In brief
Abu Dhabi's Real Estate Centre (ADREC) has announced a temporary freeze on all rental increases across the emirate, meaning that no upward adjustments to rent will be permitted until further notice. The announcement constitutes a material update in the Abu Dhabi rental market and is expected to have immediate practical implications for both landlords and tenants across the emirate.
The measure applies to all commercial, industrial and residential properties, with a carve-out for the Abu Dhabi Global Market (ADGM) (as further noted below). On renewal or re-letting, the rent cap will be the rental value recorded in the most recently registered Tawtheeq or Tamleeq for the relevant unit. Landlords and tenants should review their lease portfolios, renewal timelines, and contractual rent escalation provisions to assess the immediate impact on their arrangements.
In more detail
Impact on new lease agreements and lease renewals
- General approach: For all new leases and lease renewals across all types of properties, the rental value recorded in the most recent registered rental contract (Tamleeq or Tawtheeq) for the relevant property or unit will serve as the benchmark.
- Lease renewals: Existing leases (across residential, commercial and industrial sectors) must be renewed at the same rental level as the current contract, with no upward adjustment permitted while the measure remains in force.
- New tenancy contracts on previously rented units: Where a property is re-let to a new tenant, the rent must align with the value recorded in the most recent registered contract for that unit, which effectively operates as a cap.
- Ongoing compliance: Landlords and property managers are required to continue applying the prevailing registered rental value and are not permitted to increase rents while the suspension remains in force.
Key takeaways
For Tenants
- Review your lease renewal timeline. The rent freeze applies to renewals processed during the period it is in force. Where a renewal is imminent, tenants would be well advised to engage with landlords promptly and seek written confirmation that any proposed increase has been withdrawn. Renewals completed prior to the measure taking effect may not benefit from the freeze.
- Review your rent escalation provisions. Tenants should consider whether their leases include contractual rent escalation mechanisms, such as index-linked increases or pre-agreed step-ups, and take advice on whether these are effectively suspended for the duration of the ADREC measure. This is particularly relevant for commercial and industrial tenants operating under long-term lease arrangements.
For Landlords
- Audit your portfolio and renewal pipeline immediately. Landlords should promptly identify leases due for renewal during the period of the measure and reassess projected rental income on that basis. Where rental income underpins financing arrangements, consideration should be given to whether the absence of anticipated uplifts could affect financial covenants or debt service obligations, with early engagement with lenders where appropriate.
- Ensure compliance with the reference rate. The rental value recorded in the most recent Tamleeq or Tawtheeq for a given property or unit will serve as the binding benchmark for any new letting during the period of the measure. Landlords should ensure that lease documentation and agent instructions reflect this constraint. Agreeing rent in excess of this level may expose landlords to regulatory challenge and potential enforcement action by ADREC.
- Monitor the duration closely. ADREC has indicated that the suspension will remain in place until further notice, with the regulator expected to continue assessing market conditions, rental demand and prevailing trends before making any adjustments. Landlords should keep ADREC communications under close review so they are well positioned to recalibrate their leasing strategies, including pricing, incentives and negotiation positions, once the measure is lifted.
ADGM exception
As of the date of this alert, the measure applies to all commercial, industrial and residential properties across Abu Dhabi, with ADGM communities representing the sole exception. ADREC has informally indicated that the rental freeze does not extend to the ADGM, reflecting its status as a separate jurisdiction with its own legal and regulatory framework. This is consistent with the ADGM’s position as a designated financial free zone operating under a law system similar to English law, with property matters governed by its own distinct regime. Accordingly, landlords and tenants within ADGM-managed communities - including Al Maryah Island and Reem Island - should continue to be guided by their contractual arrangements and the applicable ADGM property laws. Notwithstanding this carve-out, the position remains fluid and the Baker McKenzie team are actively monitoring developments.
Note
As of the date of this alert, no formal legislative instrument or decree number has been published; the measure has been communicated via a circular, social media channels and verbally by ADREC.
This alert is provided for general information purposes only and does not constitute legal or other professional advice. The content of this alert is based on information available as of the date of preparation and may be subject to change without notice. This alert should not be relied upon as a substitute for specific advice tailored to particular circumstances.
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Mousa Abughoush, Trainee Associate, has contributed to this legal update.