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. It’s nice to see you.
Ludmila Yamalova:
Great to be here with you, Tim, as always.
Tim Elliot:
Now today, Ludmila, this is the first of four podcasts looking at the cost of renting property here in Dubai, a little about the market. But more specifically, it’s about the rent valuation certificate in Dubai, and we’ll come to that in a moment. To say property is a hot topic is the understatement of the millennium, isn’t it? Over the last couple of years, we’ve seen rocketing property prices again. It’s time to reiterate what a landlord can and can’t do.
Ludmila Yamalova:
Yes, you’re absolutely right. As we record this podcast in May 2023, the last year, in particular, has seen a tremendous increase in property prices in the UAE and especially in Dubai. This applies to both sales and rental properties.
Because the market is so hot—though the reasons for this are beyond the scope of today’s podcast—we’ve seen properties in many parts of Dubai double or even triple in price. Many owners are using this opportunity to sell their properties at significant profit margins, while others are looking to increase rents substantially.
This surge has created turbulence in the market, with some landlords issuing eviction notices under the pretense of selling properties, only to later attempt significant rent increases. Historically, Dubai has been home to a large number of expats, making it a dynamic market for property purchases, rentals, and flips.
As we’ve discussed in previous podcasts, rental laws vary across emirates. Today, we’re focusing on Dubai’s rental market, governed by specific laws and regulatory authorities, including the Dubai Land Department (DLD), the Real Estate Regulatory Agency (RERA), and the Rent Dispute Centre (RDC).
Dubai’s rental laws were introduced in 2007 and later amended in 2008 and 2013. These laws, alongside the aforementioned authorities, regulate tenant-landlord relationships and oversee enforcement in the market.
Tim Elliot:
So, we’ve got the Dubai Land Department as the main authority, RERA as the regulatory body, and then the Rent Dispute Centre for resolving disputes. Now, let’s focus on renting and the rent valuation certificate. RERA also manages the rent calculator, which regulates the rental landscape, right?
Ludmila Yamalova:
Correct. The Dubai rental law sets clear guidelines for rent increases, evictions, and other aspects of the tenant-landlord relationship. For rent increases specifically:
- Landlords can only increase rent at the end of the lease term, not during it.
- Proper notice must be given to tenants for any rent increase.
- Any changes to the rental contract, including price increases, must be agreed upon by both parties.
The RERA calculator plays a key role here. It sets parameters for allowable rent increases. By entering details about the property—such as location, type, and current rent—landlords and tenants can see if a rent increase is allowed and, if so, by what percentage.
This calculator is an effective tool, widely known among tenants and landlords. It helps tenants push back against unauthorized rent increases by providing clear evidence that no increase is permitted.
Tim Elliot:
Historically, the rent calculator has been updated annually. But since COVID, that doesn’t seem to have happened. Rents have risen dramatically, especially in the past couple of years. Where are we now with the rent calculator?
Ludmila Yamalova:
You’re right. Over the past year or two, the authorities have claimed to reassess and adjust the RERA calculator regularly to reflect current market trends. However, there’s limited public visibility into how or when these updates happen.
From what we’ve seen, updates are more nuanced, focusing on property specifics rather than broad market increases. For example, geographic areas in the calculator may now have more detailed subdivisions, allowing for more precise valuation based on property specifications.
While landlords may feel the calculator isn’t updated quickly or adequately, there is constant effort behind the scenes to refine it.
Tim Elliot:
Dubai moves fast. You can go away for a couple of months and come back to find new buildings where there were none before. With property prices rising exponentially, landlords feel justified in charging higher rents. To do that, they need a rent valuation certificate. What’s the process?
Ludmila Yamalova:
Under Dubai rental law, landlords who believe their property isn’t accurately valued by the RERA calculator can request a rent valuation certificate from the Dubai Land Department.
The process involves:
- Using the Dubai REST app or website to submit a request.
- Providing property details, including photos and specifications.
- Paying a fee of AED 2,000.
This certificate evaluates the specific property, taking into account factors like renovations, unique features, or a standout view. For example, a fully renovated unit with a sea view may warrant a higher value than other units in the same building.
It’s important to note that the certificate is property-specific. If a landlord owns multiple units, they must request separate certificates for each one if they intend to rely on them officially.
Tim Elliot:
The rent valuation certificate is an official document. Once obtained, it allows landlords to request a rent increase at the next renewal. However, there are rules on how much the rent can actually increase. Could you summarize these?
Ludmila Yamalova:
Certainly. Dubai’s rental laws limit rent increases to specific percentages based on the difference between the current rent and the market value. The key ranges are:
- 0% increase: If the current rent is up to 10% below market value.
- 5% increase: If the current rent is 11-20% below market value.
- 10% increase: If the current rent is 21-30% below market value.
- 15% increase: If the current rent is 31-40% below market value.
- 20% increase: If the current rent is more than 40% below market value.
Even with a rent valuation certificate showing a significant difference in value, the law caps increases based on these ranges. For example, if a property rented at AED 100,000 is valued at AED 120,000, the landlord can only request a 5% increase, or AED 5,000, not the full AED 20,000 difference.
Tim Elliot:
That’s a crucial point. A rent valuation certificate doesn’t guarantee an automatic or full increase. It’s merely a reference point. What happens if the tenant disagrees with the increase?
Ludmila Yamalova:
If the tenant disagrees, the dispute may go to the Rent Dispute Centre (RDC). At RDC, the rent valuation certificate is considered evidence, but the allowable increase remains governed by the law’s prescribed percentages.
A recent case highlights this. A landlord renting a property for AED 175,000 obtained a rent valuation certificate showing a market value of AED 200,000. The landlord requested a 14.3% increase but was only granted 5% by RDC, amounting to AED 8,750.
The case underscores that while the rent valuation certificate is valid, increases are still subject to the legal caps.
Tim Elliot:
It’s all about balance—ensuring landlords get a fair return while protecting tenants from sudden, dramatic rent hikes.
Ludmila Yamalova:
Exactly. These regulations aim to stabilize the market and maintain societal balance, protecting tenants from excessive disruption while giving landlords avenues to increase rent within reason.
Tim Elliot:
That wraps up this episode of Lawgical, focusing on rent valuation certificates in Dubai and how they affect rent increases. Ludmila, as always, your insights are invaluable.
Ludmila Yamalova:
Thank you, Tim. Always a pleasure to discuss these important topics with you.
Tim Elliot:
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