As many investors/landlords are not native to the local rental market, in this article I would like to present the most important precautions to take with respect to the initiation and execution of rental contracts.
1. Understand Contract Terms
Even though the wording on the standard contracts seems to imply otherwise, any Dubai rental contract of one year and longer is not subject to expiration and is to be terminated by giving twelve months written notice (Law No. 33 of 2008 Art. 2) stating the exact reason for termination, i.e. owner occupation, alienation, demolition etc. Also – contrary to common perception – the renewal date of the contract does not need to have lapsed for an eviction notice to be permissible. More simply speaking, a landlord`s termination notice can be served at any point in time after the contract has entered into force.
2. Do your Ejari Registration
Ejari is the government system for attesting tenancy contracts and thereby collecting relevant market data to feed the rental indices. While the (residential) tenant periodically requires the Ejari registration to apply for a visa, the landlord does not from a practical standpoint. You should however make sure your rental contract is attested with Ejari as this is a prerequisite to approach the Rental Dispute Settlement Centre („Dubai Rental Committee“) should troubles arise with the tenant.
3. Verify Your Tenant`s Status
Make sure that the tenant is eligible to enter into the respective tenancy contract. For an individual, a valid residency visa is obligatory while a company proves its good standing by producing a valid trade license issued by the Dubai Department of Economic Development (DED) or – in some instances – the relevant freezone authority. In the case of a commercial tenancy, also request a certificate of incumbency to validate the authorisation of the signatory.
4. Understand the Rent Increase Procedure
Make sure you check the RERA rental increase calculator more than 90 days prior to the renewal date of the contract in order to establish if you are eligible for a rent increase as per the rent index. If you are, notify the tenant of the demanded rent increase through Notary Public, registered post or courier at least 90 days prior to the renewal date.
5. Do Not Exchange Contracts without Cheques and/or Deposits
When you sign and exchange the contracts, make sure you are provided with all the current and/or post-dated cheques (rental payment) as well as a deposit cheque, for which the industry standard is 5% of the yearly rent. In case the tenant is a company, also ask for a passport copy of the particular signatory (contract, cheques).
6. Prepare a Handover Documentation (Protocol)
Prepare detailed notes of the condition (possible damages, paint) of the unit and its contents and have this protocol signed by both parties. Include all items like keys and access cards handed over included their quantity. Make photos of the property as an additional fallback measure.
7. Deal with a Competent and Trusted Agent
Even though the property market in Dubai has witnessed a significant professionalisation in the past years, it is vital to choose a reputable and well-established property agent. Be sure to make this choice diligently and back it up whenever possible with references and recommendations of peers who have dealt with your partner of choice before.
As brokers often focus on certain sectors (commercial/residential), areas or even buildings, verify that the agent of your choice has ample experience and potential client streams in your relevant segment and area.
As one indication of their professionalism, the agent should ask you to furnish the necessary documents like title deed and passport copy and ask you to sign either a marketing contract or, in case of a sales transaction, the standard form as published and required by RERA.
This final point of choosing a competent agent cannot be emphasised enough, as hiring incompetency in this field will most likely cause you to lose out on potential tenants and – as a consequence – rents.
While the items described above are obviously not exhaustive by nature, as per my experience they do cover the investor from the most crucial and/or common troubles during the leasing process.
That said, I would like to stress nonetheless that the Dubai rental law is very stringent, clear and concise in nature, therefore not necessarily calling for legal advice implementing standard transactions.
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The author advises institutional investors about property transactions and handles property portfolios in Dubai since the year 2007. Should you have comments or inquiries, please contact the author on firstname.lastname@example.org.