Abu Dhabi, UAEFriday 7 August 2020

CORONAVIRUS

Coronavirus: Dubai judge says tenants can end rent contract early if hit by financial hardship

The city's Rental Dispute Centre said it was dealing with hundreds of claims from residents and landlords

Dubai's Rent Dispute Centre urged tenants and landlords to work together to get through disagreements. Paulo Vecina / The National
Dubai's Rent Dispute Centre urged tenants and landlords to work together to get through disagreements. Paulo Vecina / The National

Dubai tenants can break their rental contact without financial penalty if they can prove they were affected by 'exceptional circumstances', a senior judge said.

The loss of a job or reduction of income may mean residents could move during a 12 month lease without losing two or three months' rent.

Judge Abdulqader Musa, director of the Rental Disputes Centre, said he was aware of the hardship some people had found themselves in due to the impact of the coronavirus outbreak.

Tenants in disputes with their landlords can claim 'force majeure' as a legal defence to end a contract without penalty. The phrase relates to unexpected, external circumstances that do not allow a person to meet their obligations.

It is the responsibility of all respective parties to support one another, and being prepared to waive some of their rights

Judge Abdulqader Musa, Rental Disputes Centre, Dubai Land Department

“During these exceptional times, tenants are indeed able to request for early termination of a contract with a landlord due to force majeure, whereby they would not have any viable alternative,” Judge Musa told The National.

Such circumstances are being handled on a case-by-case scenario by the RDC to, among others, confirm the integrity of the termination and validate the tenant’s reasons for doing so.”

The centre, which is the judicial arm of the Dubai Land Department, said it has settled several cases in favour of tenants recently.

The judge called for compassion from property owners, who are typically able to charge two months' rent if a tenant leaves early. In the UAE, most residential contracts are paid a year in advance, using pre-written cheques that are cashed over 12 months.

“During such unprecedented times, it is the responsibility of all respective parties to adhere to co-operate and support one another, taking account their circumstances and being prepared to waive some of their rights until this exceptional global crisis subsides,” Judge Musa said.

Judge Abdulqader Musa, director of the Rental Disputes Centre at Dubai Land Department. Courtesy: Dubai Land Department
Judge Abdulqader Musa, director of the Rental Disputes Centre at Dubai Land Department. Courtesy: Dubai Land Department

A total of 563 disputes were filed between January and the end of May, with 278 settled to date.

“We have continuously supported tenants through their challenges, especially during such trying times,” Judge Musa said.

In a case reported by The National last week, a small business owner took the landlord of his commercial premises in Al Sufouh, near Dubai Marina, to the dispute centre.

The tenant, who ran a company that cares for elderly residents in their own homes, said his firm could not pay due to the disruption caused by the outbreak.

A judge ruled this was justified and allowed him to break his tenancy contract early without paying a penalty and ordered the landlord to return two rent cheques uncashed.

Real estate experts said they appreciated the flexibility shown by judges - but warned landlords could also find themselves in trouble if they cannot make their own payments.

Mario Volpi said it was important tenants do not have 'carte blanche' to the detriment of landlords, who have mortages and fees to pay themselves. Antonie Robertson / The National
Mario Volpi said it was important tenants do not have 'carte blanche' to the detriment of landlords, who have mortages and fees to pay themselves. Antonie Robertson / The National

“This is the right thing to do but we must remember that it should not just be one-way traffic,” said Mario Volpi, sales and leasing manager at Engel & Volkers in Dubai and a property columnist for The National.

“It cannot be just what the tenant wants. What is really important is that tenants do not think that they have a carte blanche on this.

“The tenant will clearly have to prove hardship; has to prove salary has been cut or that a job has been lost to stop him or her from being able to pay.

"Both parties need to understand that these are unprecedented circumstances.”

Mr Volpi said force majeure, which does not have to be written into a contact to be brought up as a defence, was difficult to prove.

"What is better is the clause of 'unforeseen circumstances'.

"Under normal circumstances if a tenant loses his job and everybody else in the world is fine, then he would be expected to get another job.

“When it affects everybody in a 'public loss' like this, that is where the unforeseen circumstances clause can come into play.”

Before resorting to litigation, the best option for the tenant was to talk to the landlord to defer rent or pay a token amount.

“This is about human-to-human negotiating,” Mr Volpi said.

"Things will change as we start to get move back to some sort of normality.”

Updated: July 2, 2020 02:12 PM

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