x Abu Dhabi, UAEThursday 20 July 2017

Dubai property agents ‘demanding double commission otherwise no apartment’

Property expert Mario Volpi assists a tenant who is asked to pay commission twice by a real estate agent in Dubai.

A view of Downtown Dubai from the Armani Hotel at the Burj Khalifa. A Dubai resident is questioning the amount of commission that should be paid to agents. Pawan Singh / The National
A view of Downtown Dubai from the Armani Hotel at the Burj Khalifa. A Dubai resident is questioning the amount of commission that should be paid to agents. Pawan Singh / The National

I am about to rent an apartment for Dh95,000 and the agent tells me the commission needs to be shared with them. On the quote they gave me, it shows half the commission for the owner and then the other half for my agent, plus another 5 per cent. I am effectively paying two commissions. I have let them know that I think this is illegal and they insist it is not. I have already put a deposit down and I do want the apartment. I spoke to the manager of this realty company and he said 5 per was “normal” but not necessary. This is not the first time in the past few weeks I have been asked for “extras” to be paid. Some agents told me outright, “if you pay me a double commission, you get an apartment, if you don’t, then there isn’t any to rent at the moment.” Seriously? LL, Dubai

I, too, have rented in this way. I had to pay 5 per cent commission as normal and this was divided equally between the owner and another agent. To pay two lots of commission, however, is not normal and I would question this. The tenant pays 5 per cent commission irrespective of how many agents are involved, this fee is always divided. Make sure the companies you are dealing with are all Rera registered, so do not be bullied into paying more than this. It is not right that the agents are exploiting the market. Tell them you will report them to Rera if they insist. There should be no “extras” to pay unless you engage the agent to work for you in registering for Ejari, Dewa or your cooling provider. Offer to pay the normal commission and stick to your guns.

I have a number of questions:

1. Can rent increase the second year (the first renewal) or not? There is conflicting information all over the internet about this.

2. If the Rera calculator changes and allows an increase of rent within 90 days of the lease renewal (when at the 90-day mark the calculator showed no allowed increase), can a landlord really increase the rent? If so, how can that be, when it would be impossible for a tenant to receive a written 90-day notice of the increase?

3. Can a landlord change the terms of a tenancy contract for the second year to require three cheques instead of four?

4. Can an agent charge the 5 per cent fee for simply renewing the contract – as they do when issuing an initial contract?

5. What is the fee for registering a tenancy contract with Rera/Ejari? I’ve seen contradicting information ranging from Dh150 to Dh200. Can an agent or landlord charge a tenant more that what the fee actually costs them? JD, Dubai

Thank you for your questions, I would like to answer them as posed:

1. According to the old law No 26 of 2007, Article 9, the answer would be no, but this law has since been amended. The landlord can therefore increase the rent in the first, second or any year providing the Rera rent calculator says so.

2. At least 90 days before the expiry of the contract both parties need to inform each other of their intentions as to any changes to the contract. Your role would presumably be to remain in the property and therefore extend for another year. Your landlord’s role, I guess, would be to confirm that he would look at a rental increase. The actual amount of increase would therefore have to be deferred to much nearer the renewal date when the Rera rent calculator will determine the correct amount.

3. According to the law, no changes to the contract would be allowed, but I suppose it would come down to negotiating if you were to allow this.

4. Agents do charge renewal fees and this is normal. Agents do have a role to play in negotiating, writing contracts, running around getting signatures on the correct paperwork, collecting cheques and distribution.

The normal fee is approximately Dh1,000. To charge another 5 per cent of the rent would appear to be greedy but again this is all down to negotiating. Rera will tell you that this is not allowed but if you engage an agent to work, he does so for a fee as no agency will work for free.

5. The cost of registering at Ejari is approximately Dh200 if done in person but is cheaper online at approximately Dh160. If you are asking an agent to do this for you there would be an additional charge.

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

Follow us on Twitter @Ind_Insights