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Tenant-landlord disputes surge amid soaring Dubai rental costs

Associate Rita Ayoub recently spoke with Al Arabiya News answering the following questions regarding rental disputes. 

How much have rental disputes gone up year on year?
Dubai's legal framework has continually adapted to the evolving demands of the real estate market. In 2013, the government of Dubai introduced Decree No. 43, establishing a rental increase calculator (the "RERA Index"). This tool outlines the maximum allowable percentage increase in rent when a lease is renewed.

Since the outbreak of COVID-19, the UAE real estate market has experienced an increase in demand, particularly in the Emirate of Dubai. Rents have been steadily increasing, and landlords are capitalizing on these favourable market conditions to maximize their return on investment.

This trend in the real estate market is seen as a positive development for the UAE economy, as landlords are achieving higher rental returns, which attracts more investors to the UAE real estate sector. While at the same time, some landlords are taking advantage of the current situation by increasing the rental value of the properties beyond the RERA Index.

Some tenants may be willing to go beyond the rental rates prescribed by the RERA Index to avoid moving costs or even paying higher rents for leasing new properties; however, it is undisputed that the considerable increase in rent is presenting challenges for some tenants, which led to an increase in rental disputes.

While there are no specific statistics available indicating the exact number of rental cases registered per year or the percentage of increase in such cases, we can confirm a notable increase in the number of clients seeking legal advice on rental disputes.

These clients include not only tenants dealing with rising rental costs, but also investors/landlords who are actively seeking ways to have their properties rented at rates aligned with the current market dynamics.

What is the most common rental dispute?
During and after the pandemic, disputes pertaining to default in payment in rent were the most common rental disputes encountered, as individuals and companies experienced financial distress, leading to a surge in disputes arising from their inability to meet rent payment obligations.

More recently, we have seen a significant increase in disputes related to the quantum of the rent during lease renewals, as well as disputes relating to evictions served by landlords to tenants.

In the midst of Dubai's property market displaying a robust recovery from the pandemic, certain landlords have endeavored to impose significant hikes in annual rents. Consequently, numerous tenants are now seeking a clearer grasp of their rights, particularly concerning adjustments to rental rates. However, tenants' rights are frequently a source of confusion, leading to uncertainty. Can you explain what rights they have when being served with eviction?
Given that the real estate market is on the rise in Dubai, it goes without saying that landlords will endeavor to grasp this opportunity to maximize their investment, by either serving eviction notices upon their tenants or attempting to increase the rent to the maximum extent possible.

On this note, the Dubai Law number 26 of year 2007 as amended by Law number 33 of year 2008 on the organization of the relationship between the landlords and tenants in the Emirate of Dubai (“Tenancy Law”), provides an equilibrium in the rights of landlords and tenants.

Such equilibrium is clearly observed in respect of eviction processes, whereas an eviction notice can only be served by a landlord for specific reasons including but not limited to breach of the lease agreement, necessary refurbishment of the property, sale of the property, or personal use.

It is worthy to mention that an eviction notice must be justified with one of the reasons prescribed by the Tenancy Law and cannot be arbitrarily served by a landlord upon a tenant. It is important to note that the various grounds provided under the Tenancy Law for landlords to evict their tenants, may affect the duration of the notice granted to the tenant to evict the property.

For instance, when a landlord wishes to evict a tenant during the term of the lease agreement for reasons attributable to the tenant, the landlord must provide the tenant with a notarized 30 days’ notice to rectify their breach. If such breach is not rectified, only then can the landlord initiate legal proceedings to evict the tenant for their breach of the lease agreement.

While if the landlord wishes to recover the property to sell or live in or refurbish the property, the landlord must serve a 12 months’ eviction notice through the notary public or registered mail. Thus, a landlord notifying a tenant by email about the eviction is not legally binding nor sufficient to evict a tenant through the Rental Disputes Centre (“RDC”).

What tenants must know to safeguard their legal rights is that rental hikes in the market is not a reason for eviction. In fact, if the landlord wishes to increase the rent, which is considered an amendment to the contract, the landlord must address a written request to the tenant at least 90 days prior to the expiry of the lease agreement. To determine if the rental value is subject to an increase both the landlord and the tenant can verify the rental market rates in the relevant area from the RERA Index or the Dubai Land Department’s (“DLD”) paid service of rental evaluation.

It is also pertinent to note that even if the rent is subject to an increase at the time of the renewal of the lease, such increase is governed and restricted with percentages, with a minimum increase of 5% and a maximum of 20%. The implementation of these percentages would vary depending on the actual rent amount and the current rental market rates. This means a landlord cannot arbitrarily demand an exorbitant increase in the rental value. If the parties disagree on the value of the rent at the time of the renewal of the lease, then the landlord can file a claim to seek increase in the rent based on the RERA Index or the DLD’s paid service of rental evaluation.

For unlawful evictions, what is the process tenants have to face? And what kind of charges can they expect to pay upfront, but also what kind of compensation are they likely to receive?
In the event where a tenant is unlawfully evicted, the tenant would need to file a claim before the RDC seeking compensation for the financial damages they have incurred as a result of the landlord’s unlawful eviction.

The anticipated charges that must be borne by the tenant to file such a claim would be the court fees which are 3.5% of the total claimed amount with a maximum cap of AED 20,000.

Throughout the trial, the tenant must prove to the RDC that they were indeed unlawfully evicted; this would include presenting documentation evidencing that another tenant is residing in the property.

The tenants must also present legitimate and tangible evidence to the RDC about the financial damages they have sustained as a result of the unlawful eviction. The common evidence deemed as valid and acceptable by the RDC includes, but is not limited to, moving costs and difference in the rental amount incurred by the tenant in case they had to rent out another property for a higher rental value.

In cases where the tenant fulfils the evidence requirements, the RDC will most likely indemnify the tenant for the amount of actual financial damages they were able to prove by way of supporting documentation.

The full article can be read here: Tenant-landlord disputes surge amid soaring Dubai rental costs.

This article was written by corporate disputes lawyer Rita Ayoub and focuses on rental disputes. 

BSA is a regional Law Firm in the Middle East with offices in the UAE, Oman and Saudi Arabia. As a full-service law firm our practice areas include litigation, arbitration and corporate services, including M&A, banking & finance, Intellectual Property, TMT, Fintech, employment and insurance.

Published on 29 August, 2023.

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