x Abu Dhabi, UAE Thursday 20 July 2017

12 months' advance rent hurts market

In the UAE, regulators need to consider stronger measures to prevent tenants from being exploited by unscrupulous property agents.

Rarely are consumers asked to pay a bill one year in advance. Utility bills, bank loans and other expenses usually hit consumers month by month. But rent, for many people across the UAE, has long been paid a full year in advance at the start of the lease.

Fortunately, that is beginning to change. Since the recession of 2009, property oversupply has started, slowly, to tip market conditions more in favour of tenants. Anecdotal evidence abounds: many landlords will take payment, over the course of a one-year lease, in four, six or even 12 cheques. A growing chorus of opinion is supporting this change.

But it remains to be seen how rapidly this apparent trend will take hold, and whether the different emirates will be equally affected. If the renters' market continues to be weighted heavily in favour of property owners, authorities need to consider other options. In these pages, we have argued before that rental contracts could be standardised to protect tenants from being exploited. In the long term, authorities might want to consider narrowly tailored legislation that would prevent landlords from charging a full year's rent.

There are several reasons why the practice is so pernicious, both in respect to tenants' rights and for the property sector as a whole. If tenants are locked into a contract for a year, and the costs of cancellation are prohibitive, renters have sharply diminished options if the landlord changes the terms of the deal — tenants have complained of this in Dubai when maintenance fees have been hiked without a clear reason.

In many cases, employers help to cover advance rent, but when individuals are left to their own devices, some write guarantee cheques that exceeds their savings. That benefits no one, and can even lead a tenant to debtor's prison in extreme cases.

Recent — admittedly extreme — cases show how the system can be manipulated. Last month, property agents from Marks Falcon Real Estate and FHS Properties fled with half-yearly rent payments amounting to at least Dh80 million. Criminal cases are unusual, but large advance payments made the malefactors' crime possible.

We hope that these problems will work themselves out in a more competitive rental market. But in UAE markets where the problems persist, regulators must consider stronger consumer-protection measures.