x Abu Dhabi, UAEMonday 24 July 2017

Can Dubai landlord set new rent rate after buying property?

Mario Volpi advises a new home owner on his rights as a landlord over a sitting tenant.

A new Dubai landlord seeks advice on rental issues. Paulo Vecina / The National
A new Dubai landlord seeks advice on rental issues. Paulo Vecina / The National

I am the new owner of an apartment that had been rented out to a tenant by the previous landlord. The previous landlord gave him the “vacating notice” 12 months ago. Now that I am the new owner, the tenant wishes to continue staying there. Could you please advise: 1. If I can set a new rent rate (as per current market value)? 2. If he does not agree to the new rent, is he expected to vacate the property by the previous contract so I can get a new tenant? NS, Dubai.

If you have bought this property with a tenant in situ, by buying it you take over the responsibility and the contract of the old landlord in its entirety. You cannot raise the rent at this stage. Ninety days before the expiration of the agreement, get in touch with the tenant, explaining that the rent will be going up (assuming this is allowed as per the Rera rent calculator). If the tenant was served with the 12 months’ eviction notice in the proper manner, ie through notary public or registered mail, then when this period has elapsed you would then be entitled to vacant possession. You would then be entitled to seek a new tenant and charge the market rent.

I would appreciate your feedback on the following two rental contract related queries. 1. Some real estate companies are serving tenants with rental renewal requests (served in the correct manner) asking them to accept to renew to “a rental price increase determined by the Rera calculator, at the time of the renewal” hence a figure that will only be known at a future date – often more than three months away. While seemingly conformant, this seems more of a grey area loophole that would commit tenants to renew to an unknown amount and not in the spirit of the law. Your feedback on the legality of such a clause would be appreciated. 2. If neither party has communicated any changes to the rental contract prior to the 90-day period before expiry, would all addendums to the contract also automatically renew with the principal features of the contract? In particular, the contract includes an addendum stating that “the contract can be renewed at the rental price of the current year” (which was included to ensure that the contract could be renewed in the second year, at the same price as that of the first year). Given that no changes have been communicated prior to, nor even post, the completion of the first year of tenancy, would I be right in assuming that the addendum should be included in the second year’s contract, effectively ensuring that the rental price will also be the same in the third year? JML, Dubai

Firstly, all parties (tenants and landlords) are required by law to notify each other of any changes to the existing contract 90 days prior to the expiration of the agreement. Therefore the correct procedure would be to get in touch with the respective parties within this time to ascertain what each would like to do. The rent calculator is calibrated only every quarter, so there will be times when it is up to date and other times it could be out by three months. The only thing parties can do is to look up the calculator three months before to see what the calculator indicates the rent would be at that time, just to give a guide. A few weeks before the actual date of renewal, repeat this exercise to see what the rent would actually be then. This is the only legitimate way to stay within the law quoted as per the 90-day notice and the correct rent determined by the calculator.

If neither party gets in touch, but the tenant continues to live in the property then the contract automatically renews at the same rent and terms/conditions as the previous contract including the addendum. The onus therefore is more on the landlord to get in touch prior to the 90-days’ notice, otherwise no changes can be legally made to the contract.

Mario Volpi is the managing director of Prestige Real Estate in Dubai (prestigedubai.com). He has 30 years of property industry experience in the emirate and London. Send any questions to mario@prestigedubai.com

The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice

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