In these unprecedented times, questions and scenarios are being presented to Landlords that they have never faced before. Below are some of the questions that we are most frequently being asked by our clients, along with our recommendations. Please note that, in this fast-changing situation, the regulatory framework is evolving quite quickly, so we will update these responses periodically, as required.  If you have a question that is not answered below, please contact us and we will be happy to give you our opinion and advice based on your personal circumstances. 

In many cases, the crux of the query relates to the term “force majeure”, and they refer to Article 249 of the Civil Code whereby ‘exceptional circumstances of a public nature that have not been foreseen occur, leading to failure to perform a contract by one or both of the parties but not necessarily impossible.’ Therefore, a judge has discretion to reduce obligation to a reasonable level. The ambiguity surrounding what may be deemed ‘reasonable’ creates uncertainty for both parties,  and therein lies the desire to avoid such a scenario and negotiate freely with your Tenant.

Q1. As a Landlord, what is my best course of action to ensure minimal vacancy periods in the current climate?

If your property is empty at the moment, then you should consider being more flexible on the rental rate you are prepared to accept and the number of instalments being offered. Many prospective Tenants are suffering financially and will be looking for real value offering, which means that it is likely to be a competitive market for Landlords in the short term. A void period of tenancy costs you 8.3% of the annual rent per month and rents could reduce further, depending on the impact that the pandemic has on job security. Another consideration would be to offer a 13-month contract for the price of an annual one, upon renewal. Whereas you may not have considered more than four cheques previously, it might be worth considering six, or even 12. Work with a credible agency to ensure securing a quality Tenant with means to satisfy the terms of the contract. 

Q2. My Tenant has proposed a very low rent renewal rate, what should I do?

In these uncertain times it is very difficult to forecast anyone’s financial position 60 to 90 days’ in advance. There is a reluctance, if not even legal restriction, to move during the COVID-19 pandemic, so Tenants are trying to negotiate lower rents upon renewal of their contract. Likewise, as a Landlord, it is very difficult to forecast the impact of the pandemic on the rental value of your property at such time as it may become vacant. Therefore, it is wise to enter into reasonable discussions with your Tenant to maintain an ongoing relationship causing the least amount of stress for both parties. It is advisable to be flexible in these times until normality resumes.  

Q3. My tenant has asked to extend his contract for three months only, is this legal?

This is not uncommon during the lockdown period given the uncertainty of the job market for many and the nature of Dubai being home to so many expatriates who may potentially need to leave. It is perfectly legal to extend your tenancy contract by a number of months but ensure to register a signed Addendum with Ejari to protect both parties. It actually works in your favour as well rather than losing your Tenant completely and inevitably face a void period or a reduced rental rate with a new Tenant.

Q4. How much notice should my Tenant give me to leave my property?

Normally a rental contract will stipulate 60 or 90 days’ notice is required but if your Tenant has suffered job loss or a salary reduction then it would be prudent to mutually agree a timeframe to suit both parties. It really depends on the financial circumstances surrounding the request to vacate.  If you disagree with what your Tenant is proposing, then you or (s)he can take the matter to the Rent Disputes Settlement Centre at Dubai Land Department where the circumstances will be evaluated.

Q5; My tenant has approached me about their financial situation. How can I help without impacting the value of my investment?

Firstly it is important to communicate with your tenant to understand their situation. You should gain evidence as to their situation showing if they have lost their job, been put on unpaid leave or had a salary reduction.

Where there is a salary reduction or unpaid leave, consider if it is reasonable to offer more frequent instalments to ease their cash flow. You could offer a payment holiday with the balance being split over future payments within the current lease term. Alternatively, you could give a rent holiday for that same period where no rent is taken but extend the lease by the same amount of time to avoid any potential vacancy for longer. All reasonable solutions are better considered than none, as a Tenant who is genuinely financially affected can walk away, leaving without making further payments and with the option to take the case to court.   

Q6. Does my Tenant still need to pay a penalty for early termination?

If your Tenant has been financially impacted by the effects of COVID-19 to a level where he cannot afford to keep paying the rent, then they only need to pay the rent amount pro-rata until the day they vacate. They are not obliged to pay an early termination penalty. If you are in any doubt as to this being their situation, then you are entitled to ask for documented proof 

Q7. What shall I do if my Tenant’s rental cheque has bounced?

Sadly, this might not be such an unusual occurrence at the present time. Everyone has been affected in some way by the pandemic leading to financial stress. The important factor is to establish contact at the earliest opportunity and to understand the circumstances of the Tenant.  Once this is understood, further actions can then be taken to realign the payment schedule and /or consider some kind of rent deferment or temporary reduction.

It is strongly advised to keep a good relationship with your Tenant so that you can work through this period together on reasonable terms.  From a legal perspective (at time or writing), the Government has suspended evictions for two months, meaning that legal recourse does not exist at the moment for Landlords. 

If you are a landlord with questions that have not been covered here, please CLICK HERE and I will be pleased to offer advice and assistance. 

Please note, the advice given in this article was correct at the time of writing, though in the current circumstances, new information and regulatory guidance is being released frequently and our advice in the future will be based upon the information that is available in the market at that time.