Property Valuation Certificate – Recent Change

Тим Эллиотт
Welcome to Lawgical, the first regular podcast navigating legal processes in the UAE. I’m Tim Elliott, and I’m here with the managing partner of the Dubai-based legal firm HPL Yamalova & Plewka, Ludmila Yamalova. Good to chat with you, Ludmila.

Людмила Ямалова
Good to be here with you, Tim, as always. Thanks for having me.

Тим Эллиотт
This time, we’re discussing new rules for rental valuation certificates in Dubai. If you’re a landlord or a tenant, this is, well, crucial information. Let’s dive into it in a Q&A format. What’s the new rule for rental valuation certificates in Dubai?

Людмила Ямалова
Starting from April 1, 2024, rental valuation certificates can now only be issued if there’s a legal order or a judgment mandating the valuation of the property. That’s the gist of it.

Тим Эллиотт
Okay, that’s the new rule, but how was it previously?

Людмила Ямалова
Previously, obtaining a valuation certificate was straightforward. It was more of an administrative process requiring minimal documentation. Typically, a landlord would submit a few photos of the property, file a request, pay the fee, and get the certificate.

This system, especially over the last couple of years when real estate prices in Dubai surged, was heavily utilized—and arguably abused—by landlords. They could obtain a valuation certificate without the tenant’s knowledge or input. There was no inspection or detailed evaluation of the property. Often, the tenants were unaware their properties were being evaluated or re-evaluated, let alone having the opportunity to comment on the findings.

Тим Эллиотт
I guess that kind of explains why this change was necessary. This is about transparency, isn’t it?

Людмила Ямалова
Indeed. The previous process lacked transparency and proper scrutiny. Certificates were issued without property inspections, and the valuation often relied on generic data from the Dubai Land Department’s database. It became a tool for landlords to challenge the RERA index and argue for higher rents, which led to discrepancies and disputes.

Тим Эллиотт
To your point, there wasn’t clarity or transparency in how valuation certificates were determined or what data was being relied upon.

Людмила Ямалова
Exactly. The absence of clear evaluation criteria or inspections meant landlords could obtain certificates showing significantly higher property valuations than what the RERA index indicated. This created conflicts, as landlords would use the certificates to justify rent increases, even when the RERA index capped those increases.

Тим Эллиотт
Can you give an example of one of these discrepancies?

Людмила Ямалова
Certainly. For example, imagine you’re paying AED 100,000 in rent, and the RERA index shows that no rent increase is allowed because your rent falls within the acceptable range. Meanwhile, a landlord could obtain a valuation certificate claiming the property is worth AED 150,000, well above the RERA index’s range. This discrepancy would then lead to disputes between landlords and tenants, especially as landlords sought to capitalize on soaring market prices.

Тим Эллиотт
So how do the courts handle these discrepancies?

Людмила Ямалова
Under Dubai’s rental laws, the RERA index remains the primary reference for determining rent increases. However, when landlords presented valuation certificates issued by the Dubai Land Department—a government entity—courts had to weigh these competing documents. Many cases ended up at the Rental Dispute Center (RDC), where tenants challenged the validity of valuation certificates, arguing they didn’t reflect the true condition of their properties.

For instance, tenants often pointed out that their properties hadn’t been inspected or upgraded, and therefore, the valuations didn’t justify a higher rent. These challenges likely highlighted deficiencies in the previous system, prompting the authorities to introduce stricter requirements.

Тим Эллиотт
So what’s the new requirement for issuing a rental valuation certificate?

Людмила Ямалова
Now, landlords must file a substantive case to obtain a rental valuation certificate. This involves getting an order or judgment from the RDC, which will appoint an expert to evaluate the property. The expert is expected to inspect the property in person, considering specific factors such as location, view, upgrades, and condition.

This new process ensures that valuation certificates are based on accurate and individualized assessments rather than generic data.

Тим Эллиотт
What prompted this change?

Людмила Ямалова
We believe it aligns with the updates to the RERA index introduced in March 2024. The index was revised upward, enabling landlords to increase rents in more cases. By simultaneously making it harder to obtain valuation certificates, the authorities aimed to strike a balance—providing landlords opportunities for rent increases while protecting tenants from arbitrary hikes.

Тим Эллиотт
How does this affect determining average rents?

Людмила Ямалова
The RERA index remains the primary tool for determining average rents, as per Decree 43 of 2013, specifically Article 3. The index sets rental caps and averages, which guide rent increases unless proven otherwise through court proceedings.

Тим Эллиотт
How can someone obtain a rental valuation certificate now?

Людмила Ямалова
Landlords must file a case with the RDC, arguing that their property is worth more than the RERA index suggests. The court will then appoint an expert to assess the property. This assessment will consider specific factors like location, upgrades, and other unique features, ensuring the valuation reflects the property’s true market value.

For example, two properties on the same floor may differ significantly in value based on their views or condition. An expert’s evaluation will account for such differences, making the process more accurate and fair.

Тим Эллиотт
Any final thoughts, Ludmila?

Людмила Ямалова
This change is a step in the right direction. It addresses the discrepancies we’ve seen in valuation practices and ensures a more transparent and balanced process. While it may result in fewer valuation certificates being issued, the ones that are will carry more weight and accuracy.

Ultimately, this benefits both landlords and tenants by reducing unnecessary disputes and creating a clearer framework for determining rent increases.

Тим Эллиотт
New rules for rental valuation certificates in Dubai—a crucial topic discussed here on Lawgical. Thank you for listening and watching. If you’re with us on YouTube, thank you for joining. And as always, thanks to our legal expert, managing partner of HPL Yamalova & Plewka, Ludmila Yamalova.

Людмила Ямалова
Good to be here with you, Tim. Thanks for chatting with me.

Тим Эллиотт
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