Dubai: UAE’s tenants will need to convince landlords first about changes to their job status if they are to get any sort of rent relaxations. Expecting across-the-board rent waivers or rent-free periods may be expecting too much, market sources say.

Getting involved in civil disputes with landlords too may not serve the purpose… especially when tenant finances are stretched.

What tenants could do is show landlords proof of any change to their job or salary status, and try and negotiate around that. So, tenants are better off retaining any proof that can back up their demand for a rent waiver or discount.

“We do not believe that many tenants have the resources to be able to open a civil court case in order to get a judgement in their favour, which would allow them terminate their leases without penalty,” said John Stevens, Managing Director at Asteco Property Management.

“The best solution is to approach the landlord and present their change in circumstances with supporting documentation, and see whether they are willing and able to offer any concessions.

“Some landlords are able to support tenants more than others. This is equally as difficult a time for landlords/property investors as it is for tenants.

“And there’s always the Rent Dispute Committee in Dubai to assist in mediating and find mutually agreeable solutions.”

March blues
Things were progressing relatively smoothly through the first two months in the residential market. In Dubai’s apartment space, rental declines on an annual basis was at around 12 per cent, according to Asteco estimates. But then March gave a shock to the system, with businesses in the UAE warning about imminent job losses and also taking pre-emptive measures such as salary cuts from April itself.

By every indication, this process will only hasten in the coming weeks – “A true indication of where the residential rental market is headed will be had when flight services resume,” said an industry source. “That would give an insight into the sort of job losses that have taken place, and whether families are heading back to their home countries until the market situation improves.

“Saving on cash is the only priority for tenants in the current climate.”

Biggest worry
A wholesale departure of their tenants is what landlords are fearing. ‘Gulf News’ spoke to landlords who own and rent out multiple units at leading residential communities, and their only priority is whether they will get their rental dues once the next cheques are encashed.

Asteco in its first quarter market update reckons that most tenants will stay put rather than bear the additional cost burden of shifting/relocating. “We expect a reduced number of new leases and relocations as tenants are likely to adopt a wait-and-see approach to re-evaluate their circumstances once the restrictions have been lifted,” the report adds.

How far will landlords go?
But much depends on whether landlords will listen. They could say that they have already adjusted their rental demands in line with market values. And dropping rents any further will reduce their income and also leaves them limited funds for the upkeep of their properties.

To counter that, tenants could say that service charges are being reduced this year, in Dubai especially. Plus, since March, it’s a totally different set of circumstances they and landlords are facing.

“Further pressure on Rental rates across all asset classes is expected for the year as global events weigh down heavily on market sentiment,” says the Asteco report.

Also, recent government announcements have been quite clear about residential allowances that employers provide their staff. “Our understanding of Ministerial Resolution 279 clearly articulates that employers are responsible to pay the residential accommodation allowance to their staff while they remain in Dubai – even if their salaries and other benefits have been cut,” said Stevens. “This step is particularly important as until residents can relocate or secure alternative employment, their housing is essential.

“Many landlords are prepared to accept rent payments by direct debit. And some have already agreed to accept rent in monthly instalments.

“We expect this trend to increase significantly over the coming weeks. Many landlords have commitments to banks and while they cannot easily accept reductions, smaller amounts – but at regular intervals – are palatable.”

Will tenants be willing to live with that? Or do they expect more?

Next few weeks will decide that.

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Collected and published by Arms &McGregor International Realty editorial team.