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. As ever, on the 18th floor, and here’s the Managing Partner, Ludmila Yamalova. Nice to see you.
Ludmila Yamalova
Good to see you too, Tim.
Tim Elliott
This is the final part of our four podcasts. We’ve been looking at what it really costs to rent property here in Dubai. We’ve specifically been considering the rent valuation certificate. This time we’re going to look at a recent real-life Rental Dispute Committee (RDC) case, and in good old law-and-order fashion, I should state at the outset that names have been changed to protect the innocent.
Ludmila, this is a real case you’ve had firsthand experience with. Over the last three podcasts, we’ve learned that a rent valuation certificate doesn’t automatically lead to a rent increase. In addition to serving the tenant notice, a tenant still has to agree to an increase, and there has to be a contractual arrangement. In Dubai, landlords can’t just arbitrarily pluck a figure out of the air and demand a tenant pay it. With that in mind, could you run through the background of this example case today?
Ludmila Yamalova
It stems from the role of the rent valuation certificate. As we’ve discussed before, the rental market in Dubai is regulated by law, specifically Decree Law 43 of 2013, which governs rent increases. This law supplements the main Dubai Rental Law, Law 33 of 2008, creating a regulatory framework for landlord-tenant relationships.
Landlords have rights over their properties but also face limitations. For instance, they cannot evict tenants or increase rent arbitrarily. The law provides a specific formula for allowable rent increases based on market rates, as determined by the Real Estate Regulatory Agency (RERA), which operates under the Dubai Land Department (DLD). RERA provides a rent calculator where landlords and tenants can check if a rent increase is permitted and, if so, the allowable percentage, which ranges from 5% to 20%.
If landlords believe their property has a higher value than reflected in the rent calculator, they can apply for a rent valuation certificate, which serves as an official document of the property’s market value. However, as we’ve discussed, there is often confusion surrounding this certificate. Landlords sometimes believe it automatically entitles them to increase the rent to match the valuation, but that’s not the case.
For example, if I’m renting a property for AED 100,000, and the rent valuation certificate says it’s worth AED 120,000, there’s a misconception that the landlord can demand the tenant pay AED 120,000. This is incorrect. Rent increases must still adhere to the law’s percentage margins.
Many tenants are becoming more informed and are challenging landlords’ rent increase demands based on the valuation certificate in RDC.
This brings us to a real case from April 2023, which illustrates these concepts. The landlord in this case rented a property at a contract value of AED 175,000 and obtained a rent valuation certificate showing a new value of AED 200,000—a difference of AED 25,000. The landlord issued a notice of rent increase, citing the valuation certificate and requesting an additional AED 25,000.
The tenant disagreed, arguing that the valuation certificate doesn’t automatically allow the landlord to demand the full increase. The case went to RDC and eventually reached the highest level of appeal, resulting in a final judgment.
The RDC did allow a rent increase, acknowledging the rent valuation certificate as official evidence of the property’s market value. However, the increase was capped at 5%, or AED 8,750, rather than the requested AED 25,000.
This case highlights how rent increases are determined in Dubai. The valuation certificate provides a benchmark for market value, but the allowable increase is still subject to the percentage caps outlined in Decree Law 43. In this case, the landlord sought a 14.3% increase, but since the law only permits a 5% increase for properties with a market value increase of 11-20%, the RDC applied the maximum allowable 5%.
Both parties achieved a compromise: the landlord received a lawful rent increase based on the valuation certificate, while the tenant limited the increase to the allowable margin.
Tim Elliott
It’s a fascinating case that encapsulates everything we’ve discussed about the role of rent valuation certificates and legal rent increases in Dubai.
Ludmila Yamalova
Yes, and it also underscores the UAE’s legal framework, which blends elements of civil and common law. While UAE law primarily follows civil law principles, court decisions like this one often influence future rulings, even though they’re not binding precedents in the common law sense. Judges frequently reference similar cases when making their decisions, creating a hybrid system where court decisions carry significant weight.
For tenants and landlords navigating similar disputes, this case serves as a critical reference point.
Tim Elliott
That’s a great way to sum up this series of podcasts. This concludes our four-part series on rent valuation certificates and what it really costs to rent property in Dubai.
As ever, thanks for watching, listening, or both. And thank you to our legal expert, the Managing Partner here at Yamalova & Plewka, Ludmila Yamalova. Your insights are always appreciated.
Ludmila Yamalova
Tim, always a pleasure chatting with you.
Tim Elliott
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