Dubai tenants warned to study contracts before signing

Some tenants caught out with inclusion of enforcement of three-month termination clause
Dubai tenants warned to study contracts before signing
Dubai Land Department (DLD) has urged tenants to read their rental contracts before signing as contractual terms are upheld by the law.
By Parag Deulgaonkar
Mon 20 Feb 2017 03:29 PM

Dubai Land Department (DLD) has urged tenants to read their
rental contracts before signing as contractual terms are upheld by the law.

The advice comes after Arabian Business raised
the complaints of Dubai tenants with the department who said their landlords
had included an enforceable three-month termination clause in their rental agreements, with monetary compensation required when there is a breach.

In 2013 and 2014, such contract termination notices were
limited to a month, primarily driven by the “vibrant rental market” that enabled landlords to earn higher
rents from new renters. The clause,
however, was increased to two months in 2015 and 2016 as the number of redundancies
increased due to economic slowdown.

Dubai tenant Ankit (who asked to use his first name only) told Arabian Business that his new rent contract includes
a three-month contract termination clause.

“If I am not giving the landlord the three-month termination
notice, I have to pay a three-month fine to break my lease. Unfortunately, I
realised it later when the clause was mentioned the addendum,” he said.

Another resident who spoke to Arabian Business said he
renewed a contract on two-bed apartment in Jumeirah Lakes Towers that also
included a three-month termination clause. 

It is quite a common practice in the emirate that landlords
will add a number of clauses in an addendum along with the rent contract, which
specifies penalties for tenants and their ‘limited’ responsibilities. Last
week, the DLD issued a new united rent contract, but it still does not stop
landlords from adding more clauses.

Mohammed Yahya, deputy executive director, rental affairs
sector, DLD, told Arabian Business that a tenant should
be aware of every clause mentioned in
the contract before signing it.

“That’s what does not happen in most cases where the tenant
files a complaint [with the rent dispute centre] when they need to terminate
their contract,” he said.

Yahya, however, said such clauses are subject to mutual
agreement.

Ivana Vucinic, head of Research and Advisory, Chestertons,
said as per the regulations [Law no. 26 of 2007 regulating the relationship
between the landlords and the tenants in Dubai], the landlord has the right to
ask for a three-month notice period, but shorter periods can be negotiated
between the parties prior to signing of the lease agreement.

“In a period of uncertainty and job cuttings this certainly
represents the burden on the tenants wishing to terminate their lease contract earlier.
On the other side, significant portion of the rental income collected by
landlords goes towards loan repayment for the subject properties.

“When seen from that perspective, three month notice period
helps timely mortgage payments towards banks and decreases the default rates,”
she said.

Parvees Gafur, chief executive officer, PropSquare Real
Estate, said he suggests his clients (landlords) to follow a two month notice
to vacate and apply a one month rent penalty in their tenancy contracts.

“Most terminations are seen as a result of redundancy,
unemployment or migration and we do step in and help the tenant to resolve the
terms amicably with landlords on a case-to-case basis,” he said.

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