Have you received an eviction notice? What to do

Eviction notices are gaining significant attention in Dubai these days, particularly since rents have likely increased by 50% in the city and other UAE states. Owners are capitalising on this recent surge in rent and taking the necessary steps to evict their current tenants. This is due to their desire to either remain in their current apartment and reduce their rent costs or to capitalise on the surplus they receive from this increase. Let's assume that they have a mortgage of AED 1,000,000 with a 5% interest rate from the bank for a two-bedroom apartment. The developer has already received 20% of the mortgage amount, and they will pay the remaining balance over a period of 10 to 15 years. Let's say that the owner took out a mortgage in 2018. Then, let's calculate the monthly payments and perform some math.

Initial Information

1. Mortgage Amount: AED 1,000,000
2. Interest Rate: 5% per year
3. Down Payment: 20% of AED 1,000,000 (AED 200,000)
4. Loan Term for Mortgage: Either 10 or 15 years
5. Personal Loan for Down Payment: 5 years maximum

Monthly Payments Breakdown

1. Personal Loan for Down Payment (5 years)

• Loan Amount: AED 200,000

• Monthly Payment: AED 3,774.25

2. Mortgage Payments

• Loan Amount: AED 800,000

For a 10-Year Term (120 months):

• Monthly Payment: AED 8,485.24

For a 15-Year Term (180 months):

• Monthly Payment: AED 6,326.35

Combined Monthly Payments for the First 5 Years

10-Year Mortgage Term:

• Personal Loan: AED 3,774.25
• Mortgage Payment: AED 8,485.24
• Total Monthly Payment for First 5 Years: AED 12,259.49

15-Year Mortgage Term:

• Personal Loan: AED 3,774.25
• Mortgage Payment: AED 6,326.35
• Total Monthly Payment for First 5 Years: AED 10,100.60

Summary

• For the first 5 years, with a 10-year mortgage term, the total monthly payment will be AED 12,259.49.
• For the first 5 years, with a 15-year mortgage term, the total monthly payment will be AED 10,100.60.

After the first 5 years, the personal loan will be fully paid off, and the monthly payments will only include the mortgage amounts:

• 10-Year Term: AED 8,485.24 per month
• 15-Year Term: AED 6,326.35 per month

Imagine an owner paying approximately AED 10,000 per month for a 10-year mortgage to relieve some of the burden from the many years of the mortgage. Surprisingly, after 5 years, the developer handed over the project in 2023, and he began renting the apartment for AED 120,000 per month, in line with the 2023 rental rates, which were approximately AED 10,000 per month, to cover his mortgage and personal loan payments. Suddenly, the year 2024 arrived, and the apartment's value, boosted by the recent real estate surge, has risen to AED 2,000,000. Therefore, the owner will consider covering his mortgage payment and will also profit from the difference in the amount he will rent the apartment for. Good investment, though!

Here, the owner considers reasons to remove the current tenant from the apartment and re-rent it. Here are some of the reasons the owner may believe he needs to vacate his apartment or villa:

• One reason is that the owner wants to use the apartment for himself or his first-degree relatives, such as his parents, spouse, or children. However, the owner must prove that he does not own any alternative property suitable for this purpose, and he must notify the tenant of his intention at least twelve months before the date of eviction, either through a notary public or registered mail.
• Another reason is that the owner wishes to sell the apartment, in which case he must also give the tenant a twelve-month notice before eviction. In this case, the law does not specify whether the owner must prove that he does not own any alternative property or whether the tenant has any right of first refusal to buy the apartment.
• If the owner evicts the tenant for his own use or for his first-degree relatives, he may not rent the apartment to a third party before the lapse of at least two years; otherwise, the tenant may claim fair compensation from him.
• The property may undergo demolition, reconstruction, or sale.

Legal Implications

If the owner wants to evacuate the apartment from the current tenant and he needs to stay in the apartment himself or re-rent it, he must follow certain legal procedures and conditions according to UAE real estate legislation. He must notify the tenant in writing at least 12 months before the lease contract expires, either through the notary public or registered mail, of his intention to evict the tenant for one of the reasons specified in Article 25.2 of Law No. 26 of 2007. Within 15 days of receiving the eviction notice, the tenant may challenge it before the Rent Dispute Settlement Committee, and the committee may decide whether to uphold or cancel the eviction. The tenant must have a valid ground for challenging the eviction notice, such as non-compliance with the notification period, lack of permits for demolition or reconstruction, absence of another suitable property for the landlord's personal use, or re-rental of the property within one year of eviction for personal use. The tenant may also challenge the eviction notice if the landlord has violated the RERA rent calculator's guidelines and imposed an unlawful rent increase prior to the eviction notice.

The owner cannot evict the tenant before the lease contract expires, unless the tenant violates one of the conditions in Article 25.1 of Law No. 26 of 2007, such as non-payment of rent, subletting without approval, or using the property for illegal purposes. In such cases, the owner must notify the tenant in writing to remedy the violation within 30 days, and if the tenant fails to do so, the owner may seek eviction through the Rent Dispute Settlement Committee.

The lease contract stipulates the rent that the tenant must pay, and the owner cannot raise the rent unless the contract permits it or the rent is significantly lower than the market value. The Real Estate Regulatory Agency (RERA) is responsible for setting criteria for rent increases in Dubai, considering the economic situation and the condition of the property. RERA offers an online tool called the RERA Rent Calculator, which compares similar properties to determine typical rentals and legal rent increases. On March 1st, 2024, RERA reset the rent calculator, allowing a maximum 20% rent increase based on the current rent's comparison with market value:

Rent increase limits at 5% for 11–20% below market value, 10% for 21–30% below, 15% for 31-40% below, and 20% for 41% or more below market value. Landlords and tenants can agree on a higher increase during private negotiations, potentially exceeding 20%.

The RERA rent calculator is only applicable in Dubai; other emirates may have different rules and regulations for rent increases. For instance, Abu Dhabi removed the rent cap in 2013, allowing landlords and tenants to negotiate rent increases based on market conditions. Despite the unexpected fall in rents in Abu Dhabi's rental market since early 2016, we welcome the decision to cap rentals, as it offers enhanced stability and protection for tenants in Abu Dhabi. In February 2016, the Chairman of the Abu Dhabi Executive Council issued Resolution No. 13 of 2016 (“Resolution No. 13”) introducing a housing fee in Abu Dhabi. All residential leases to expatriates carry a housing fee, calculated at 3% of the annual rent. Abu Dhabi Municipality has now begun charging housing fees based on electricity and water bills issued by Abu Dhabi Distribution Company (ADDC). In 2014, Sharjah set the rent cap at 5%, prohibiting landlords from raising the rent during the first three years of the lease contract. In 2015, Ajman set the rent cap at 20%, prohibiting landlords from raising the rent during the first two years of the lease contract.

Tenant Rights

The tenant can object to any unfair rent increase or eviction notice by filing a complaint with the Rent Dispute Settlement Committee in the respective emirate and presenting evidence to support his or her case. The tenant can also use the RERA rent calculator in Dubai or other sources of information in other emirates to understand the average rental values and negotiate rents effectively. The tenant must also observe his or her obligations under the lease contract, such as paying the rent on time, maintaining the property, and not making changes without the landlord's consent.

However, what about the tenant who did not have a salary increase or any kind of compensation that allowed him to evacuate this apartment and rent another one in the vicinity? Especially if the current tenant has a large family and the current rent, he pays does not allow him to evacuate this apartment and rent another apartment in the vicinity? If the current tenant has a large family and the current rent he pays prevents him from relocating to another nearby apartment, they must consider the developer's upcoming new projects, which may be distant from his and his spouse's workplace, the children's educational institutions, and other local entertainment venues. Therefore, the authorities may need to consider the situation of tenants who have not received salary increases or compensations that allow them to relocate to other areas, and who may have family and work obligations that prevent them from moving far away from their current locations. I think the authorities should compare Dubai's rental regulations to those in Abu Dhabi, Sharjah, and Ajman, which are more flexible for tenants due to salary and market conditions.