Stuck with a tenant at low rent?
Every landlord is an investor who is looking for the best ROI (return on investment).
During corona time in Dubai, rent values dropped dramatically as everyone was scared from the unknown. Some tenants relocated to bigger and cheaper properties and many other tenants left the country leaving vacant properties behind them. Landlords start to rent for low value to reduce rental gap and cover their service charges fees.
Today, as Dubai recovered faster than any other place around the world, expats dashed back to Dubai changing the shape of supply and demand which led to higher rental values.
It’s a bit of a pity as both landlords and tenants are both victims of the spike. As a landlord, your property is worth at least 50% more than the current rental value. As a tenant who secured a unit at low rent, moving out now sounds impossible as prices are ridiculously increased.
Dubai is trying to play balance here, looking to keep both tenant and landlord happy, for some reason, they did not update the rental index leaving the two parties against the wind.
So what do you do as a landlord if you are stuck with a tenant at low rent?
Please follow this process, and make sure all communication must happen via email.
- Ask the tenant clearly if he/she is willing to renew the lease or they wanna vacate. – example
Prior to lease ending date of Unit X – I am obliged as an owner to communicate with you regarding your intention of renewing the lease or vacating the property please send me your answer as soon as possible.
(If he said I am not willing to renew, this email is enough to evict him at the end of the current lease)
- Tell the tenant that you are not planning to renew the lease for personal reasons.
it worked with some owners, the tenant said oh ok and left. - If he insists, say that you will approve to renew the lease based on the new market price and state the amount you’re looking for.
Stating the price of the current market always scares the tenant and they start to think seriously of leaving because even if they insist on staying at low rent they can stay for 1 more year only and obviously they have to vacate.(Please note that many many tenants don’t know that as an owner you are not allowed to increase the rent more than 15% based on the rental index).
- If they refuse your new price and they argue about rera index and the 15% rental increase only. Then you can ask dubai land department to value your unit in specific by visiting this link:
https://dubailand.gov.ae/en/eservices/request-for-valuation-of-property-lease
Based on this valuation you can increase the rent despite the rera index. - If the valuation comes low, try to offer the tenant money to leave as it will be a win-win for you.
Calculate the current lease and the new lease.
Keep in mind you are only allowed up 15% increase if rera index showed 40% extra. - Serve the tenant a legal notice from the notary service
(Tasheel Notary Public Dubai Court | Al Barsha Mall)Once the tenant receives the notice he is obliged to leave within one year despite the condition of his lease.
