Dubai speeds up collection of arrears from tenants who lose rental disputes
Tenants in arrears could have their bank accounts frozen within two days of losing a legal dispute, after Dubai’s Land Department (DLD) struck a deal with the Central Bank.
The DLD announced over the weekend that it was setting up an electronic system linking its Rental Disputes Centre (RDC) with the country’s Central Bank, which it says will enable landlords to recoup unpaid rents far more quickly.
The DLD said it was developing an electronic framework of cooperation with the Central Bank that would cut the amount of time it takes to freeze bank accounts belonging to tenants who lose their cases in the RDC.
Under an agreement signed by the RDC director Abdulqader Musa Mohammed and the Central Bank’s assistant governor for banking supervision, Saeed Abdullah Al Hamiz, the Central Bank’s existing customer information request system will be upgraded to an electronic system, allowing the amount of time it takes for official paperwork to take effect to be cut to just two working days from six months.
The RDC said all of the 2,630 judgements that have been made so far this year will be rapidly implemented using the new electronic system. Amid lower oil prices and a slowing economy, there has been an increase in the number of rental disputes between landlords and tenants.
Mario Volpi, the chief sales officer at Kensington Executive Properties and The National’s property advice columnist, said that while it was unusual in Dubai for tenants to maliciously withhold rent that “at the moment we are seeing a few cases where tenants lose their jobs and can’t afford to pay the rent”.
“Also, it is becoming the norm in Dubai to pay rent in as many as six postdated cheques, so if a tenant loses his job partway through the year it is possible for him to not pay,” he said.
“Generally in Dubai the real estate laws are weighted towards the tenant rather than the landlord so perhaps this is a way of impressing upon people that renting is a serious undertaking, but I hope that under this new system tenants are able to resolve any debt problems with their landlords.”
Despite the rather drastic-sounding nature of the new system, the DLD said it would “ensure a higher level of security for all parties involved in property contracts”.
“The customer information request system at the Central Bank of the UAE has safeguarded stability across many of Dubai’s industry sectors, and we are certain that this will also be the case for our cooperation with the RDC and DLD,” Mr Hamiz said,
“Our plan will help the Emirate’s property sector by maintaining the rights of all parties, ensuring justice through the fair and efficient application of the provisions of UAE law.”
Governments around the world have the power to freeze bank accounts for a variety of reasons, including civil court judgements, suspected illegal activities or suspicious activities that have been detected by government agencies or regulatory bodies. The death of the account holder may also trigger a temporary freeze on bank accounts.
Matthew Green, the head of research at CBRE’s Dubai office, welcomed the move. “This is an encouraging development for the property sector as a whole, as it will help to dramatically reduce the process time for rental disputes, which in turn sends out a positive message to the market,” he said.
“The move comes as a further sign of the maturing nature of the industry, and also underlines the continued efforts in streamlining government services as the country moves towards an online economy. With transaction volumes currently dampened by the impact of the sustained strength of the US dollar and negative investment market sentiment caused by ongoing global economic uncertainty, the government is clearly taking a proactive role in kick-starting property activity through the means of better regulation and improved process efficiency.”
Villa and apartment prices in Dubai and Abu Dhabi fell between 4 per cent and 6 per cent during the second quarter compared to the same period last year, according to the property consultants Cavendish Maxwell.
Home prices, however, are expected to remain stable in the third quarter as the slow months of summer and Ramadan put a damper on the number of transactions.
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