Legal experts in Abu Dhabi have urged the emirate’s government to intervene to legalise and regulate the recent sharp increase in residential and commercial rents in the UAE capital.
Arabic newspaper ‘Al Bayan’ said the legal experts said this was necessary to prevent worsening of problems between landlords and tenants.
They said the abolition of the five per cent ceiling on rent hikes, leaving rents to the forces of supply and demand, had made the market unstable.
Tenants are claiming that many owners of old houses have jacked up rents by 40 to 100 per cent, though some have sought increases of five to seven per cent only.
The newspaper said complaints by tenants have increased after many landlords took advantage of the current market situation and raised housing and office rents sharply.
The rental burden on many middle-income tenants have doubled in the absence of regulations to determine reasonable rents, making urgent government intervention necessary, the paper said.
Judge Mohammed Saeed Mohammed Mattar Al Za’abi, head of the Abu Dhabi Federal First Instance Court, said there is some justification for rent hikes as owners of old buildings have seen a decline in the growth of their incomes in the past few years as a result of inflation and the five per cent ceiling on rent hikes, though it is also true that the real estate market is now much stronger than in 2008 and 2009.
Al Za’abi also said a large number of low-income tenants working in both government and private sectors have suffered after housing rents were left to free market forces.
It is difficult for this segment of society to bear the burden of a 50 to 60 per cent rent hike. The rent hikes for government employees are generally more than the rise in their housing allowances, he added.
Some tenants living in three-room flats, whose rents of Dh100,000 a year were paid by their employers, have seen their rents shoot up to as much as Dh160,000, making it difficult for employers to compensate their staff fully, Al Za’abi said.
The judge also said even if the tenant is able to find a new place at the old rent, he has to bear the very high cost of moving to the new house, besides the mental stress.
Al Za’abi said though rent hikes are permissible, the demands of the landlords should be logical and reasonable.
Exploitation and greed should not be acceptable and all should aim to achieve a stable housing market in Abu Dhabi, he added.
Al Za’abi suggested drawing up three-year fixed rent contracts which could be revised for two more years.
Mohammed Yassin Mansour, legal adviser to the Abu Dhabi Chamber of Commerce and Industry, confirmed that complaints from tenants have risen significantly as a result of inordinate rent hikes by landlords.
Yassin said complaints are likely to increase in the coming months, especially with the end of house leases of majority of government employees in April.
He said significant hikes in both residential and commercial rents, ranging from Dh85,000 to Dh160,000, had taken place.
He also expressed fears of a return to the pre-2009 conditions which saw dramatic surge in rents.
Effect on investments
Lawyer Tariq Al Serkal said the increase in residential and commercial rents will affect investments in Abu Dhabi.
Al Serkal said it is important to create a safe investment environment for Abu Dhabi to achieve its ambitious economic plans until the year 2030 and such an environment cannot be created without regulating rents.
The first question any potential investor in Abu Dhabi would ask is about rent hikes which could harm his profit margins, he added.
If rent hikes continue uncontrolled, investor will be reluctant to come as all companies need offices and houses for their staff.
It will be difficult for companies to make profits as long as rents remain high, he added.
Rents should match the incomes of the largest segments of Abu Dhabi’s residents to prevent the capital from becoming too expensive, Al Serkal said.
He said hikes in shop rents will force traders to raise prices which in turn will raise the cost of living.
A return in house rent hikes to 2008 and 2009 levels will also have negative psychological and social impact on tenants living with families, forcing them to send their families home and take to bachelor accommodations, he added.
When house rents are reasonable, tenants with families spend much on their children’s education in private schools and medical treatment.
The emirate’s economy will be affected by fewer students, patients and shoppers, all because of high rents, he pointed out.
He also said, because of high rents in Abu Dhabi, major international companies prefer to open its representative offices only in Abu Dhabi and open regional offices in other emirates or neighbouring countries even when the booming UAE capital has launched huge projects.
Al Serkal said high rents could force international companies to move out of Abu Dhabi to more attractive places.
Lawyer Hidya Hammad said new buildings cannot help solve Abu Dhabi’s rent problem because rents are too high even there which most of the tenants cannot afford.
Some landlords have exploited the situation to raise rents of old buildings by as much as 100 per cent, she added.
Tariq Serkal stressed the need for government intervention in the real estate market in Abu Dhabi.
He added the government is still the main player in the market and should not stay away from the market in the present worrying situation. State intervention has helped achieve economic stability and increased investment in the past.
He said the problem of residential and commercial rents could be solved by fixing rents for the various areas of the city like Corniche, Al Murour and others.
Legal adviser Mohammed Yassin said the law in Abu Dhabi requires the tenant to be given a notice period before raising the rent.
He said that, according to Article 16 of the law, lease contracts are considered to have been renewed automatically unless the tenant has been notified about the change in the terms of the contract or has been asked to vacate the property.