UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva and Sean Cope, DLA Piper Middle East LLP
6.3 Regulation of Rents or Lease Terms Rent in the UAE may be freely negotiated between the parties to the lease. In Abu Dhabi, Executive Council Resolution No 14 of 2016 on the leasing of premises agree - ments prohibits rental increases of greater than 5% per annum. In Dubai (excluding the DIFC), Decree No 43 of 2013 provides for the average market rent to be set according to the Rent Index for the Emir - ate of Dubai, as approved by the Real Estate Regulatory Agency (RERA). The percentage of the maximum increase in the real estate rents is determined on renewal according to the current annual rent amount compared with the average rent for a similar property. While these restric - tions apply to both residential and commercial property, in practice, for commercial property, agreed-upon alternative terms (such as fixed increases) are likely to be respected. 6.4 Typical Terms of a Lease The terms of a lease may be freely negotiated between the parties, provided that the contents of the lease agreement do not contravene law. Both the Abu Dhabi and Dubai landlord and tenant laws include provisions in relation to the repair and maintenance, termination, eviction and term of leases where the lease agreement remains silent on such topics, and are manda - tory in application; although in practice most contracts will contain express terms on those matters and on which provisions must not con - travene the applicable law. 6.5 Rent Variation The rent payable under a lease must be speci - fied in the lease agreement, and is generally sub - ject to fixed or index-linked increases at regular
intervals. In addition to a base rent, turnover rents are common in retail lettings. Market rent review provisions are also included in some leases, but these clauses are not used as frequently as they are used in more devel - oped real estate markets, since reliable compa - rable transactions can be difficult to establish due to the lack of publicly available market data. 6.6 Determination of New Rent Revised rents may be determined by applying a fixed or index-linked percentage increase, or by determining the open market rent. 6.7 Payment of VAT VAT applies to rent payable for a commercial property. 6.8 Costs Payable by a Tenant at the Start of a Lease A tenant’s liability for upfront costs should be set out in the lease agreement. The parties to a lease commonly agree that the tenant will be responsible for paying the registration fees asso - ciated with registration of the lease at the rel - evant registration department. Tenants are also generally responsible for the cost of opening an account for utilities and telecommunications, and for paying for meters and connections in new properties. A tenant may also be liable for the fees of any agent (such as real estate bro - kers) involved in the transaction. 6.9 Payment of Maintenance and Repair A commercial lease agreement may impose an obligation on the tenant to pay a service charge to the landlord, to be used for the maintenance and repair of the common property.
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