The issue of rents remains one of the more sensitive areas of real estate regulation in Dubai and the UAE, particularly in the residential space. And given the fact that the city is still predominantly a tenanted one.
Over the years, the passage of laws have made the relationship between landlords and tenants increasingly transparent, removing the practice of unscrupulous activity on the part of either. This has now further evolved with the passage of a unified rental contract.
While the impact will be felt over time as the system gets fully implemented, the fact that the entirety of the agreement will be considered as an integral part should any dispute arise makes it particularly relevant. Not only for tenants and landlords, but also for investors, and facilitate a greater securitisation of the markets in the years ahead.
The majority of rental cases revolve around the increase- or decrease – of rental value, returning of cheques related to the payment of rents due to insufficient balance, or the sub-lease of property by some tenants without the consent of the owner.
It could also be using the property for a purpose than that designated for its use or for purposes that violate Sharia or law, or the desire of the owner in the evacuation of the tenant to sell the apartment or villa or to restore the same for his personal use.
For each of the above cases, there are different procedures that must be followed in order to reach the desired result.
Whether that be the difference in the period to send a warning – it should be sent 90 days prior to the expiration of the lease or before the 12th month – or a difference in the ways of proof and documents that must be submitted in each case.
The laws and the articles, whilst flexible enough to deal with individual variants, clearly spell out the rights of both parties, and the conditions under which they can be escalated to the Rental Disputes Settlement Centre. However, what is often observed is the addendums attached to the contract are parlay drafted, and in some cases even in conflict with prevailing laws, making the contract difficult to enforce. Dubai’s move to create unified rental contracts marks yet another important milestone in its regulation of the market, providing a remedy for such cases. With its particular emphasis on Article 33 in Law 25, specifying clearly the terms that allow for early breakage of contract, there was already a greater degree of comfort in place for the tenants.
With the passage of a unified contract creating terms mutually agreed upon in a standardised format, it sets the stage for not only long term leases coming into place at the residential level, but allows for the creation of local and community based REITs that can capitalise on such standardisation of rental terms.
This facilitates greater visibility of rental streams, and a greater upkeep of the property under predefined levels. It is particularly relevant for commercial leases as well, which have a varying number of individualised terms that are currently attached as an annexure to the standardised contract.
With a unified contract, tenants and landlords can move towards safeguarding their interests within the Ejari contract itself, paving the way for the contract to move online in its entirety.
This will facilitate not only greater transparency, but will also mean that there will be no provision for addendums within the contract. Currently, the contract will not be applicable for long-term tenancy contracts (defined as having a duration of more than 10 years).
And there is a separate registrar (Real Property Register maintained in the Dubai Land Department), where such leases need to be recorded. However, it is apparent that the move towards standardising will allow for a unified system eventually to incorporate long-term leases and across all real estate classes.
Such a possible move for longer-dated contracts should enhance the status of Dubai as a global destination for real estate investments.