Dubai's Amlak threatens to tear up tenancy contracts

Mortgage firm says tenants in properties it has repossessed must repay rent or be evicted

Amlak Finance, the Islamic mortgage company part-owned by Emaar Properties, is threatening tenants living in properties it has repossessed to repay their rent or face eviction, home owners have claimed.

Tenants said they had been contacted by Amlak, one of the biggest mortgage providers in Dubai, following foreclosure proceedings, notifying them that it will not honour existing tenancy contracts.

One tenant, who wished to remain unnamed, paid a year’s rent in October for her Dubai Marina property after requesting a copy of the landlord’s title deed. She was contacted by Amlak in January and told to repay the rent stated in her previous contact or move out.

A representative from the company said she would have to follow up previous payments with her former landlord.

“Amlak invited me into the office and said you have to tell us what you are going to do; whether you are going to pay us with one cheque… or tell us how many days you need to vacate the property,” she said.

“For me, it’s absolutely wrong; if someone’s apartment is taken over by a new owner then they have to follow the tenancy contract that was signed by the previous owner. [When I signed in] October they (Amlak) didn’t have the title deed in their name, they were not the owners,” she added.

The number of owners defaulting on mortgage repayments soared in the wake of the economic downturn, which saw Dubai property prices decline by over 60 percent. The emirate introduced a repossession law in 2008 setting out rules for default, foreclosure and repossession.

UK-based Barclays won Dubai’s first foreclosure case in court in 2010, clearing the way for other lenders to take action when borrowers default. Islamic lender Tamweel estimated in 2010 that 3 percent of its mortgages were in default.

Shares of Amlak and Tamweel were suspended in November 2008 following on onset of the global downturn. Amlak posted a third quarter loss of AED40m (US$11m) in 2011, the last time it disclosed financial results.

Creditors of Amlak are considering a restructuring proposal from the mortgage company in a bid to revive its business, sources told Reuters earlier in the month.

Mortgage companies that repossess properties should honour existing tenancy contracts, said Elizabeth Riesenburg, who specialises in real estate arbitration at Dubai law firm Habib Al Mulla & Company.

“Law no.26 of 2007, article 7 clearly states that where a tenancy contract is due invalided it cannot be unilaterally terminated by the landlord or tenants unless both parties agree on such termination,” she said.

“The tenant still has a valid tenancy contract, even though it was entered with the previous landlord,” she added.

Amlak Finance did not respond to email requests or phone calls from Arabian Business.

Arabian Business understands that Amlak has since requested the tenant sign a new tenancy agreement with another real estate broker and is now only requesting she repay her security deposit.

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Posted by: His Excellency Dr Paul

Whether this is legal or not isn't really the point. It's long been clear that contracts in the UAE are worthless if you're the little guy as countless thousands of property investors found out. Now it seems that even legitimate tenancy contracts are worthless too.

The place has learned nothing from its near collapse and bailout. It's still a free-for-all by greedy corporations to milk, decieve, abuse and exploit people, with no meaningful consumer protection at all.

I guess this is why the marketing now is all targeted at refugees from war zones and countries facing economic embargoes. Far easier to convince them it's a step up, and not a shark-infested pool.

Posted by: Richard P

There are too many people commenting on this site with a small grasp of the law or often not bringing in their home country's interpretation of property law.

Some people have boldly stated the actions of Amlak are against the law. If it is, I would be interested to know exactly to which UAE law you refer.

I will agree that the law is not clear enough and not understood enough by the general population. But ignorantia legis neminem excusat (ignorance of the law excuses no one).

And no. @landlord I am not being self-righteous. I am clearly stating that for the property market to get moving again there needs to be some bold steps.

It helps no one pleading a special case for people who invested in property, and chose to borrow from Amlak in particular, that they can no longer afford.

Posted by: Wildwine

@Richard P; so threatening the tenants (who have not broken any law) is considered the kind of bold step to get the market moving again? What else do you suggest, file legal action against all investors who have not paid 100% yet their properties are not even off the ground??
Based on my limited knowledge of law (of course interpretation of my home country), change of ownership does not mean that you can simply evict the tenant. You need to file a court case and get an eviction notice (which is highly unlikely in this case as tenant has not breached the contract).
Moreover, application of law in most countries can be totally different based on the circumstances.
I think it certainly warrants pleading a special case for the tenants in this case!

Posted by: Practitioner


OMG! Half of this article is wrong!. As a legal practitioner I see lots of cases where the tenants do not undertake a proper due diligence on the owner before signing the lease. The problem is that the current tenant did not lease the unit from the real owner. In conventional financing you are right, but most people forget/ignore the fact that in Islamic finance model the buyer is legally a "tenant" himself, so actually he is subletting the unit to the current tenant. If the financing Co. approved the sublease then they cannot evict the current tenant (so next time ask for the finance Co.?s approval on the lease IN WRITING), but in any other case the finance Co. has the right to evict the tenant, then the tenant should recover the paid rent from the lessor. Should have asked for the title deed as a proof of ownership because you would have seen that the apartment is owned by the bank/finance Co. and the lessor is mentioned there as a TENANT!!!

Posted by: nice

As a matter of law Amlak has no right to do this. Their right is to petition the court for a sale of the property which would then be undertaken at public auction under the mortgage law provisions. They cannot force people out - they have no basis upon which to make such demands.

Posted by: Richard P

People seem to have forgotten that what we are talking about is repossession. I know that it is a dirty word, but everyone enters into a mortgage arrangement knowing that if they are unable to keep up with the monthly repayments, then their house/home is at risk.

And that is what has happened in these cases. The property has been foreclosed. The home owner no longer owns it. Amlak does.

Therefore, it is the home owner who has funds from the tenants that he/she is no longer entitled to.

And the owner should immediately repay that rent money to the tenant as they are no longer to honour that contract.

Why blame Amlak?

Posted by: Horseman

@landlord you are absolutely right on the button here. This should never be allowed to happen. Surely part of the re-possesion law (if there is such a thing) should adequately take care of these situations. There surely is some adjustment to the amount that Amlak are owed with a sitting tenant's rent being offset - if Amlak choose to shift it on, then it surely has to be sold with the tenant in situ?!?!?! This will affect the sale value of the property and ultimately the amount the previous owner still owes to the finance company. In the end, the previous owner still pays and the current tenant is left to enjoy possession of the property upto the end of the tenancy contract.

The words 'threatening' do not paint Amlak, Emaar, Dubai in a good light whatsoever.

Come on guys, we can do better than simply evicting people who paid in good faith.

Posted by: landlord

Richard you're obviously sitting behind the computer being self-righteous cause something like this probably never happened to you. Better hope it doesn't cause that would definitely changed your perspective.

The tenant should have no obligation to chase the owner for the money. That should be Amlak's issue to resolve.

Whatever happened between the owner and Amlak should not be the tenant's problem and Amlak needs to address the issue with owner.

The law clearly says that if the ownership of the property changes, the new owner gets possession of the property including the tenant if the tenant has a valid tenancy contract. Amlak can only ask the tenant to move out at the tenancy contract and only under certain conditions.

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