Saturday, 31 January 2009

Dubai Moves to Rein in Rents

DUBAI - Tenants whose home or commercial property is less than a quarter below the average price for a similar premises will not have to pay any increase in rent, according to a decree issued on Monday by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE, in his capacity as Ruler of Dubai.

Mohammed Ibrahim Al Shaibani, director of the Dubai Ruler’s Court said the decree was aimed at curbing the increase in property prices within the emirate to maintain a balance between the interests of both landlords and tenants and to ensure stability of the real estate sector, according to state news agency, Wam.

The decree, the Ruler’s first of 2009, provides for a freeze of rent prices in 2009 for tenants renewing contracts signed in 2008.

It states that the rental value of those properties must be equal to or less than 25 per cent of a corresponding rent average established by the rental index.

The guideline for the rental index was issued on Wednesday last week by Dubai’s Real Estate Regulatory Authority and is expected to replace the rent cap.

While the authority has issued a point system for evaluating the rental value of a property, the average rents for properties are yet to be ascertained.

“The evaluation process for all types of properties is based on giving each property points for various attributes such as building facilities, near-by retail outlets, age and condition of building, etc,” according to the Rera statement.

“These points are used as a statistical basis to set a minimum average and a maximum average rent price.”

The minimum average and maximum average rent price are yet to be declared and the status of the evaluation process has not been given by the authority.

However, the decree issued on Monday states that the rate would be established when the tenancy contract is renewed.

The ruling also defines a formula designed to generate lower rent values but allowing a proportional increase in 2009.

Another decree outlined the relationship between the tenant and landlord. The law, which came into effect on December 1 last year, has been amended. It includes points on the basis of which a tenant can be evicted, such as non-payment of rent or if the tenant is found subletting the property.