Rent dispute cases in Dubai drop 40% in 2009

Rent dispute cases in Dubai dropped 40 per cent in 2009 from the previous year, according to a top official of the Dubai Rent Committee.

A total of 5,373 dispute cases were registered in 2009 against 9,000 cases in 2008, Mohammad Al Sheikh, General Secretary, Dubai Rent Committee, told Emirates Business.

In the first quarter 2010, Dubai recorded 943 rent dispute cases as opposed to 2,003 cases in 2009 and 1,635 cases in 2008 during the same period.

Meanwhile, Dubai recorded a 10 per cent increase in the total number of rent dispute cases resolved in 2009.

According to the committee, 6,737 cases were resolved in 2009, while the committee resolved 6,069 cases in the previous year.

In the first quarter of this year alone, Dubai resolved 1,119 rent dispute cases.

According to the data, during the first quarter of 2009, the rent committee resolved 2,007 cases, while in the first quarter of the previous year, 2,064 cases were resolved.

Sheikh said the main reason for a drop in the new rent cases registered was the fact that now more and more people are adhering to their rent contracts. "People now are understanding the law and abiding by their contracts," he said.

He said the new cases registered mostly pertain to landlords or tenants breaching their rental contracts. "When a cheque is not honoured that is when either of the parties comes and registers the case with us," said Sheikh.

Ronald Hinchey, Director, Cluttons, said fall in rent dispute cases is a positive indicator and attributed falling rents as one of the main reasons for lesser number of rent dispute cases in Dubai.

"During the boom period from 2003 to 2004 in the Dubai real estate market, commercial and residential rents increased to such an extent that the government felt it necessary to introduce a rent control limit on lease renewal which is now in place.

"Residential rents in particular became inflated to a point where they became out of step with economic reality in terms of end-user earnings, with many examples of tenants paying in excess of 50 per cent of gross earnings for accommodation, resulting in actions taken by the rent committee out of pure economic necessity. Hence, a high number of cases were reported in 2008," said Hinchey.

Michael Lunjevich, Partner, Hadef & Partners, said: "The drop in cases is most likely market driven. The demand and supply dynamic has forced landlords and tenants to meet each others' expectations on rents, number of cheques and tenancy terms. Therefore, we are not seeing disputes where landlords are trying to vacate tenants to get better rents."

According to Hinchey, with the correction in the rental market resulting in downward pressure on residential and commercial rents in 2009 and 2010, new letting and lease renewal rents have become more affordable to tenants with fewer cases being taken to the rent committee.

"The rent index also had an impact in reducing the number of rent disputes being referred to the rent committee," he said.

He added that property lease contracts are generally for periods of one year minimum in duration, resulting in a time lag from the market correction in the fourth quarter of 2008 to lease renewal upon expiry during 2009.

Lunjevich, however, said: Hadef & Partners expects this year there will be an increase in cases initiated by landlords for unpaid rental, particularly in relation to longer-term tenancies entered into when rents were higher. "This is mainly to be seen in the commercial and retail markets. We expect landlords to hold the upper hand in these cases as generally contracts are clear in terms of term and rent due."

"Landlords have to be realistic in expectations on enforcement and it may be a hallow victory to get a judgment against an insolvent tenant or someone who has left the country."

Lunjevich said that with respect to tenants losing jobs, the firm has not seen a huge rise in cases as generally rents are pre-paid for a period and landlords (if they are smart) will be alert about tenants who vacate without notice and they can generally mitigate their loses by re-letting the premises.

In November 2009, the Dubai Government established a new judicial committee to deal with bounced cheque cases in the property sector. The committee settles dispute cases pertaining to bounced cheques irrespective of whether issued by a buyer to a developer or from tenants and beneficiaries of long-term units as per the provisions of Law No7 of 2006 pertaining to property registration in Dubai.

Judgments pronounced by the committee is decisive and cannot be challenged and is implemented through the execution department of the Dubai Courts. The decree prevents the public prosecution and courts from carrying out any investigation into bounced cheques or issuing any ruling in this regard until the case is looked into by the committee.