Question: I rented a villa from a real estate office for a year. Now I asked them to renew the lease contract. Two months ago, the real estate office sent me a message via email increasing the rental value, equivalent to 30 per cent of the value of the lease contract.
Is this increase allowed? What is the maximum increase that a landlord can impose on a tenant?
Answer: The real estate office doesn’t have the right to ask for an increase equivalent to 30 per cent of the value of the lease contract because the maximum legal increase amount is 20 per cent, according to Article 1 of Decree No. 43 of 2013 On Determining the Increase in the Real-Estate Rentals in the Emirate of Dubai.
This states that the percentage of the maximum increase in real estate rentals in Dubai shall be determined upon renewing the real estate leases as follows:
a) With no increase in the rent value of the real-estate unit, if its rental is less than 10 per cent of the average market rental rate
b) Five per cent of the rent value of the real-estate unit, if its rental is decreased by 11 per cent; 20 per cent of the average market rental rate;
c) 10 per cent of the rent value of the real-estate unit, if its rental is decreased by 21 per cent: 30 per cent of the average market rental rate
d) 15 per cent of the rent value of the real-estate unit, if its rental is decreased by 31 per cent: 40 per cent of the average market rental rate; and
e) 20 per cent of the rent value of the real-estate unit, if its rental is decreased by more than 40 per cent of the average market rental rate
This increase is annual. For the purpose of applying Article 1 hereof, the average market rental rate shall be set according to the “Rent Index of the Emirate of Dubai” which is approved by the Real Estate Regulatory Agency. The Agency shall have the exclusive authority to specify percentage of rent increase in the emirate, in view of economic circumstances.
For the purposes of renewing a lease contract, the landlord and tenant may, prior to the expiry of the lease sontract, reconsider increasing or reducing the rent.
If the landlord and tenant fail to reach an agreement in this regard, the agency may determine the fair rent, taking into account the economic situation in the emirate; the condition of the real property; the prevailing rental value of similar real property in other similar real property markets within the same area; the provisions of any legislation in force in the emirate regulating real property rent, and any other factors which the agency deems appropriate.
