In 2013, Dubai introduced a rental increase cap, which limits the increase in rent that a landlord can demand upon renewal of the lease. The caps are based on the amount of rent a tenant was paying in the previous lease term, versus the average similar rent for a property with the same number of bedrooms located in the same area, according to the rent index created by the Real Estate Regulatory Agency (Rera).
How do rent caps work?
In the existing lease, if the tenant is paying:
* 10 per cent or less than the average similar property, the landlord cannot increase the rent.
* 11-20 per cent less than the average similar property, landlord may increase rent by up to 5 per cent.
* 21-30 per cent less than the average similar property, the landlord may increase rent by up to 10 per cent.
* 31-40 per cent less than the average similar property, the landlord may increase rent by up to 15 per cent.
* Over 40 per cent less than the average similar property, the landlord may increase rent by up to 20 per cent.
When a tenant receives a rental increase notice from the landlord, the tenant can confirm whether the landlord is entitled to an increase, and if so, the maximum percentage permitted by using the rental increase calculator on the Dubai Land Department (DLD) website (www.dubailand.gov.ae).
The 90-day notice
Most Dubai landlords and tenants are now aware that the landlord must give notice of a rental increase to the tenant at least 90 days prior to expiration of the lease term. Unlike eviction notices, the Rental Disputes Centre (RDC) judges generally allow the rental increase notice to be delivered informally by email, SMS or informal letter, if there is proof that the tenant received the notice.
Another 90-day notice that must be given is for amendments to the lease terms. For example, if the landlord previously accepted the rent payment in three cheques, but now wants the entire amount paid in one cheque, a notice of at least 90 days must be given to the tenant. Any changes, such as the cost of the chiller to be paid by the tenant, as well as amendments to renewal and termination notice periods, should be included in the 90-day notice.
This also applies to the tenant. If the tenant wants to change any lease terms, a 90-day notice must be given to the landlord. If, for instance, the tenant wants to pay in four cheques instead of one, or to include an early termination clause in the lease, notice is required.
The law states that notice of a rental increase or any proposed amendments to the lease terms must be given no less than 90 days prior to the expiry date, unless both parties agree to a different notice period in the lease. However, from recent case decisions, it appears that RDC judges have been enforcing a minimum of 90 days’ notice, regardless of the lease terms.
One common misunderstanding is that a tenant must give a 90-day notice to the landlord when choosing not to renew the lease. Under Law 26 of 2007, this was a requirement. However, Law 33 of 2008 removed the obligation to give notice for non-renewal. Therefore, if a landlord wishes to receive at least 90 days’ notice of a tenant’s intention not to renew, it should be included in the lease terms.
Filing a claim
What happens if the landlord and tenant do not agree to new terms? If the notice is not given within the 90-day time frame, the landlord cannot demand an increase and the lease renews on the same terms as the previous lease period. If the landlord refuses to renew the lease on the same terms, the tenant may deposit the new lease, along with the rent cheque(s), with the RDC.
If either party proposes amendments to the lease and the other party does not accept the new terms, a claim must be filed at the RDC.