Dubai real estate market is in a constant wave of ups and downs. Real estate property can increase a decrease annually, monthly. These fluctuations lead to the real estate rental market waving towards the landlords’ (when prices go up) or tenants (when prices go down). Usually landlord’s markets go hand in hand with sellers’ market, however this is not specifically addressed in this publication.
Introduction to Rent Fluctuation in Dubai Real Estate Market
The purpose of this post is to raise common scenarios that take place when the market tilts towards the landlord’s side.
When the Dubai Real Estate market does lean towards the landlords’ interests, we tend to observe the increase in landlords’ desire to evict their tenants and tenants’ wish to stay in the property for as long as they can as swapping to a nearby property could duplicate (if not triplicate or more) their actual rent expense.
This skyrocketed market increase is precisely waht we have very recently observe in the Palm Jumeirah. During the COVID Pandemic (during the more difficult part of it) prices were relatively low because Dubai was before the pandemic and for most part of it at a low market part of the rental spectrum. Around September/October 2020 the market started to sift and prices in locations with large properties and space skyrocketed, even apartments’ locations started to increase because of the market recovery. Villas’ locations increased due to the recovery of the economy and the preference for larger homes, out of COVID-19.
In these conditions we started to assist clients:
- Evict their tenants;
- Resisting their eviction.
Tenants often reach to us showing us the eviction notice received. These eviction notices require them out by the end of the tenancy period. Many of them give tenants 3 months’ notice prior to the renewal of the contract.
Tenants want to know whether they are forced to leave.
What the Law Says
The law would be on their side in this case because Dubai Tenancy Laws do require that Landlords notify their intention to evict tenants with at least 12 months’ prior notice. The Law applicable in this case would be Law 33 of 2008 amending certain provision of Law No. 26 of 2007 on Landlords’ and Tenants’ relations.
It is further important to stress that Landlords need to have a reason to evict their tenants. Article 25.2 of Law No. 33 of 2008 sets a limited number of reasons, namely:
- If the landlord wishes to renew the Property and do major construction incompatible with the life of the Tenant within the premises.
- If the landlord needs the Property for personal use or use of first-degree family members when the Landlord has no other alternative property where to go to in Dubai.
- If Landlord wishes to sell the P
The Landlord will not need to evidence any of the above but failure to comply with the above will enable the Tenant to seek damages post-eviction.
Announcement of Rent Increase in Dubai Real Estate Market
In another set of cases, we are contacted by Tenants worried as they have been notified a massive increase by the Landlord. Is this legal? – They ask.
It is not. We explain that in order to know the rent increase permitted by law the best tool available is the Dubai Rest Application or the Dubai Land Department website whereby plugging the expiry date of the contract, the rent value and number of bedrooms we will get an immediate response on whether or not landlord can raise the rent on renewal of the contract.
As a note on the rent increase permitted by law, this will depend on whether the rent is below a certain percentage but only by application of the specific data we will be able to know whether any rent increase would be applicable.
Reached this point, what can landlords do?
Our experience tells that being reasonable may work with some tenants. Some because not all tenants will accept paying more than then are forced to by law. The trick is whether sticking a reasonable increase may work for tenant and landlord.
Tenant is paying AED 100,000 and prices are going up.
Landlord wants Tenant to pay AED 150,000 next year.
By law Landlord is not entitled to a rent increase.
Landlord will evict the Tenant if agreement is not reached, and Tenants will need to find a new property in 12 months.
Market could be as high by then.
Why not negotiating a price increase to AED 115,000 or AED 120,000 and close the rent increase for next 3 years?
If an agreement is not reached, Tenant will need to walk out in 12 months and hope during those 12 months that rents do not continue to increase. If an agreement is reached Parties may perhaps agree to 3 years rent increase jointly sharing the risk of the Dubai real estate market. This is not always possible but occasionally is and, in our opinion, could lead to longer tenancies to the benefit of landlords and tenants. The problem is that the market tilts and its players appear not to have patience to start enjoying or stop suffering the pros and cons of the given wave. To reach consensus everyone must give something away.
Dubai real estate market goes to the extremes when it comes to ups and downs of real estate rent prices. Trying to stay in the middle may give stability to tenancies and tenancy relations.
**Post not intended as legal advice rather as a general note on current Dubai practice. For specific inquiries kindly contact us at firstname.lastname@example.org. For more information on UAE law and practice kindly visit our News Section.