Samir Salya looks at Dubai’s landlord legislation

In many countries around the globe, annual rent increases are generally accepted as completely normal due mainly to inflation. In Dubai, it’s rather different thanks to specific legislation that determines whether or not a landlord can ask for an annual rental increase from his tenants.

For tenants with a contract renewal coming up, it’s certainly worth understanding the law in order to avoid accepting rent increases that can’t be enforced. And while some in Dubai argue that the law is too restrictive, it’s generally considered a good thing by big players in the property market.

Current law introduced in 2013

Decree 43 was introduced in 2013, and contains the law we’re concerned with – Determining Rent Increases for Real Property in the Emirate of Dubai. The law applies to all of Dubai’s properties, including those in free zones. It also applies to every single landlord, including government bodies.

The law determines whether a landlord should be granted the yearly rent increase and also works out how much the increase can be. In order to determine these factors, data from a rent index set up and monitored by the Real Estate Regulatory Agency (RERA) in Dubai is used.

The standard used by RERA to work out whether a landlord is allowed a rent increase is whether the rent currently being charged is determine to be ‘average rental for similar units’.

How the law determines rent increases

If the current rent is up to 10 per cent less than average rental charges of comparable units nearby, then no rental increase is allowed under the legislation. If the existing rent is between 11 and 20 per cent less than average of comparable units in the same location, then a 5 per cent increase is allowed.

It then continues up the scale: if existing rent is between 21 and 30 per cent then a 10 per cent rent increase is allowed. If it’s 31-40 per cent less than average then a 15 per cent increase is allowed, and if it’s more than 40 per cent less than average prices of nearby rent, then it means a 20 per cent increase.

Other considerations for RERA

A well as the average rent nearby, other factors are considered by RERA before deciding whether landlords increase the rent they charge. These include the category of property, in other words whether it’s commercial, industrial or residential; whether it’s an apartment or freehold, where it is and how many bedrooms the property has.

The data used by RERA comes from a register that is held by the Dubai Land Department, which includes all leases registered to its Ejari system.

There has been some discussion by landlords and tenants as to whether this data truly reflects everything about a property that could be taken into consideration. However, for tenants in particular, the regulation is generally considered to be positive as it means an objective standard rather than random decisions from landlords.

About Samir Salya

Samir Salya is the Chairman of Reign Holdings, and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.