A representative from Bahrain Real Estate Association explains the Lease Law introduced last year provides guidelines on capped rents, but is not clear on utility billing which is subject to increase this month.
“The rent for tenants living in unfurnished homes typically excludes the water and electricity bill, which they pay themselves. But a fully furnished home is issued one standard bill that includes utilities,” says Mr. Saleh Faqihi, the association’s Secretary to Board of Directors. Even the municipality fees are calculated differently for furnished and unfurnished homes, the cost is 10% of the monthly rent for unfurnished properties and 70% for fully furnished.
The cost of water and electricity for expatriates and large businesses is expected to increase starting this month, however, there’s no clarification on how residential utilities are structured in the Lease Law introduced last year, and this can be a dilemma for fully-furnished property owners.
Introduced in February 2015, the law requires landlords to wait two years from the lease commencement date or the last rent increase date before increasing the rent. The maximum increase is set at 5% for residential properties and 7% for commercial and other properties, unless otherwise stated. A landlord must inform the tenant of their intention to increase the rent at least three months before the end of the second year.
There is a possibility that landlords of fully-furnished properties will hike their rent fee in light of increased water and electricity costs since these amenities are calculated in the total rent. How much and how often the rent increases depends entirely on the mutual agreement signed by both parties, Mr. Faqihi explains, stressing the importance of making sure property leases are officially registered with the government. But legally, homeowners can’t increase a tenant’s rent unless the lease is being renewed or two years have passed. At the same time, one can’t cross the 5% cap. Someone has to pay the price, therefore, the utility hike leaves homeowners of fully furnished homes in a rut.
“One homeowner I spoke to was concerned about dealing with the new utility charges. He can’t increase rent, so he decided that he’ll simply cancel furniture and register his tenants to pay for water, electricity and municipality on their own,” he shares. This solution holds tenants responsible for utility bills based on their respective consumption and leaves the homeowner’s current revenue unaffected. But since the property is no longer furnished, tenants will end up paying more than they previously were. Ideally, it’ll be simpler if landlords hand over the utility bill to the tenants and leave it at that.
Mr. Unkar Chanian, Senior Associate at Charles Russell Speechlys, agrees that making tenants liable for water and electricity is the easiest way to deal with the looming issue. In case of disagreement, concerned parties should take their lease complaints to the Rent Disputes Committee (RDC), a fast track court that was established subsequent to the introduction of the Lease Law last year. “People need to be aware that the court will not recognize complaints if a tenancy contract is not registered with the respective authorities,” he continues.
Mr. Faqihi expressed concern over the increased cost of living in Bahrain and says landlords might begin losing tenants as they look for cheaper accommodation or leave the country all together. He believes the lack of clarity regarding utilities could create rifts between homeowners and tenants, and hopes a clear cut explanation is provided soon.
Source: Gulf Insider