Most Dubai tenants escape contract termination... how?

Whether it was direct negotiation with their landlords or filing a case with the Rental Dispute Settlement Centre (rental committee), majority of Dubai tenants have been successful in avoiding termination of their rental contracts, according to a new report.

“Only 31 per cent of respondents challenged the proposed termination and of those over 84 per cent did so by way of direct negotiation. Where a challenge was issued, either directly or through the Rental Committee, over 64 per cent were successful,” Hadef & Partners, a UAE-based law firm, said in its report 'The legal state of the Dubai property market.'

Emirates 24|7 had reported earlier the RDSC, the judicial arm of the Dubai Land Department (DLD), had become operational from December 2013 and would resolve most of the disputes in a maximum of 30 days.

The centre was established following the issuance of Decree No. 26 of 2013 and is aimed at enhancing legal procedures that facilitate settlement of rental disputes.

According to the Article 16 of the decree, the rental committee will have to judge all lawsuits within a period not exceeding 30 days from the date of referral of the case to them. However, the deadline can be extended in accordance with the rules and procedures adopted by the chairman of the centre in this regard.

To control arbitrary rent increase, Dubai issued Decree No 43 of 2013 (read below) that sets a specific band for maximum rent increases that a landlord can demand at the time of renewing leases.

Though the implementation of the rent cap was anticipated by some in the market to increase lease terminations - this does not appear to be reflected in the results, the law firm said. The report revealed that over 80 per cent of tenants saying “their landlords had not attempted to terminate their lease in 2014”.

In cases where landlords did seek terminating of contracts, 62 per cent of cases were on the basis of the sale of property, it added.

On an annual basis, Reidin rental index shows rents in Dubai declined to 15 per cent in 2014 compared to 18 per cent in 2013.

JLL, a global real estate consultancy, expects 25,000 new units to be delivered this year, which it believes will further slowdown rental increases.

This website had quoted Marwan bin Ghalita, Chief Executive Officer, Real Estate Regulatory Agency (Rera), the legal arm of DLD, in October 2014 as saying no tenant could be evicted unless the landlord had served a 12-month notary public notice.

“If there is no valid reason, the rental committee is likely to extend your contract. In case, the owner does not sell, the committee will block it in the system so he/she can’t rent it and if the owner is going to use it for personal use then he/she cannot lease for two years,” he then said.

Rent decree

In order to control the arbitrary rent increases, Dubai government released a new rent decree in December 2013.

The Decree, No 43 of 2013 now sets a specific band for maximum rent increases that a landlord can demand at the time of renewing leases. The decree is applicable to private and public sector owned properties in Dubai, as well as within the free zones.

- No rent increase if the rent of the property unit is less than 10 per cent of the average rent of a similar property in the same residential area.

- If the rent value is between 11 per cent and 20 per cent less than the average rent of a similar property, the maximum rent increase shall be equal to 5 per cent of the rent value.

- If the rental value of a unit is between 21 and 30 per cent less than the average rent of a similar unit, the maximum rent increase shall be equal to 10 per cent of the rental value.

- If the rental value of a property is between 31 and 40 per cent less than the average rental of a similar property, the maximum rent increase shall be equal to 15 per cent of the rental value.

- If the rental value of a property unit is less than 40 per cent or more of the average rent of a similar unit, the maximum rent increase applicable is of 20 per cent.

The average similar rental value of the property will be determined by the Rera's rent index.

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