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Confused by the new rent law?
So were we, until we picked up the papers today. Rera has clarified the law issued by the Sheikh Mohammed earlier this week.
January 22, 2009 12:08 by Dana El Baltaji
Following a decree issued by Sheikh Mohammed bin Rashid Al Maktoum forbidding landlords from raising rents in 2009, the Real Estate Regulator Agency (Rera) has issued a statement clarifying the decree.
According to the law, landlords are not allowed to raise rents in 2009, unless if the rents they charge are more than 25 percent lower than Rera’s price guideline for any given district; or if the rents were determined before 2008 and are considerably lower than Rera’s price index.
What the law failed to clarify was how much landlords are allowed to raise rents that meet either one of the conditions above. Indeed, without guidelines set by the government, landlords can view the new law as a license to increase rents determined before 2008 exponentially.
Yesterday, Rera released guidelines on how much landlords can increase their rents, provided they meet the law’s conditions. According to a report in The National, the following is the breakdown: If the rent is 46 percent to 56 percent below the rate in the index, it may be raised by 15 percent. If it is 36 percent to 45 percent lower, then the tenant can be asked to pay 10 percent more. Rents 26 percent to 35 percent lower may be increased by 5 percent.
Therefore, if your rent is AED50,000 a year, and it falls 46 to 56 percent below Rera’s rental index, then your landlord has a right to increase your rent by 15 percent, or AED7,500.
The new law is meant to “maintain a proper balance and regulated relationship between landlords or lessors and tenants,” said Mohammed Khalifa bin Hammad, the director of Rera’s real estate relationships regulatory department. “In the past years, some property units were rented at very low values in comparison to the market rate.”
“The new decree has been issued to balance the rental market and make landlords who have rented their properties against very low rents entitled to a proportional increase in rents at different averages,” he added.
Rental caps in the past only applied to contracts that were renewed, and not to new contracts. There are no guidelines regarding new contracts.
So, what do you think? Will the law make your life any easier?