To change or not to change?
“Dubai rents have started to fall for the first time in three years.”
Note: This article was updated on 10 December 2017
As I turned on the radio and drove to the office this morning the first news item I heard was about the 1% dip in rentals in Dubai this quarter. It is therefore ironic that the first call I received when I arrived in office was from a tenant desperately asking for help having to receive his landlord’s notice informing that the renewal of his tenancy contract would be subject to a rent increase of 67 %.
In a country wherein expats makeup, 90% of the population one of the areas that naturally assisted growth and development was the real estate sector. And whereas investment and acquisition of property are an option for part of the population, most of the expats have no choice but to lease their home.
In recent years the return of growth and economic development has turned the real estate sector into one of the leading engines of the economy. However, the growth and development of a sector do not always mean improvements in the quality of life of the inhabitants of a country. On the contrary, it has been proven to lead to a period of unprecedented inflation in residential rent, with thousands of tenants moving to smaller apartments or even to other Emirates to afford accommodation.
Accordingly, many Dubai residents, despite working in the Emirate, had to reconsider their finances and find cheaper housing alternatives. Thus, for those thousands of expats who decided to move out of Dubai, Sharjah became a desirable and affordable solution.
Therefore, the question is - from a legal point of view and in a short or medium term – is it worth the change? Is Sharjah the housing paradise where rents cannot be increased within the first three years of tenancy that it is made out to be, or there is something else that we should know before making a move and regretting it forever?
Sharjah’s cheap rates are the token, and many families choose to change their residence only because of the appealing prices practiced in Sharjah. There it is possible to rent a two bedroomed apartment for the same price as a studio in Dubai. However, many families are unaware of the tenancy laws in Sharjah, and the dream may suddenly become a nightmare. This article aims to demystify Sharjah’s tenancy law secrets and help you to decide whether it is worth the move.
It is true that during the first three years all tenants benefit from a so-called "protection period" in which the rent increase cannot take place. As per Sharjah's 2007 law, the landlords can increase the rents after three years from the commencement of the tenancy contract, and there is no cap imposed upon that increase. Following this first rise, the lease-rent can be increased every two years thereafter.
Some landlords can take the lack of a cap as a green light to unreasonably hike the rent. Actually, as most tenants are unaware of their rights it is not uncommon for landlords to increase the rent by more than 70%, forcing the tenants to agree and pay through illegal means such as threatening them with eviction or merely disconnecting water and electricity supply.
For most tenants, the protection period of 3 years upon the commencement of the tenancy contract is also unknown. Accordingly, landlords exploit their tenants’ ignorance of the law and increase the rents yearly, randomly and arbitrarily.
Despite persistent calls from tenants for the imposition of a rental cap, which would arguably be the only suitable protection for Sharjah’s tenants, the authorities continue to defend the current position. In cases where the landlords increase the rent within three (3) years from the commencement of the lease agreement, tenants can choose to approach the police (in cases where tenants are compelled to accept the revised rent by illegal means) or approach the Sharjah Rent Dispute Committee (the RDC). The RDC encourages the landlord to increase the rent in keeping with the prevailing rent rates applicable in that area and to have in mind the place, the status of the building and its maintenance, the level of services available, its age and the existence of parking spaces, gardens, swimming pool or gym. However, approaching the RDC involves costs. Even though it is alleged that the tenant can merely visit the RDC and submit the available form or submit his memorandum (complaint), experience tells me that the appointment of a property lawyer in Sharjah is a crucial factor in winning case.
Even if rents are starting to dip in Dubai, Sharjah’s prices are still undeniably much more affordable. And yet though the lack of rental caps has already been demonstrated to be an issue requiring the urgent attention of the authorities, raising awareness of the applicable law and encouraging tenants to consult a lawyer immediately after receiving any controversial notices from the landlord may be beneficial to the disgruntled residents of Sharjah.
To know more about Sharjah Rent Laws, contact one of our lawyers in Sharjah today!
Update (December 2017):
The Executive Regulations of Law Number (2) of 2007 on Regulations of Landlord-Tenant Relationship in Sharjah (The Law).
Article 22 was added to the Law in accordance with Article (2) of the Resolution of the Executive Council Number (2) of 2010 dated 10 February 2010.
Prior to the addition of Article 22, old law (the Old Law ) provided that for commercial and residential properties, either party - the Tenants were required to serve a sixty (60) days notice in writing to the Landlords expressing their desire to terminate the lease agreement. As Per the new Law, the Tenants cannot terminate the lease agreement (except for force majeure event) and are legally obligated to continue the lease until the end of lease term. In the event of early termination by Tenant, the Tenants are obligated to compensate the Landlord. We append Article 22 as under:
"Without Prejudice to Article 12 of the Law Number (2) of 2007:
- If the lease is for a fixed period, the tenant may ask for termination of such lease, before the expiration of its period if it is proven by the tenant that there are unexpected force majeure events that make the execution impossible;
- the committee, may if it is content with such force majeure events, terminate the contract by obligating the tenant to pay compensation to the landlord in an amount not less than thirty percent (30%) of rental of the remaining period of the lease contract unless otherwise agreed by parties;
- the plaintiff shall pay the compensation set out in paragraph (1) above. The committee shall not instruct to deliver the postdated cheques or advance rentals to the tenant unless such tenant delivers the leased premises free from anything and on the date determined by the committee;
- if the landlord is the one who has asked to terminate the contract, then the tenant will not be forced to return the leased premises until he receives the compensation or obtains a sufficient security to be determined by the committee taking in to account the humanitarian conditions;
- the lease contract terminates legally in case the plaintiff pays the full compensation mentioned in paragraph (1) above unless otherwise settled by parties. If the plaintiff fails to pay the compensation in the deadline, then the committee shall reject the claim and oblige the plaintiff to pay the previous rentals to the landlord unless they have been paid by the plaintiff through cheques or rentals under the possession of the defendant (landlord); and
- provisions of this Resolution shall apply to all claims where no final judgment has delivered to them on the date of issuance of this Resolution
Article 22 of the Law also sets out that Landlord can terminate the contract (by serving a three (3) months notice only in the following two events:-
- If the Landlord wishes to demolish the leased premises for rebuilding or making a comprehensive maintenance that requires evacuation, provided the Landlord should obtain the necessary permits from the Sharjah Municipality and/or competent body;
- If the Landlord wishes to occupy, himself, or let one of his adult sons to occupy, the leased premises provided he does not own another property that is appropriate for residence at the jurisdiction of Sharjah Municipality where the leased premises is located.
In the event Tenant defaults in payment of rent (for residential property) to the Landlord, the Landlord in such event can evict the tenant and vacate the premises if rent payments are not paid within fifteen (15) days from the date the rent became due and in case of commercial properties, the Landlord can evict the tenant if the rent is not settled within thirty (30) days from the date the rent became due. As clarified in the article above, Landlord cannot change or increase the rent for a term of first three (3) years. After three years, the Landlords are permitted to change the rent every two years.
The Landlord is legally obligated to carry out each and all necessary maintenance of the premises. Minor maintenance works are the obligation of Tenant unless parties have agreed otherwise in their agreement. In cases where the Owner sells the apartment, building or property, the lease agreement between Landlord and Tenant will not be affected and shall continue to operate. This also applies in the event of the death of Landlord.
The Sharjah Rental Dispute Committee comprises of three panel - one judge and two experts. The RDC is responsible to review all lease and rental matters for properties based in Sharjah. The decision made by the RDC is final in cases where the judgment value is AED 100,000 (UAE Dirhams one hundred thousand); provided however appeal may be possible for such claims in the following events (Article 24):
- If the judgment is contrary to rules of jurisdiction;
- if the judgment contains anything that was not requested by the litigants; or exceeds what was required by the parties but leaves out some requests;
- if the judgment is delivered to a natural or artificial person while such person is not correctly represented in the claim or that the declaration has been null and void;
- if the judgment is based on documents proven to be false or determined to be false or is based on a testimony of a witness that is proven to be a false testimony; and
- if either party to contract presents a document that might change the direction of examination of the claim.
The appeal decision is final and binding and cannot be challenged or contested before any other court.