His Highness Sheikh Mohammed bin Rashid Al Maktoum has issued Decree No. 43 of 2013 (“Decree 2013”) in connection with the real estate rental increase in the Emirate of Dubai. The provisions of Decree 2013 apply to private and public sector owned properties in the Emirate of Dubai, as well as within the free zones. The provisions of Decree 2013 are replacing the provisions of Dubai Decree No. 2 of 2011 (“Decree 2011”).
Landlords are benefiting from the provisions of Decree 2013, as they will be able to increase the annual rents of their tenants by up to 20 per cent and the threshold for higher rental increases against the market index is lowered from 25 to 10 percent.
While Decree 2011 provided that landlords may not increase the rental value of a leased premises if the rent thereof is less than 25 per cent of the average rental value of similar units, Decree 2013 orders that the rent of the lease premises shall not be increased, if the rent of a leased premises is less than 10 percent of the average rent of a similarly leased premise in the same residential area.
Decree 2013 further stipulates that if the rent value is between 11 per cent and 20 percent less than the average rent of a similar property, the maximum rent increase shall be equal to 5 percent of the rent value. Decree 2011 instead required the rent to be less than 26 percent to 35 percent of the average rental values of similar units.
A maximum rental increase equal to 10 percent of the rental value shall be applicable if the rent is between 21 per cent and 30 percent less than the average rent of similar unit (Decree 2011 instead required the rent to be less than 36 percent to 45 percent than average rental value of similar units).
While Decree 2011 provided that the rental value of a property unit may increase by a maximum of 15 percent if the rent thereof is less than 46 percent to 55 percent of the average rental value of similar units, Decree 2013 requires the rental value of the leased premises to be between 31 and 40 percent less than the average rental of a similar property.
A maximum rent increase of 20 percent is applicable if the rental value of a property unit is less than 40 percent or more of the average rent of a similar unit (Decree 2011 required the rent value to exceed 55 percent of the average rental value of similar unit.
Article III of Decree 2013 states that the average similar rental value of a property is determined by the Real Estate Regulatory Agency’s rent index.
Decree 2013 is effective from the date of its issuance and shall be published in the Official Gazette.