Buying a Dubai flat with a tenant in it: you are buying the contract too

Tenanted apartments come to market at a discount and look like an obvious trade: income from day one, no void, no fit-out. Sometimes they are exactly that. But what you are buying is the apartment and the contract attached to it, and the contract was written by somebody else, at a rate set in a different year.

The rules below are the reason a tenanted flat has two prices — the one in the listing, and the one adjusted for how long you are bound by somebody else's terms.

The tenancy survives the sale

• A change of owner does not by itself end the tenancy. The running contract sees out its term.
• Nor does it allow an eviction next month. Evicting for your own occupation still requires the full notice period, served properly.
• The rent is the rent. If it is below market you cannot lift it to market at renewal — the increase scale will not allow it.

The two notice periods, and the one everybody confuses

• Changing the terms of a contract, rent included: at least 90 days' notice before the end of the term.
• Evicting on grounds such as a sale, the owner's own occupation or major renovation: 12 months' notice, served through a notary or by registered post.
• A missed deadline renews the contract on its existing terms. No verbal understanding with the tenant changes that, and no assurance from the seller does either.
• Ask the seller for proof of service, not for a description of a conversation. If a notice was served before the sale, the evidence of service is part of what you are buying.

The rent-increase scale, in force since 2013

Increases are tied to the average market rate for that property type in that district, on a fixed scale:

• Current rent no more than 10% below market — no increase permitted at all.
• 11–20% below — up to 5%.
• 21–30% below — up to 10%.
• 31–40% below — up to 15%.
• More than 40% below — up to 20%.

The Land Department publishes an official calculator that applies the scale. Its output is not a suggestion: it is what the tribunal will look at. So a flat let 35% below market does not become a market-rate flat at renewal. It becomes a flat at 15% more, and then the scale is applied again the following year.

What to check before you sign

• The Ejari registration. Registration of the tenancy with the Land Department is compulsory; without it a tenant cannot connect DEWA, cannot sponsor a family visa and cannot file at the tribunal — and a landlord cannot rely on the contract in a dispute.
• How the rent was paid. Dubai practice is payment in advance, often in one or a small number of cheques, and rent already collected for the balance of the term is settled between buyer and seller at transfer rather than assumed.
• The deposit, customarily 5% of the annual rent unfurnished and 10% furnished, and who is holding it. It transfers with the obligation to return it.
• The move-in inventory and dated photographs. Deposit arguments are the most common small dispute on this market and are almost always won by whoever has dated photographs.
• Service-charge arrears, which are the seller's to clear before a transfer certificate is issued.

Where disputes go

To the Rental Disputes Centre at the Land Department — a specialist forum rather than the general courts, and faster for it. The fee is a percentage of the annual rent with a floor and a ceiling. The practical observation from the market is that nearly everything that reaches a dispute is lost on paperwork rather than on the merits: no Ejari, a notice with no proof of service, no inventory at handover. Order in the documents is cheaper than any lawyer.

Based on Dubai's tenancy legislation and the Land Department's published rent-increase scale.