ASK THE AGENT - What you need to know about Property Law

There are attractive mortgage products in the market, with a few providers offering rates as low as 3.99% or even 3.49% which signals that competition among UAE banks for a higher share of the mortgage market is getting pretty intense.Mohanad Alwadiya, CEO, Harbor Real Estate

We heard that our building has started increasing rents. We need to renew our contract in three months. When should the landlord inform us?

For any rent increase, your landlord must give you at least a 90-day notice prior to your contract expiration. According to the law, there should not be any rent increase if the rent for the real estate unit is not more than 10% below the average rent that a similar property commands; the annual rent increases can range from 5% to 20% according to how much the current rent is less than the market average; and the market average rates are to be determined by the RERA Rental Index. The law aims to safeguard tenant interests, the industry and the economy at large from unjustifiable increases. It does not set out to control the rental value of new contracts. Where a property is to be let for the first time or to a new tenant, it is up to the owner and tenant to agree as to how much rent should be charged.

Should I buy an under-construction or ready apartment for investment?

Even as the market has slowed somewhat and as the year draws to a close, reputable developers have continued to launch off-plan properties and offer great deals to attract even the most tight-fisted investors. Ready properties are preferred by most investors but they are usually sold at a premium. On the other hand, an off-plan property can provide you with superior capital gains by the time of completion, providing the market continues to exhibit price increases beyond the completion date for the particular property. Off-plan purchases are just as affected by market movements as completed asset purchases. Be smart about the property you are buying. Look for types complete with amenities and facilities in good locations. Always deal with a reputable developer and make sure to check the status of the escrow account. Be inquisitive. After all, you will be investing your hard-earned money.

I have Dh4 million and wish to invest in an apartment that promises good returns in the next few years. Where should I buy in Dubai?

Instead of buying a single high-end apartment, you can spread your D4 million over several properties to ensure a continuation of rental income uninterrupted by vacant periods. In doing so, you will be able to take advantage of owning several units in a building or area that is performing well, or maybe even across different units located in high-performing districts. Properties located in non-prime areas such as Dubailand have been doing well. With the recovery in real estate, we are witnessing the secondary areas of the market following the trend set by the prime areas. You may also want to save a little by purchasing under-construction units promising great capital appreciation in areas like Jumeirah Village Circle. Coupled with an investment in a Dubai Marina, Jumeirah Lakes Towers or Business Bay apartment, you may soon find yourself with a varied portfolio.

Should I assign my property to a leasing broker or a property manager?

You enter into a leasing agreement when you wish your real estate agency to locate suitable tenants for your apartments and facilitate the signing of the tenancy agreement, leaving you to assume the responsibility and devote your time to managing the tenants and all aspects of the property thereafter. A property management agreement includes more. A competent property manager provides an assessment, strategy and activity plan designed to harness the financial potential of your property. Considerations include history; current market, economic and risk factors; regulations; finance; and market dynamics. An activity plan will cover pricing and marketing, customer relationship and tenant management, and policy and cost management, among others. All these will be performed under a property management agreement. A good property manager will make your investment work harder for you and the returns you receive will outweigh any fees they might charge.

Question of the Week:

A bank representative called me to offer to refinance my property. Should I avail myself of it or not?

The easy answer is yes, but only if it makes financial sense. In short, you need to do the math.

There are attractive mortgage products in the market, with a few providers offering rates as low as 3.99% or even 3.49% which signals that competition among UAE banks for a higher share of the mortgage market is getting pretty intense.

There are many things you need to consider. Is there an early payment penalty for your current mortgage? It may well be that you will need to pay a hefty fee to exit the existing contract.

While 3.99% is an attractive rate, how long are you guaranteed this? Interest rates will eventually rise and this eventuality needs to be understood by mortgagors as the attractive 3.99% interest rate enjoyed today will, in all probability, be replaced with a significantly higher rate in two years’ time, requiring increased mortgage payments to cover the interest rate hike. You need to factor this into your financial planning.

Will you need to pay any establishment fees for your new mortgage contract? With the mortgage market becoming so competitive, you should be able to have any fees waived.

Also, make sure you can pay out your new mortgage contract at a future point in time without any penalty. This is an unnecessary expense that you should not be burdened with.

Source: Freehold

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