Tenants and landlords in Dubai back proposal to freeze rents

A draft law setting out plans to freeze rents for three years in Dubai is winning support from renters and property owners.

The Dubai Land Department told The National that the proposed legislation would bring stability to the market for landlords and tenants, and reduce rental disputes.

Residents had hoped for more information on the draft law, such as whether the freeze would apply to new rental leases and existing contracts.

The Land Department said more details would be made available later, and that there was no date set yet for the law to be signed.

Andrew D’costa, a landlord in Silicon Oasis, welcomed the plan because of challenges finding tenants at a time when there is an abundance of rental properties.

“I prefer a law like this because even if I get marginally less in rent at least I will have peace of mind for three years if someone will commit,” said Mr D’costa, who is the chairman of an owners’ association in Silicon Oasis.

Mr D’costa lives in a three-bedroom apartment that he owns, and rents out a two-bedroom unit in the same building. Annual rents have decreased from about Dh95,000 ($25,870) in 20122013, to about Dh55,000 for a two-bedroom apartment in the neighbourhood.

In some new buildings, rents have dropped to Dh40,000.

Landlords can pay between Dh15,000 to Dh20,000 in service charges, leaving a small amount to cover mortgages.

Many residents across Dubai have moved out of apartments and into villas over the past year because of remote working and the desire for more personal space during the coronavirus pandemic.

Alexis Waller, head of real estate at the Clyde & Co law firm in Dubai, said similar limits on rent increases have been put in place in other emirates.

She said that other laws did not require a commitment from a tenant to sign a threeyear lease, instead merely setting out the rental terms if they remained in the same property for that length of time.

“Other emirates, such as Sharjah, currently have similar rental freezes and Abu Dhabi has, in the past, limited increases within leases of three years or less,” Ms Waller said.

“These have not applied any penalties to tenants who do not wish to sign up to a threeyear period.

“And we would expect the same for Dubai – that it is not to be used to penalise a tenant who does not wish to commit at the outset to the longer period.”

The sector is awaiting more information on whether the rental freeze will apply to all properties – residential, commercial and industrial – and if the cap would continue beyond three years.

“There was already a degree of protection under Dubai’s rent cap law limiting increases at renewal, and the proposed new law goes further to help tenants manage their rental liabilities by knowing that their agreed rate will be fixed for the proposed period,” Ms Waller said.

“It will also encourage tenants to rent the same property for longer periods.

“There could be some adverse impact to landlords if the proposed new law applied to existing contracts rather than new rental contracts, and this is the area that needs to be clarified.”

Tenants would support the decision since it would give certainty to rental outgoings and landlords would seek to manage it by building in any increase to the agreed rental rate, she said.

George Hettiaratchy moved from Sharjah to a two-bedroom apartment on Sheikh Zayed Road in Dubai in 2018. He pays Dh58,000 a year in rent.

“Considering the location and facilities, I would be happy to continue at this rate,” said Mr Hettiaratchy, who has been a UAE resident for more than three decades.

“I’m within walking distance to The Dubai Mall, Burj Khalifa and the fireworks.

“For any law you have to think of both parties, and it’s good for most tenants.

“However, some tenants may not prefer three years because rents are going down, so they may want to move.

“Landlords would prefer this but if rents were going up – like a couple of years ago – then the landlords would not agree. Still, overall, both parties will benefit.”

Nirain Lobo, a landlord in Jumeirah Islands, felt the law tipped the balance in favour of tenants.

“We have annual contracts, so if there is a rent freeze for three years, is there going to be a contract freeze for three years?” he asked.

Mr Lobo worried about investors trapped in lower rentals but paying higher interest rates on mortgages.

“For the tenant it’s probably a win-win, but it depends on which way the market moves, and it’s really very fluid,” he said.

“It will depend on the finer points in this law, like what are the exit clauses for both parties, or will both be stuck?”