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RERA rental rule myths and truths

Wednesday ,November 02, 2016

There are many misconceptions about Dubai’s real estate market in general, but most revolve around landlord-tenant laws and procedures. These are the most perpetuated tenancy myths:

The standard green lease is required

Nowhere in the law or regulations does it state that the green form has to be used.

In fact, it contains clauses that renewal is at the discretion of the Landlord and that the Lease is null and void after the expiry date. These statements contradict Tenant’s automatic right of renewal under the law, and are neither valid nor enforceable. There are other questionable clauses as well. So, why do many landlords, brokers and property managers still use it?

There are some Ejari registration typing centers that seem to be under the impression that this is the only acceptable form, or perhaps, do not want to deal with leases that are more than one page long. However, any form can be used, as long as the relevant details of the Lease are included.

Tenant must give 90-day notice for non-renewal

At one point in time, this was true. Law 26 of 2007 required that either of the parties had to give 90-day notice of the intention not to renew the Lease. However, Law 33 of 2008 deleted this requirement altogether. Unless the Lease specifically states that a non-renewal notice must be given, it is not required.

One would hope that tenants would be courteous enough to give their landlords ample notice, but unfortunately, this is not always the case. Therefore, if a landlord wants to have adequate time to find a new tenant, the Lease should specify the desired notice period.

After evicting Tenant for sale of property, Landlord cannot re-rent for two years

The two-year prohibition on re-renting only applies to evictions for personal use of the property by the Landlord (or Landlord’s first-degree relatives).

What happens if the Landlord, for whatever reason, fails to sell the property? When can Landlord bring in a new tenant? According to some of the Rental Dispute Center (RDC) judges, the answer is “Never – the Landlord’s only option is to use the property for personal use.”

If the evicted Tenant is a good detective, and discovers that a new tenant is in the property, the Tenant can file a claim in RDC for compensation from the Landlord. Since penalties and specific compensation are not addressed in the tenancy laws, it is up to RDC to decide how much, if anything, will be awarded to the Tenant in that case.

Landlord is automatically liable for repairs over AED 500

The law does not state that any repairs over AED 500 are the responsibility of the Landlord. What it does say is that the Landlord will be responsible for “maintenance works and for repairing any defect or damage that may affect the Tenant’s intended use of the property” – meaning “major” repairs. However, the law does not define what major means.

Many leases have a clause that any repairs over AED 500 will be the Landlord’s responsibility. But some leases are silent on the issue. If there is a dispute between the parties regarding repairs, it will be up to an RDC committee to decide the issue. And, that will cost much more than AED 500. So it is best for the Lease to state exactly what repairs will be covered by the Landlord, or at least include a Dirham amount, above which Landlord will pay.

It is important to note that the clause in the law regarding repairs starts with “Unless otherwise agreed by the parties”, meaning that the Lease can put full responsibility for all repairs on the Tenant. As always, Tenant should be sure to review the Lease carefully before signing.

The premises must be returned to Landlord in the “exact same condition”

The Tenant must hand over the property in the same condition, minus “ordinary wear and tear” or damage beyond Tenant’s control. Wear and tear generally includes things like scuff marks/chipping paint, chipped tiles, worn carpeting, etc – things that naturally occur when a tenant is living in the premises.

For example, many landlords threaten to deduct from the Security Deposit if the Tenant has not repainted before vacating the premises. If Tenant’s children have used the walls as an art canvas, or the Tenant paints the walls a different color, it is safe to assume that Tenant must repaint the walls the original color. However, if there are merely scuffs marks or some chipped paint, this is considered normal wear and tear. Therefore, if the Landlord wants the Tenant to put on a fresh coat of paint (or perform any other maintenance) before vacating, the Lease should clearly state this.

Write cheques to Landlord – or go to prison and pay AED 500,000 penalty

In August 2015, RERA issued a Circular about property management Supervision Services companies and rent cheques. It stated that it is illegal for those companies with the “Supervision Services” license to collect rent cheques in the name of the company, and that they must be in the name of the Landlord.

Unfortunately, some of the media misinterpreted the Circular, and wrote articles scaring Tenants into thinking that they will be arrested and penalized AED 500,000  for writing cheques to anyone other than the Landlord. In reality, the criminal and financial penalties are only imposed on those companies that violate the regulations, and not on Tenants who may have unwittingly written rent cheques to the company.

 

Disclaimer: This blog is intended for informational purposes only, and should not be considered legal advice, nor does it reflect the opinions of any government agency.

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