UAE property: 'Can I raise rent based on the vacant unit rate?

When a tenant is living in an apartment, a landlord cannot demand rent on par with an empty property

The Rera rental calculator is designed to offer both landlords and tenants a guide to future rental increases when the market is on an upwards trajectory. Getty

Question: I have been renting out my studio apartment in Dubai for the past two years. The two-year contract was signed during Covid-19 and the rent was very low.

I rented out the apartment for Dh37,000 in the first year and the year after, I increased it to Dh42,000 after a mutual agreement with the tenant.

Both times, the rent stipulated by the Real Estate Regulatory Agency (Rera) index was higher than what was mutually agreed.

As the tenancy agreement ends in March, my tenant approached me for contract renewal in January.

Since rents have gone up, I cited a higher amount of Dh55,000, which is currently the market rate for similar units.

However, he suggested a rent of Dh48,500 and we could not arrive at a mutual agreement.

My tenant sent an email last week saying that he visited the Rera office and filed a rental agreement dispute.

How can I deal with this situation, as it is difficult to pay the service charges and rent the apartment at a rate acceptable to the tenant?

I am also thinking of selling the property. What are the options to get this apartment vacant?

How does Rera decide in such cases? What needs to be done to ensure this lease is not renewed in 2024? SI, Dubai

Answer: In these times when the market is very strong, I advocate all parties to reach mutual agreements that sometimes go beyond what the law states is allowed.

The law is there as a guide, but it’s always followed by the words, “unless otherwise agreed”. It is this term that determines what actually takes place.

I understand your frustration in wanting the current market rate as rent. However, you have to take a few things into consideration.

The rent you seek at renewal is the full market rent and it is not indicative for renewals because this is a vacant unit rental price. When a tenant is in situ, the rents are not at the same level as market rates.

I understand your financial constraints, especially with service charges or mortgage payments. But this is no reason to request what is not allowed.

The Rera rental calculator is designed to offer both landlords and tenants a guide to future rental increases when the market is on an upward trajectory.

But it doesn’t mean that either party has to stick to it verbatim, it is just a guide to assist in reaching an agreement.

I have to agree with the tenant because he has suggested a figure as stipulated by the rental calculator, although less than your desired amount. This shows willingness on his behalf.

If a case is taken to the Rental Dispute Settlement Committee (RDSC), a judge could potentially look at who is being reasonable.

I suggest another round of negotiations, but keep in mind that, according to the law, your next renewal rent should be no more than Dh46,000.

The offer the tenant made is 15 per cent more, which in any one year is fair.

I cannot tell you what to do, but having a good tenant, who gives no trouble, is also worth their weight, so bear this in mind in your future negotiations.

If you wish to sell, you can send a 12-month notification of eviction citing the reason as property sale. This must be sent either via notary public or registered mail.

____________

Watch: The $60 million mansion — we take a look around Dubai's newest party palace

Your last point about non-renewal is not valid. Unfortunately, you do not have the right of refusal if your tenant wants to renew and is paying rent commensurate with what the law states. You have to renew.

If the tenant wants to vacate, you can then re-let at the rent of your choice because the property will be vacant.

Q: My villa tenancy agreement is due for renewal on May 1.

I received an email from my landlord last November and it included a statement that showed the rent increase and the new rent.

I received an email notifying me about a rent increase this year, but there was no indication of the percentage increase or new rent upon renewal.

I have requested this from the landlord, but nothing has been forthcoming to date. SD, Dubai

A: All that the landlord is doing is informing you 90 days prior to the expiration of your agreement that there will be an increase in rent at renewal.

____________

Dubai apartment prices January 2023 — in pictures

The actual amount will be determined closer to the date of renewal and according to the guidelines of the Rera rent calculator.

If, at the time of renewal, you do not agree with the proposed amount but the new amount is in line with the law, you will have no alternative but to vacate, especially if the landlord insists on this increase in rent.

However, if the increase is more than the permissible amount that the law states, you can contest this by filing a case at the RDSC.

Mario Volpi is the sales director at AX Capital. He has worked in the property sector for 39 years, in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to [e-mail]