Understanding the rent cap in Dubai

When your lease contract is due for renewal, it is important to know your legal rights as a tenant. Dubai has defined clear parameters that determine whether a landlord can request an increase in the annual rental and if applicable, the permitted percentage of increase. It has also defined certain notification requirements that a landlord should follow if he wishes to increase the rent at the time of renewal. If the landlord does not notify the tenant of the proposed increase in time, he may not be eligible to increase the rent.

Permitted rent increase:

The cap on rent increase in Dubai is set out in decree 43 of 2013. The permitted increase depends on how low the rent of the property is at the time of renewal compared to the average similar rent, and is determined in accordance with the following:

• no increase if the difference between the rent of the property and the average similar rent is less than 10%.
• 5% if the difference between the rent of the property and the average similar rent is between 11% and 20%.
• 10% if the difference between the rent of the property and the average similar rent is between 21% and 30%.
• 15% if the difference between the rent of the property and the average similar rent is between 31% and 40%.
• 20% if the difference between the rent of the property and the average similar rent is more than 40%.

Scope:

The rent cap does not apply to the following:

• Properties located in DIFC: leases of properties located in DIFC are subject to DIFC rental which does not put a cap on the permitted rent increase.
• Hotel facilities: pursuant to law No. 26 of 2007 (as amended by law No. 33 of 2008), hotel facilities in Dubai are not subject to rental law.

Determination of the average similar rent:

The information used by RERA to establish the average rent is obtained from the Ejari system. The DLD has on its website a rent increase calculator that allows to check the permitted increase on the annual rent. The criteria used by RERA to determine the applicability and extent of the permitted increase includes the type of the property whether it is residential, commercial, industrial or staff accommodation, the location of the property, the number of bedrooms or the size in respect of commercial or industrial property.

Notification requirements:

Pursuant to law No. 26 of 2007 (as amended by law No. 33 of 2008), in case either party to a lease contract desires to amend any of its terms and conditions, it shall notify the other party of same at least ninety days prior to the expiry of the lease term unless otherwise agreed between the parties. The landlord should therefore notify the tenant at least 90 days prior to the expiry of the lease of any proposed rent increase. If the landlord does not notify the tenant of the proposed increase in time, he may not be eligible to increase the rent.

By: Rani El Hajjar | Head of Property and Construction at CVML, Dubai