UAE Property: ‘Is the updated Dubai rental index effective from the time of lease renewal or the notice date?’

The renewal amount will be determined upon expiry of the old tenancy agreement

There is nothing wrong in informing a tenant way in advance that there will be a rental increase. istockphoto.com

Question: We live in Layan, renting directly from the developer / management company. Our lease is due for renewal on April 12. We were sent our renewal documents on December 13, 2024, which is quite early, as we usually receive these in January. We have lived here for eight years.

The document says rent has increased by 5 per cent based on the 2024 Rera index. A lot of tenants received the same, and we are questioning why they sent across the documents so early. Now, with the new Rera calculation, our property says no increase. My question is, does the new law stand from the date of renewal or when the renewal notice was served? We feel they served us early as they knew what was coming in the new year. J, Dubai

Answer: On January 1, 2025, the rental index was updated and now is calibrated in a much more sophisticated way. Previously, it was based on average rents in a specific location, using the number of bedrooms only. Now, artificial intelligence is used to help generate more accurate information, taking into consideration not just old rental contracts, but new ones too. Buildings are also graded and classified now, from one star, all the way up to five, and in grading them, their facilities and upkeep will be looked at to decide which grade they fall under.

There is nothing wrong in informing a tenant way in advance that there will be a rental increase, however, the actual rental amount for the renewal will be determined upon expiry of the old tenancy agreement, so in reality, this can perhaps mean a week or so before the contract ends. In your case, given that the previous rental index stated a 5 per cent increase but now the new index states no increase, it is this latter announcement that will take precedence.

Many tenants who were due to renew in the new year, but checked the status of the index in December, also found that the December increase had been cancelled out by the new index after January 1 and the main reason is that now the buildings are classified. So what could have happened for you is that the index now realises your building is not as highly categorised as was previously thought by the landlord, and hence, the reversal of the rental increase.

So you can stand your ground and agree with the landlord that for your renewal, there will be no increase at all.

Q: My tenant, whose contract is expiring next month, is asking for a lower rent with a higher number of cheques compared to the existing contract. In the current market, I am not inclined to accept his request. I want to know what my options are if the tenant does not agree to renew the lease at the current rent. PB, Dubai

A: Agreeing to terms for a rental renewal is basically down to three factors. First, the timing of information that there will be a change to the renewal contract. Secondly, the data within the rental index and, thirdly, agreeing terms between the parties.

Looking at the first point, any changes to a rental contract has to be communicated to each party in writing, giving at least 90 days notice for the same. This period is laid out by the Dubai rental laws and is strictly adhered to by the rent dispute courts. If the landlord wants to renew at the same rate, then the 90-day window is not applicable, although it would be, if there were other changes not including the rental amount.

The second point is about the index itself. Once the 90-day notice with any changes has been communicated, the actual figure of rent will be determined by the index. The index can be found on the Dubai REST app or Dubai Land Department's website. Once all the information is imputed, it will ascertain how much increase (if any) is allowed. Just to point out, should both landlord and the tenant agree to whatever increases they both decide on at the time of renewal, this will be legal, even if the index was not consulted.

The third point is self-explanatory, if, however, you have taken all the steps correctly, given the 90-day notice in writing, kept to the parameters of the index, and then, if the tenant still doesn't agree, you can file a case with the rent committee. It will cost 3.5 per cent of the rental amount to do so, but if you win the case, you normally are awarded costs.

Alternatively, you can ask the tenant to leave at the end of the term due to non-compliance of the law, and if the tenant does vacate, you would be within your rights to re-let the unit.