Early Termination of Tenancy Contracts in the UAE
A tenancy contract is a rental agreement between a tenant and the landlord that must be signed before receiving the keys of the real estate property. A tenancy contract is essentially a legally binding agreement that allows the tenants to use the property for a particular purpose and for a set length of time. It outlines all of the lease's terms, including both parties' obligations and expectations, in the form of provisions in the contract. Preventing disputes and misunderstandings between parties by clearly stating and specifying all terms and conditions of the agreement.
Contract of Tenancy
According to Article 4 of the Dubai Tenancy Law, the contractual relationship between the Landlord and the Tenant will be governed by a written Lease or Tenancy Contract signed by both parties and detailing, in a manner that leaves no room for doubt, a description of the leased real property, the purpose of the tenancy contract, the name of the owner, the number and type of the land, and the area where the leased Real Property will be located. It will also decide the lease contract's term, the rent, and the mode of payment.
The tenancy contract includes the details about Landlord's name and contact information, the tenant's name, and contact information. Property information including - complete address, building name and location, size, plot number, DEWA premise number, rent amount, contract term, and contract date. The amount of the security deposit, Payment options. Any additional terms and conditions not contained in the basic the provisions of the tenancy contract are linked to the agreement as an amendment. that spells out each party's particular responsibilities.
All lease contracts for real estate that are subject to the terms of this law, as well as any modifications to those requirements, will be recorded with Real Estate Regulatory Agency (RERA). Unless a Lease Contract is registered with RERA in compliance with the relevant rules and regulations, judicial authorities, government departments, authorities, and corporations may not examine any dispute or claim or take any other action about it.
A Lease Contract's term must be specified. The Lease Contract will be assumed valid for the period specified for payment of the rent if the term is not specified in the Lease Contract or if it is impossible to substantiate the purported term. According to Article 6 of Dubai Tenancy Law, if a Lease Contract's term expires but the tenant continues to occupy the Real Property without the Landlord's consent, the Lease Contract will be extended for the same duration or one year, whichever is shorter, and on the same terms as the previous Lease Contract.
The Lease Contract does not end when either the Landlord or the Tenant demises. The contractual relationship with the heirs continues until the Tenant's heirs choose to end it, in which case termination must occur within thirty (30) days of notifying the landlord of such intent or the expiration date of the Lease Contract, whichever comes first.
The Tenant's entitlement to continue to occupy the Real Property under the terms of the Lease Contract entered into with the previous owner is unaffected by the transfer of title to a new owner, provided that the Lease Contract has a fixed term. While a basic tenancy contract in Dubai is one page long, an addendum can be added to the contract to provide additional terms and conditions. Always be aware of these terms and clauses, which may include payments for utility expenses and repairs, as well as annual rent increases.
Tenancy Law in Dubai
The Real Estate Regulatory Agency (RERA) regulates the interaction between landlords and tenants in Dubai under the Dubai Rental Law No. 26 of 2007 (and revisions from Law No. 33). (2008). To avoid any potential problems or misunderstandings, the law spells out the roles and responsibilities of landlords and tenants. The Rent Issues Settlement Centre (RDSC), which was formed by Decree No. 26 of 2013, investigates and resolves all rental disputes in Dubai, whereas Decree No. 43 of 2013 governs all rent increases.
RERA administers tenancy contract rules as well as the real estate sector in Dubai overall. Under the Ejari system, a new tenancy contract system has been built, and all tenancy agreements must be recorded with the system. The Dubai Land Department's judicial arm, the Rental Dispute Settlement Centre (RDC), was founded in 2013. RDC's goals include using new ways with adaptable mechanisms to suit the needs of the next era, as well as assisting in the execution of issues and problems about Dubai real estate with better precision, impartiality, and transparency.
RDC is in charge of resolving all rental disputes between tenants and landlords involving real estate in the Emirate or its free zones, including counterclaims and requests for interim or urgent action from either party to the lease. RDC has created a specialized court system to deal with rental disputes, as well as conciliation procedures, to maintain social and economic stability while simultaneously promoting the Emirate's long-term growth. RDC also hears appeals against decisions and verdicts in line with the decree's requirements and the regulations issued thereunder, and its staff is in charge of enforcing RDC's decisions and judgments in rental disputes.
Important Tenancy Contract Clauses
- An addendum to the regular leasing contract can be appended by the landlord and tenant, outlining the terms of the agreement, including who pays for what services, such as the chiller. However, as stated in Article 4 of the Dubai Tenancy Law, it is essential to register the tenancy contract, as well as any revisions, with Real Estate Regulatory Agency RERA.
- A single party cannot cancel a tenancy contract unless the two parties agree otherwise. If the tenant continues to occupy the property as indicated in Article 6 of Dubai Tenancy Law, the contract term is automatically extended for a similar length or one year (whichever is shorter) with the same terms and circumstances after the contract expires.
- According to Article 14 of the Dubai Rental Law, if the landlord wishes to terminate or change the tenancy contract, he must give written notice to the tenant at least 90 days before the contract expires.
- According to Article 27 of the Dubai Tenancy Law, the tenancy contract will not be automatically terminated in the event of the death of either the landlord or the tenant. It shall pass to the heirs unless the tenant's heirs wish to terminate the lease, in which case the termination will take effect within 30 days of contacting the landlord.
- Under Article 28 of the Dubai Tenancy Law, if the property is transferred to a new owner, the tenant's right to continue to occupy the property is unaffected, as long as the tenancy contract includes a specified date.
Who is responsible for signing the tenancy agreement?
A tenancy contract must be signed in the presence of a witness by both parties, the landlord and the tenant. If a Power of Attorney (POA) is required, the Dubai Land Development DLD recognizes the signature of the landlord's legal representative. A Power of Attorney, or POA, on the other hand, is only valid for two years and must be re-stamped by the Dubai Courts after that period. Property management companies with a DLD license are also allowed to execute leases for the units they manage. The approved list of businesses can be seen on the DLD's official website.
Early termination of Tenancy Contracts
The provisions of Law No. 26 of 2007 Regulating Landlord-Tenant Relationships in the Emirate of Dubai (the Dubai Tenancy Law) and Law No. 33 of 2008 Amending Law No. 26 of 2007 Regulating Landlord-Tenant Relationships in the Emirate of Dubai (the Amended Dubai Tenancy Law) apply. The tenancy contract cannot be unilaterally cancelled by either the landlord or the tenant, but it can be mutually terminated by both the landlord and the tenant during the period of the contract. This complies with Dubai Tenancy Law Article 7, which states: "A legal lease contract cannot be unilaterally cancelled by the landlord or the tenant throughout its duration. It can only be ended by mutual agreement or in compliance with this law's rules."
Both the landlord and the tenant are bound by the terms and conditions of the tenancy contract. This complies with Article 4(1) of the Amended Dubai Tenancy Law, which states: "The contractual relationship between a landlord and a tenant will be regulated by a tenancy contract detailing, in a manner that leaves no room for doubt, a description of the leased real property, the purpose of the tenancy, the term of the tenancy contract, the rent and payment method, and the name of the owner of the property if the landlord is not the owner."
Furthermore, Article 19 of the Dubai Tenancy Law states that the renter is responsible for paying the rent on time. In the case that the tenant fails to pay the rent, the landlord has the right to evict the tenant under Article 25 (1) (a) of the Amended Dubai Tenancy Law. According to the aforementioned legal regulations, as a tenant, you must fulfil the requirements stated in your tenancy contract, and you may be required to pay two months' rent as a penalty for terminating the contract early.
Unless an early termination clause is specifically included in the agreement, the landlord is not required by law to refund any rent if a tenant chooses to quit the property early. In the emirates of Dubai, there is no standard rule or controlling principle regarding early tenancy termination. Instead, the tenant should ask for a language in the contract that specifies a notice period and penalty amount in the event of early termination. Real Estate Regulatory Agency RERA's Law 26. of 2007 regulating landlord-tenant relationships does not have an article allowing for early contract cancellation but rather governs the relationship between the two parties throughout the contract.
There is no provision in Dubai's tenancy law for terminating lease agreements early. Tenants must be aware that the Dubai tenancy legislation does not allow for the early termination of a lease agreement. The rental law only applies to landlord-tenant relationships for as long as the contract is in effect.
One of the essential provisions of Law 26 of 2007 is that the lease agreement is binding on both the landlord and the tenant and that neither party can terminate it without the other's approval. Law 33 of 2008, which revised several provisions of Law 26 of 2007, only states that if either the landlord or the tenant wishes to alter any of the contract's provisions, they must give the other party notice at least 90 days before the tenancy contract expires.
As a result, the effect of terminating the lease early will be determined by the tenancy contract's early termination clause. In the emirates of Dubai, if tenants have such a condition in their rental contract, they must follow it when terminating a leasing arrangement early.
If the tenancy contract in Dubai does not include an early termination clause, the landlord may seek compensation from the tenant for breaching the lease and leaving early. This means that if the tenant wants to terminate the tenancy agreement early, they may have to forfeit their rent for the remaining time of the contract or pay some other kind of compensation to their landlord.
What are the notice period and penalty for terminating a contract early?
The tenant must provide the landlord 60 days' notice if they are quitting the property early. The penalty is usually 2 months' rent, which is paid to the landlord. However, because Real Estate Regulatory Agency RERA does not include an article allowing for early contract termination, any penalty or refund of prepaid rent is entirely at the discretion of the landlord.
According to Dubai's tenancy legislation, a landlord can demand early termination of a lease agreement. Under Article 25 of the Dubai Tenancy Law,
- the Landlord may seek eviction of the Tenant from the Real Property before the term of the Tenancy expiring only under the following circumstances:
- If the Tenant fails to pay the Rent or any part of it within thirty (30) days on the date the Landlord gives the Tenant a Notice to Pay unless the parties agree otherwise;
- if the Tenant sublets the Real Property or any part of it without first getting written permission from the Landlord. The eviction will apply to both the Tenant and the Sub-Tenant in this circumstance. The Sub-right Tenants to seek compensation from the Tenant, however, will be protected.
- when the Tenant uses or allows others to use the Real Property for any illegal purpose or for a purpose that violates public order or morality;
- unless both parties agree otherwise, the Tenant of commercial Real Property leaves the Real Property vacant for thirty (30) consecutive days or ninety (90) non-consecutive days within the same year for no justifiable reason;
- when the tenant makes a change to the Real Property that makes it unsafe and makes it difficult to restore it to its original condition or damages the Real Property willfully or through gross negligence, by failing to exercise due diligence, or by permitting others to cause such damage;
- if the Tenant uses the Real Property for a purpose other than that for which it was leased, or if the Tenant uses the Real Property in a manner that violates the Emirate's planning, construction, or use-of-land restrictions;
- if the Real Property is condemned, the Landlord must show this by a technical report issued by or verified by Dubai Municipality;
- the Tenant fails to comply with any obligation imposed on him by this Law or any of the provisions of the Tenancy Contract within thirty (30) days of the Landlord serving him with a Notice to Perform such obligation or term; or
- Where competent government entities need the demolition or reconstruction of real property to meet the Emirate's urban development requirements.
The Landlord will give Notice to the Tenant through a Notary Public or registered mail for paragraph (1) of this Article.
2. Only under the following circumstances may the Landlord request removal of the Tenant from the Real Property after the Tenancy Contract has expired:
- If the owner of the Real Property desires to demolish the Real Property to reconstruct it, or to construct any new structures that will prevent the Tenant from utilizing the Real Property, provided that the necessary licenses are acquired from the competent organizations;
- if the Real Property is in a state that necessitates repair or extensive repair that cannot be performed in the presence of the Tenant, provided that the Real Property's condition is verified by a technical report issued by or certified to the Dubai Municipality;
- If the owner of the Real Property desires to take possession of it for his personal use or that of any of his first-degree relatives, provided that the owner establishes that he does not own another Real Property suitable for such use; or
- the leased Real Property is being sold by the owner of the Real Property.
For paragraph (2) of this Article, the Landlord must provide the Tenant notice of the eviction grounds twelve (12) months before the eviction date, provided that the notice is issued through a Notary Public or registered mail.
Tips for resolve reparations of early Terminating of Tenancy Agreement
To begin, look for an escape provision in the rental contract that allows the tenant to terminate the tenancy early. When entering a lease agreement, tenants must ensure that an exit clause is included. If they find themselves in the position of having to terminate a lease arrangement early, this will save them a lot of time and effort.
If the tenancy contract does not have such a clause, approach the landlord. Explain the circumstances and reason for terminate the leasing arrangement. If the landlord accepts to negotiate an exit settlement, then it is obligatory to remunerate the landlord with payment of the penalty. Alternatively, the tenant might offer to locate a new renter for the landlord to avoid any financial damage. If the tenant is unable to find a renter promptly, they will most likely be required to compensate the landlord.
In the past, tenants and landlords in Dubai were required to offer a 90-day notice period in the event of a rental contract not being renewed. However, after the implementation of Law 33 of 2008, which altered some provisions of Law 26 of 2007, a 90-day notice period is no longer necessary if either party does not intend to extend the tenancy agreement. Instead, Dubai's rental legislation has been changed to prioritize the conditions of lease agreements. As a result, tenants must make certain that they are aware of the notice time stipulated in the rental agreement.
In Dubai, rent is usually paid through post-dated checks that are deposited with the landlord. If the landlord refuses to accept the checks, they can be delivered to the Dubai Rental Dispute Settlement Centre. The renter is expected to receive the leased property in excellent working order, and the landlord is usually responsible for any substantial maintenance or repairs.
Experiencing a forcible eviction
If a tenant in the emirates of Dubai faces eviction by their landlord, the tenant must first approach the landlord and try to resolve the situation. If the tenant and the landlord are unable to settle, the tenant has the right to submit a complaint with the Dubai Rent Dispute Settlement Centre (RDSC). When initiating a rental disagreement case in Dubai, tenants should provide all of their legitimate papers, including their tenancy contract or Ejari Dubai, the most recent DEWA bill, a copy of the title deed, and a copy of the tenant's passport and visa. Before addressing the RDSC, customers should have a copy of their Emirates ID and any other supporting documentation.
The Financial hardship during the pandemic of COVID-19
If a tenant is having financial difficulties and is unable to pay the rent, the first step is to approach the landlord, explain the situation, and try to reach an agreement that is acceptable to all sides. Providing supporting documentation, such as a copy of your employer's termination letter/pay reduction, will assist establish your claim of early lease termination. If the landlord refuses to bargain, the tenant can seek counsel from the Rent Dispute Settlement Centre (RDSC).
Furthermore, in light of the current Covid-19 epidemic, local governments have asked both landlords and renters to reach an agreement on revisions to the existing lease contract. Based on the epidemic, both the landlord and the tenant may mutually agree to a rent reduction, early termination of the lease contract, rent-free time options, or any other concessions. The Dubai Tenancy Law and the Amended Dubai Tenancy Law are quiet on the subject of tenancy contract cancellation owing to force majeure. In layman's terms, "force majeure" refers to unforeseen events that prevent someone from performing their obligations under a contract.
The pandemic may be regarded as an unforeseen event, and as a result, you may be allowed to unilaterally cancel your leasing agreement with your landlord. This conforms with Article 273 (1) of the Civil Transactions Law, which stipulates that in contracts involving both parties, if force majeure intervenes and renders the contract impossible to execute, the associated duty ceases, and the contract is automatically dissolved.
Tenants can also personally approach and negotiate with the landlord, explaining that owing to the present financial position, to which tenants are unable to pay the penalty. To corroborate the claim of early termination, provide a copy of the Employer's wage Reduction letter or the updated employment contract to the landlord. If the landlord refuses to comply with the request of the tenant, a complaint can be submitted to the Rental Dispute Centre (RDC) in the emirate of Dubai, alleging that the concerned landlord refused to consent to early termination of your rental contract without penalty.
It is also required to furnish a copy of your Termination letter to the RDC or Rental Dispute Centre. The complaint may be accepted by the RDC, and the tenancy contract may be terminated without penalty to the landlord. This is under Article 249 of the Civil Transactions Law, which states that "where exceptional circumstances of a public nature occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor to the point of threatening him with grave loss, it should be permissible for the judge - under the provisions of the Civil Transactions Law."
The Rental Disputes Centre rules that tenants can end rent contract early if hit by financial hardship during COVID-19
While dealing with hundreds of cases from residents and landlords, the Rental Dispute Centre declared that Dubai renters could terminate their rental agreement without incurring financial penalties provided they can show they were impacted by 'extraordinary circumstances.' Residents may be able to move during a 12-month lease without losing two or three months' rent due to the loss of a job or a fall in income.
In light of the hardships some individuals had experienced as a result of the coronavirus outbreak, the head of the Rental Disputes Centre. Tenants can use 'Force Majeure as a legal defence to break a contract without penalty if they have a problem with their landlord. The expression refers to unforeseen external factors that prevent a person from fulfilling their duties.
During the outbreak, the centre, which is the judicial arm of the Dubai Land Department, said that it had solved many cases in favour of renters. The judge urged property owners to be compassionate, as they are normally permitted to collect two months' rent if a renter vacates early. Most residential contracts in the UAE are paid a year in advance, with pre-written checks that are deposited over 12 months. During such extraordinary times, it is incumbent on all parties to cooperate and assist one another, taking into consideration their unique situations and being willing to give up some of their rights until the global crisis calms.
The renter, who managed a company that provided in-home care for elderly people, told that they could not pay because of the outbreak's inconvenience. A judge concluded that this was justified, allowing them to end his lease without penalty and ordering the landlord to refund two uncashed rent checks. Real estate experts praised the judges' leniency but warned that if landlords are unable to make their payments, they might face legal action.