me, so what do I do? A lot of times people just do not know what to do. They are afraid to go to court.
Also, even emotionally and psychologically, that was just too much for them to handle, so they would just move out. Well now, they are better informed, and they are less risk-averse. They actually take their chances and go to court. I have to tell you, I think COVID has helped a lot in that regard because it has made a lot of the government services, including judicial services and other regulatory services, available online.
This means now you don’t have to go, as the case was before, to the rental court and stand there in line and appear before hearings, wait for hours on end, and then be afraid, your knees shaking, every time you had to appear before a judge who only spoke Arabic. You’d be surrounded and overwhelmed with people around you. These are real-life stories.
Tim Elliot
Sure.
Ludmila Yamalova
We’ve been there on that particular path many times over, and for a lot of people, it was not really worth it. Well now, all of these services are available exclusively in digital format. You can no longer, even if you wanted to, go to the rental court and apply physically or appear in the hearing physically. No. Everything is online.
That’s been a great blessing for everyone, for owners and especially for tenants, because they don’t have to leave work to appear before a judge in the rent court. They can actually do it all from the comfort of their workplace through Zoom or Microsoft Teams. That’s with regard to court appearances, but also submission of documents and being able to track your case. Before, the only way to find out the status of your case was to physically go and check. Now, everything the parties submit in these cases is stored and accessible online.
That’s been one of the greatest blessings of COVID, I’d like to think. Now people are doing this a lot more. Therefore, owners similarly now know they’re dealing with intelligent and well-educated tenants who know about the RERA calculator and are also equally informed about the valuation certificate.
This certificate can be applied for through the Land Department via the Dubai REST App. It requires property specifications, photos, a description of the property, and a fee of AED 2,000 for the valuation certificate itself. Once issued, if you were renting a property for AED 100,000, and the certificate states it’s worth AED 150,000, this document trumps or supersedes the RERA calculator. It becomes the benchmark for the Rent Dispute Centre (RDC) when deciding whether a rent increase is allowed.
Tim Elliot
Well, the valuation certificate is an official document, isn’t it? That’s the point. It proves your property is worth more than it was because the market is hot at the moment. What kinds of percentages in terms of rent increases are allowed? Just give us an overview. I want to look at them specifically in the next episode. But just as an overview, what’s the banding? How does that work?
Ludmila Yamalova
The range is from 5% to a maximum of 20%. That is what’s allowed. Obviously, (1) this is if you want to apply the law, and (2) if you want to challenge it in court. Person to person, outside of court, you can agree on whatever. For example, you could agree on a lower percentage, such as 3% instead of 5%.
Equally, some tenants may offer higher percentages, beyond the legal maximum of 20%, if they believe it’s fair due to property value or paying less than market rates. By law, however, the range remains 5% to 20%.
Interestingly, the valuation certificate does not immediately allow rent increases. It only applies to the next rental term and requires a 90-day notice. The tenant must also agree to any changes. Without agreement, disputes go to the RDC.
Tim Elliot
That’s an important point. Just because you, as a landlord, have a valuation certificate, that doesn’t automatically mean the rent is going up.
Ludmila Yamalova
Exactly. Let me give an example. Suppose I’m your tenant, paying AED 100,000. You obtain a valuation certificate showing the property is now worth AED 120,000. That does not mean you can increase my rent by AED 20,000. By law, increases depend on the margin between current and market rent. If the difference is 11% to 20%, the maximum increase is 5%.
Tim Elliot
Again, that’s key because similar properties vary due to timing in rental cycles and other factors. Apples aren’t always apples.
Ludmila Yamalova
Exactly. For instance, a client of mine recently planned to increase rent based on a valuation certificate. However, they misunderstood the law and thought the certificate alone justified the increase. It’s crucial for both landlords and tenants to understand these nuances.
Tim Elliot
We’ll explore this further in upcoming episodes, including specific banding and real-life examples from the RDC. Thanks as always to Ludmila Yamalova, Managing Partner at Yamalova & Plewka.
Ludmila Yamalova
Always a pleasure, Tim.
Tim Elliot
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