Is A New Landlord Bound By An Old Landlords Lease Legal Cap Over Rental Hike

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Legal Cap Over Rental Hike

Complaints regarding the hike in rents from Dubai residents are rising due to unreasonable increases being demanded by the landlord. There is no federal law determining the rent cap, each emirate has its own separate laws.

For the emirate of Dubai, Law No. 26 of 2007 regulates the relationship between landlord and the tenant and provides for regulations in regards to rent. In respect of rent, the Union Supreme Court has stated that “the effect of the provisions of a contract of lease (tenancy contract) as set out in articles 742 et seq. of the Civil Code is that rent is payable in consideration of the enjoyment of the thing leased.”

(It should be noted that the Dubai Law No. 26 of 2007 is applicable all over Dubai except for the areas that are covered by the DIFC zone as the real property in the DIFC zone is regulated by the DIFC Law No. 4 of 2007).

The law defines rent as a specified amount of consideration which the tenant is bound to pay according to the tenancy contract. The tenancy contract is the contract by which the landlord is committed to enable tenant to benefit from the property for the specified purpose and period against specified consideration and thus the amount of rent is to be specified in the contract and shall remain the same till the expiration of the said contract.

Further the law provides for the determination of the rent value in case the same is not provided for in the tenancy contract or where the rent is determined but it is not possible to evidence the same. In such cases the Committee i.e. the Judicial Committee authorized to settle disputes between landlords and tenants, is to determine the rent of the property so leased in accordance with the ‘similar rent’. The ‘similar rent’ is to be specified by the committee in accordance with the standards of specifying the rent increase percentage applied by the Real Estate Regulatory Agency (RERA). Also, the general economic circumstances in the Emirate, the status of the property, market rent in the same area and existing legislation are all factors that have to be taken into consideration when determining the similar rent. RERA is to set out criteria to determine the rent increase rates in the Emirate, in accordance with the general economic conditions therein.

Any dispute regarding the rent of leased premises is to be referred to the committee as the jurisdiction of the committee includes all such disputes.

Upon the expiry of the tenancy contract, it is to be renewed for a similar period and during the renewal the landlord may amend the contractual terms. He may review the rent which he may either maintain at the same rental amount or he may increase or decrease it. The rent so increased or decreased would be valid for the period of the tenancy contract. For the tenancy contract to continue to be in force it is essential that the tenant consents to the terms so amended by the landlord, if the parties do not reach an agreement, the Committee may decide a fair rent. If either party to the tenancy contract wishes to amend any of its conditions then he must notify the same to the other party not less than 90 days prior to expiry date but this condition may be nullified by agreement of the landlord and the tenant.

The law also sets a ceiling limit to the increase in the rent by the landlord so that landlords do not take advantage of the vulnerable position of tenants and exploit them by unreasonable increases in the rent rates. Also the rent may not be increased during a tenancy contract. It can be increased only after the expiry of the previous contract, and therefore the rent is to remain for a period of one year starting from the commencement of the tenancy contract.

Further the Dubai Decree No. 62 of 2009 concerning rental prices in the emirate of Dubai has fixed the maximum increase in the rents of properties in the Emirate of Dubai according to the average rent of properties in the same area and the percentage of the difference between the average rent and the present rent. Thus depending on the difference the increase may be up to the following limit:

i. zero increase of rent in the case the rent is up to 25% less than the average rent of properties of similar specifications;

ii. 5% of the applicable rent in the case the rent is 26% to 35% less than the average rent of properties of similar specifications;

iii. 10% of the applicable rent in case the rent is 36% to 45% less than the average rent of properties of similar specifications;

iv. 15% of the applicable rent in case the rent is 46% to 55% less than the average rent of properties of similar specifications; and

v. 20% of the applicable rent in case the rent is over 55% less than the average rent of properties of similar specifications.

Apart from this the government of Dubai has provided us with an online rental increase calculator on the following website: http://www.dubailand.gov.ae/english/Tanzeem/Rentals/Rental_Increase_Calculator.aspx

The above mentioned website of the government provides for a service to calculate increase percentages in order to obtain rental values in certain areas as a guiding tool. All that the user has to do to use this service is to select the calculator from the website and enter the required details and then he/she shall be provided with the increase cap and average rental for the requested area and unit.

Tips on avoiding an illegal rent hike:

1. Make sure that the landlord has given a notice in writing to you of the proposed rental increase not less than 90 days before the end of tenancy contract.

2. Check that the amount of the increase accords with the RERA rent calculator for your property.

3. If you cannot reach an agreement with your landlord on the amount of the rent increase make an application to the Rent Committee.

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