Avoid the rent renewal disputes

PWAn agent’s renewal fee is one of the most contentious issues when renewing a rent contract l Shutterstock

Every year scores of renters around Dubai assess their annual rent outlay and decide whether to renew, look for better accommodation and terms or move up the property ladder and become homeowners. While negotiating with a landlord seems tedious, rent renewals are actually now less burdensome with new regulations and tools laid out by the Real Estate Regulatory Agency (Rera). For instance, tenants can now check the government’s rent calculator to determine the rental price of their property, while the law prohibits landlords from evicting tenants arbitrarily.

Despite advances in the regulatory and procedural fronts, still many rent renewal disputes arise. The Rera’s rental dispute committee is tasked to resolve such disputes, but experts say understanding how tenancy contracts work can help prevent such potentially costly disputes.

     See related story: Stability in the number of rental disputes

“Rera set out the framework for all tenancy contracts,” says Toby Young, Managing Director of Property rights, which provides legal advice on matters related to real estate. “All tenancy contracts are considered legally binding, although no clause can supersede the laws of Dubai. This ensures that tenants are not forced to abide by clauses they may not understand or in cases where they don’t realise  the impact [of such clauses].”

Renewal fee
An issue that most tenants find contentious is the agent’s renewal fees. It is important to understand the terms of this fee within the original agreement. “Renewal fees are generally written into the contract by the agent,” says Young. “If not, then they are unenforceable and they can’t just be demanded without any basis.”

Rera guidelines suggest such fees should not exceed Dh500. However, certain clauses in rent contracts may state higher amounts to be paid as part of the annual rent. “If a tenant and landlord renew the tenancy contract without an agent, then no such payment is due. Essentially, when the fee is written into the contract, it is payment for work done,” says Young. “If no work is done, agents can’t demand payment.”

Young suggests depositing tenancy contracts at Rera with the relevant rent cheques. This automatically invalidates a renewal fee, but related costs can total to approximately Dh600.

Dispute resolution
The process of resolving rent renewal disputes is overseen by Rera and cases can be filed by landlords or tenants. Cases brought to the dispute committee range from unrefunded deposits to rent increases and evictions. A deposit is required when filing a complaint, equivalent to 3.5 per cent of the annual rent, with a minimum amount of Dh500.

“Invariably, the losing party is told to pay the fees regardless of who brings up the case,” says Young. “After the initial filing of a case, Rera will organise a mediation session to see if the dispute can be resolved without going to a judge. If it is resolved, then half of the fee is refunded. The entire process can take up to a month.”

All rent contracts have to be registered under the Ejari system of the Dubai Land Department. It is also imperative that a cancellation of the registration be carried out in cases of non-renewal of contract or tenants vacating a property. Failure to do so will lead to the new property registration being rejected, which would prevent tenants from applying for visas for their relatives or utility services.

Typically, it is up to the property owner to complete the procedure before entering a new contract. The cancellation fee for an Ejari contract is Dh30 and the process is completed within a day.

     Ejari registration for all Dubai lease contracts

Know the law
Be aware of your rights as a tenant or landlord. Here’s what Law No. 26 of 2007 (amended Law 33 of 2008) says about tenancy contract renewal.

Article 4
The contractual relationship between landlord and tenant will be regulated by a tenancy contract detailing, in a manner allowing no room for uncertainty, a description of the leased real property, the purpose of the tenancy, the term of the tenancy contract, the rent and payment method and the name of the owner of the real property, if the landlord is not the owner.

Article 6
Where the term of a tenancy contract expires but the tenant continues to occupy the real property without any objection by the landlord, the tenancy contract will be renewed for the same term or for a term of one year, whichever is shorter, and under the same terms as the previous tenancy contract.

Article 7
Where a tenancy contract is valid, it may not be unilaterally terminated during its term by the landlord or the tenant. It can only be terminated by mutual consent or in accordance with the provisions of this Law.

Article 9
The tribunal will determine the rent of similar real property, taking into account the criteria determining the percentage of rent increase set by Rera, the overall economic situation in the emirate, the condition of the real property and the average rent of similar real property in similar real property markets within the same area and in accordance with any applicable legislation in the emirate concerning real property rent or any other factors the tribunal deems appropriate.

Article 13
For the purpose of renewing the tenancy contract, the landlord and tenant may, prior to the expiry of the tenancy contract, amend any of the terms of the tenancy contract or review the rent, whether increasing or decreasing it. Should the landlord and tenant fail to reach an agreement, then the tribunal may determine the fair rent, taking into account the criteria stipulated in Article 9.

Article 28
Transferring the ownership of real property to a new owner does not affect the tenant’s right to continue to occupy the real property by virtue of the tenancy contract entered into with the previous owner, provided that such tenancy contract has a fixed term.

Source: Manika Dhama, Special to Property WeeklyPW


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