Tim Elliott
This is Lawgical, the UAE’s first, and still the only, legal podcast. Welcome. My name’s Tim Elliott. Lawgical comes to you from the Dubai-based legal firm, Yamalova & Plewka, and as ever, I’m with the Managing Partner, Ludmila Yamalova. Nice to see you again.
Ludmila Yamalova
Great to be here with you, Tim, as always.
Tim Elliott
This is the third episode of four podcasts. We’re looking at the cost of renting somewhere to live here in Dubai. Specifically, we’re focusing on the rent valuation certificates, what the law says about rental costs, and the permissible percentages for rent increases. Let’s dive right in, Ludmila.
Assuming a landlord has obtained the requisite rent valuation certificate, the rent is going to go up. What kinds of percentages are permissible? What’s okay and what’s not okay?
Ludmila Yamalova
Yes. As you rightly pointed out, this applies specifically to Dubai, as rental laws differ across the UAE. Dubai’s rental laws were first introduced in 2007, amended in 2008, and are currently governed by Decree 43 of 2013, titled “Determining Rent Increases in Real Property in the Emirate of Dubai.” Article 1 of this decree specifies the percentages of permissible rent increases.
It’s important to note that just because a landlord believes their property is worth more, rent increases are regulated. The allowable percentages depend on the difference between the current rent and the market value, as determined by the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA).
RERA provides a rent calculator, accessible online, where landlords and tenants can input property details to check if a rent increase is allowed. If landlords feel the calculator undervalues their property, they can obtain a rent valuation certificate from the DLD. This certificate provides an official assessment of the property’s market value. However, even with this certificate, landlords must negotiate the rent increase with tenants. If no agreement is reached, the matter is escalated to the Rental Dispute Centre (RDC).
Let’s consider an example: I’m your tenant, paying AED 100,000 annually. You’ve obtained a rent valuation certificate showing the property is now worth AED 120,000, so you propose a AED 20,000 increase. I disagree, so we end up at RDC.
At RDC, the law applies. Decree 43 of 2013 specifies the percentage increases allowed, depending on the difference between the contract rent and the market value. In this scenario, the difference is 20%, but the law caps increases based on specific ranges.
- If the market value increase is 0%-10% above the contract value, no rent increase is permitted. For instance, if your valuation certificate shows the property is worth AED 110,000, you cannot increase the rent, even though the market value is AED 10,000 higher.
- If the increase is 11%-20%, the maximum permissible increase is 5%. Using the AED 120,000 valuation, the increase is capped at AED 5,000, not the AED 20,000 you proposed.
- If the increase is 21%-30%, the maximum permissible increase is 10%. For example, if the valuation certificate shows AED 125,000, you can only request AED 10,000 more.
- If the increase is 31%-40%, the maximum permissible increase is 15%. For a valuation of AED 135,000, the maximum increase would be AED 15,000.
- If the market value exceeds 40% of the contract value, the maximum permissible increase is 20%. For example, even if your property is valued at AED 200,000 while I’m paying AED 100,000, the law limits the increase to AED 20,000.
This regulatory framework ensures market stability and protects tenants from sudden, excessive increases, while still allowing landlords to adjust rents within reasonable limits.
Tim Elliott
It’s a clear attempt to strike a balance. On one hand, property is an investment for landlords, but for tenants, it’s their home. This system seems designed to protect tenants while ensuring landlords can still achieve a fair return on investment.
Ludmila Yamalova
Exactly. The law provides avenues for landlords to adjust rents, including obtaining valuation certificates and negotiating with tenants. If they still feel limited, they can sell their property to benefit from the high real estate market. These regulations, introduced to stabilize the rental market, were also designed to protect the broader community.
Without these rules, landlords could make arbitrary demands, leading to frequent tenant relocations and societal imbalance. For instance, in 2008, before such laws were introduced, tenants often received eviction notices immediately after moving in. It created instability, especially for families, disrupting their lives and the community.
While these rules may frustrate some property owners, they help maintain a balanced, sustainable real estate market in Dubai.
Tim Elliott
This is the third of four podcasts exploring rent valuation certificates and what landlords can do to increase rent within legal limits.
As always, thanks for watching, listening, or both. And thanks to our legal expert, the Managing Partner at Yamalova & Plewka, Ludmila Yamalova. Your expertise is greatly appreciated.
Ludmila Yamalova
Thank you, Tim.
Tim Elliott
In the next episode, we’ll look at an actual rent valuation certificate dispute case. You can find us on social media at LYLAW on Facebook, Instagram, TikTok, LinkedIn, and YouTube. All our podcasts are available at lylawyers.com or wherever you get your podcasts.
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