Tim Elliott
This is Lawgical, the UAE’s first and still the only regular legal podcast. Welcome. My name’s Tim Elliott. 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 Elliott
Now today, Ludmila, this is the first of four podcasts looking at the cost of renting property here in Dubai, a little bit about the market. But more specifically, it’s about the rent valuation certificate here in Dubai, and we’ll come to that in a moment. But I wanted to start with, I guess, to say that property is a hot topic, is the understatement of the millennium, really, isn’t it? Let’s face it. For the last couple of years, we’ve seen rocketing property prices once again. It’s really, I think, time to reiterate what a landlord can and what a landlord can’t do.
Ludmila Yamalova
Yes. You’re absolutely right. As we’re recording this podcast, it is May 2023, and as you said, in the last year in particular, there has been a tremendous increase in property prices in the UAE in general and certainly in Dubai. This applies to the sale of properties—sales prices—as well as rental properties.
Because the market is so hot, we can speculate the reasons why it’s so hot, but this is perhaps beyond the subject of today’s podcast. The reality is that in many parts of Dubai, properties have gone up at least double, if not triple. A lot of owners who purchased properties during less lucrative times are now seeing an opportunity to sell their properties at double or triple the purchase price, which is happening all across the market.
That’s on one hand. Owners want to sell properties because they think they can obtain much better prices and believe the time is now—or throughout this year, 2023. On the other hand, there are many owners who want to increase rent or at least obtain much higher rents. They may not want to sell but are eager to milk more from their properties.
As I’ve said, property prices for rentals have doubled or even tripled over the last year in many cases. Because of this, there is now quite a bit of turbulence in the market, with owners wanting to evict tenants either to sell the property or, in most cases, to increase rent. Often, they issue eviction notices claiming they want to sell the property, but in reality, they just want to raise the rent.
This is specific to the UAE, and Dubai in particular, which historically has had the largest number of expats. This means there are more properties being bought, rented, and flipped.
As we’ve talked about in previous podcasts, every emirate in the UAE has its own rental laws. When discussing the Dubai rental market, we’re referring to Dubai-specific rental laws. Dubai has a specific law governing rentals and landlord-tenant relationships, as well as specific authorities regulating and adjudicating the market.
In Dubai, the key authorities include the Dubai Land Department (DLD) and, under it, the Real Estate Regulatory Agency (RERA), which regulates the market. Then there’s the Rent Dispute Centre (RDC), which adjudicates rental issues. These authorities enforce Dubai’s rental laws, which include the 2007 law, later amended in 2008 and 2013. The RDC applies and enforces these laws in the UAE.
Tim Elliott
Okay. We’ve got the Dubai Land Department, which is the head agency. Then we’ve got the Real Estate Regulatory Agency (RERA). I want to get into the perspective of people who are renting because these four podcasts are really about rent valuation certificates. We also have what’s known as the rent calculator, which RERA oversees. They regulate the rental landscape in Dubai, don’t they?
Ludmila Yamalova
Yes. The Dubai rental law sets specific guidelines and regulations for when landlords can increase rent, evict tenants, and under what conditions.
Let’s focus on rent increases. If a landlord wants to increase rent, there are specific conditions they must follow:
- Rent increases can only happen at the end of the lease agreement term. They cannot raise rent during the term.
- Landlords must give tenants proper notice if they intend to increase rent for the next term.
- The tenant must agree because a lease agreement is a contract. No party can unilaterally change its terms.
- Rent increases must comply with the RERA rent calculator.
The RERA calculator is a tool on RERA’s website that sets parameters for whether and by how much rent can be increased. To use it, tenants or landlords input details like the property’s location, specifications (e.g., number of bedrooms, apartment or villa), and the current rent. The calculator then determines if a rent increase is allowed and what the percentage can be.
This calculator is widely used. Most landlords and tenants are aware of it. Often, tenants will run to the RERA calculator, take a screenshot of the results, and send it to their landlord to demonstrate that a rent increase isn’t permitted.
Tim Elliott
As with everything, there are variables here. But that’s the helicopter view, isn’t it? Historically, the rent calculator was updated annually. Since COVID, it doesn’t seem to have been updated as frequently, and rents have dramatically increased. Where are we now with the rent calculator?
Ludmila Yamalova
You’re right. Over the last year or two, the authorities have said they are constantly reassessing and updating the RERA calculator to align with current market trends.
While we don’t have visibility into how and when updates occur, the presumption is that the current calculator reflects adjusted market factors. However, landlords might argue it hasn’t been updated quickly or substantially enough.
Adjustments might focus less on raising prices and more on adding nuances. For example, geographic areas are being narrowed and refined. The calculator now considers more specific property characteristics, ensuring valuations reflect actual property value more accurately.
Tim Elliott
The thing is, Dubai moves quickly, doesn’t it? It always seems to me you go away for a couple of months—maybe for a summer holiday—and you come back and drive down the road, and there’s a building there that wasn’t there two months ago. I’m not exaggerating much. It does move really fast.
Prices have increased exponentially over the last couple of years. You can understand why landlords have something to say. Let’s take the position of the landlord. If you feel like your property value has increased—exponentially, again—and that means you should be charging a higher rent to reflect that, what do you need to do? You’d need to prove that, right? You’d have to go to the Land Department and get a rent valuation certificate. Is that the procedure?
Ludmila Yamalova
Yes, exactly. The Dubai rental law we discussed provides a mechanism for landlords to request a valuation certificate if they believe the RERA calculator doesn’t adequately represent their property’s value.
This process allows landlords to ask the authorities to assess their specific property and potentially assign it a different valuation than the general average in the area.
In light of recent trends and the increase in property values, more landlords are pursuing this option. The process involves filing a request with the Dubai Land Department (DLD) through their Dubai REST app or website. Landlords must provide:
- Property details and photos.
- Payment of a valuation fee, currently AED 2,000.
Once submitted, the authorities assess the property. This is typically done based on the documents and data provided. Physical inspections of the property by representatives from the DLD are rare but can occur in some cases.
Tim Elliott
So, let’s say I’m a landlord. I’ve made significant upgrades to my property—renovated the kitchen, repainted, and replaced old tiles and appliances. My unit is now much more valuable than others in the same building. Can this justify requesting a valuation certificate?
Ludmila Yamalova
Yes, exactly. Renovations are a common reason for requesting a reevaluation. Many properties in Dubai are now over 15 years old and require updates. Landlords who invest in upgrades—like repainting, replacing appliances, or even making structural changes—can argue their property stands out from others in the same building or neighborhood.
Another example is views. Two units in the same area may have vastly different values simply because one overlooks the sea while the other faces another building. Landlords can use this unique value proposition to justify a valuation.
Additionally, landlords who recently purchased properties at significantly higher prices than historical values may feel justified in requesting a higher rental valuation.
Once submitted, the authorities evaluate the information and data on similar properties in the area. They may issue a valuation certificate reflecting the property’s revised value.
Tim Elliott
Okay. So, assuming you’re a landlord and you’ve obtained a rent valuation certificate, what happens next? That document is official and recognized, right?
Ludmila Yamalova
Yes, it’s an official document issued by the authorities. It serves as an alternative reference point to the RERA calculator.
Under Dubai Law 33 of 2008, particularly Article 9.2, landlords can use the valuation certificate to support rent increases based on the property’s reassessed market value. The certificate effectively takes precedence over the RERA calculator.
This is why landlords go through the effort of obtaining it—it provides them with the means to justify a higher rent at the next appropriate opportunity.
Tim Elliott
The principle of property reevaluation is regulated and approved under Dubai law. My last question: What does it cost? And if you own multiple properties, do you need a certificate for each one?
Ludmila Yamalova
Yes, you need a separate certificate for each property. The valuation certificate is tied to a specific property, not the owner. So, if you own ten properties—even on the same floor—you must apply for and pay for a certificate for each one if you plan to use it officially.
The current fee for a valuation certificate is AED 2,000 per property. However, if you’re negotiating with tenants informally, you could use one certificate as an example for similar units. For instance, if all ten units are nearly identical, you might present one certificate to your tenants as a benchmark.
But if your tenant disputes the rent increase and the matter goes to the Rent Dispute Centre (RDC), you would need a specific certificate for that exact property.
Tim Elliott
Later in this series, we’ll break down by how much rent can be increased and the precise stipulations that apply if you, as a landlord, have a rent valuation certificate. For now, that’s the first of four podcasts looking at the rent valuation certificate here in Dubai.
Next time, we’ll explore increasing rents based on the certificate. That’ll be part two. As ever, thanks for watching, listening, or both. Thanks to our legal expert, the Managing Partner here at Yamalova & Plewka, that’s Ludmila. Nice to see you.
Ludmila Yamalova
Nice to see you too, Tim. Thanks for being here.
Tim Elliott
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