UAE Property: ‘Can I be charged a 5% fee for lease renewal?'

When a change to a contract is put forward, irrespective of whether 90 days’ notice has been given, there needs to be agreement on both sides. Photo: istockphoto.com

Question: I have been renting a villa for 15 years. I always pay the rent with an annual increase or decrease according to the market value and in mutual agreement with the management office.

I also pay a small annual administration fee for the Ejari registration.

Recently, the landlord changed management offices and the new agency wants to charge a management fee of 5 per cent for contract renewal.

It informed me of this 90 days before the expiry of the contract.

My original tenancy contract, which has been renewed year after year, had no mention of a management fee.

The 5 per cent management fee and the 10 per cent rent increase according to the Real Estate Regulatory Agency effectively add up to a 15 per cent increase to my annual cost of living.

I have tried talking to the agency, but they insist on charging this fee.

Is the new management office allowed to introduce a fee into the contract after so many years?

Wouldn’t that be considered as a one-sided change of terms in the tenancy agreement?

And if it is not allowed to do so, how can I convince or prove that it can't do this?

I am not keen on filing a case with the Rent Dispute Settlement Committee as this will also cost a considerable amount of money. MW, Dubai

Answer: For what reason has this new management fee of 5 per cent been levied? If it is an administration cost to prepare the contract, then I can understand that a set fee of perhaps Dh1,000 or Dh1,500 plus value added tax would be a reasonable sum, but 5 per cent is excessive.

The management company needs to justify this cost to you and then you can decide whether you wish to continue to pay this fee or not.

You say that you would not like to go to the RDSC as this will cost too much.

Unfortunately, if you don’t get a judgment in your favour, the 5 per cent that the management company is requesting will continue to be charged.

So, I believe that the 3.5 per cent fee that is required to file a case is money well spent, especially if the judge finds in your favour.

When a change to a contract is put forward, irrespective of whether 90 days’ notice has been given, there needs to be agreement on both sides to the changes and if there is not, the only way to resolve the issue is to file a case at the RDSC.

Q: The Rera rent calculator index has not been updated. The rents reflected show data that is two years old.

Because of this, landlords like me cannot increase rent. The rental valuation certificate allows only for a maximum increase of 20 per cent for existing tenants.

I understand that tenants need to be protected but if they are very rigid based on an outdated Rera rental index, how can landlords deal with it?

I am sure there are many small-time investors like me caught in a similar situation. MC, Dubai

A: It is true that the rental market appears to be stacked in favour of the tenant, but this stance is replicated all over the world.

I suppose it has to be this way, otherwise the alternative would be anarchy, allowing landlords to set their own rates. This will not be good for the long-term view of any rental market.

The balance may have been adjusted towards a more level basis by the introduction of the Dubai Land Department’s valuation service, which can help landlords in certain situations.

The Rera rental calculator used to be updated quarterly and then it went to being updated once a year.

The DLD has been working on rating buildings to give a more accurate assessment for both residential and commercial properties.

This is a colossal task and one that will take time but once implemented, it will bring about a fairer assessment of rental values, taking into consideration facilities, quality of materials used, views and property sizes.

In the meantime, be safe in the knowledge that despite existing rental values not necessarily keeping up with vacant unit rental values, the Dubai property market has performed extremely well since the Covid-19 pandemic, so there is some consolation regarding capital appreciation.

Therefore, your small investment will have gained in value, which will be somewhat of a cushion to the dilemma you and many landlords face.

Mario Volpi is the sales director at AX Capital. He has worked in the property sector for 40 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to [e-mail]