Abu Dhabi, UAEWednesday 16 October 2019

Homefront: 'how would a three-year Dubai rent freeze affect my income as a landlord?'

The homeowner lets out three apartments in the emirate

Dubai is studying a proposal to freeze rents for three years after landlords and tenants sign rental contracts, according to the DLD. AFP  
Dubai is studying a proposal to freeze rents for three years after landlords and tenants sign rental contracts, according to the DLD. AFP  

I am a landlord with three apartments in Dubai. I have heard a new law that includes a three-year rent freeze is being considered in the emirate. How would that affect my rental income? Rents are lower at the moment, so would that mean locking in a new tenant at the current rates? BL, Dubai

The Dubai Land Department in conjunction with the Rental Dispute Settlement Committee is studying a proposal that would mean there could be no rental increases for three years after signing a lease agreement between a landlord and tenant. I must stress this is just an idea that the DLD is considering at the moment and no decision has been taken on whether it will be taken up or indeed when it will be rolled out - if at all.

I don’t think you need to worry too much at this stage as the Government has always adopted a market-driven model. Personally, I question the need for such a cap at present as the current rental calculator/index is working well. The only time a cap such as this is needed would be in an out of control rising rental market. The proposed cap mentions no increase in rent would be allowed within the first three-year period but what it does not address is if the rent were to fall lower within this period. Can a tenant renegotiate a lower rent for the subsequent years? Given this question and other possible challenges, I believe this proposal may take some time to happen, if at all.

I am moving home to the US this summer and the contract on my villa expires in January. If I leave in July, what kind of penalty will I have to pay? My rent is higher than the market rate, so by the end of July I will have already covered what the landlord can secure in annual rent in the current market. How should I play this? WK, Dubai

If you need to break your rental contract early, the first thing to do is read through the terms and conditions of your contract to see if you have a relevant clause allowing you to do this. In the past contracts did not have any break clauses, so a tenant would be at the mercy of the landlord to get some or all of their remaining rent back. If you do have a relevant clause, then the terms of the contract have to be adhered to. Should there be no provision, the industry norm is to inform the landlord as soon as possible of your intention to leave early then offer to pay some form of compensation for the loss of rent. This compensation is normally one to two months rent. The actual amount of annual rent has no bearing on the fact that you will not have fulfilled the agreed length of the tenancy, which is why a compensation of one to two months is appropriate. Inform your landlord as soon as possible in order for you to organise dates and moving logistics etcetera. To ensure a continuing good landlord/tenant relationship, you could help out by being flexible with potential future viewings too; this way you leave on a positive note.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for 35 years in London and Dubai

The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com

Updated: May 8, 2019 12:19 PM

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