The UAE's banking sector is taking steps to digitise payments, operations and interactions as the country's digital transformation ambitions progress. However, even as recently as August 2021, 11% of total funds cleared by UAE banks were through cheques, demonstrating the continued importance of this payment method.

Given that over 90% of the population in the UAE comprises of expats who rent properties on a yearly basis, residential rent payments are mainly cleared by cheques, making it one of the most preferred modes of payment.

At the start of the lease period, it is customary to provide post-dated cheques with the tenancy contract, which the landlord can encash on a yearly, bi-annual, quarterly or monthly basis. These cheques, however, sometimes bounce due to insufficient cash or fraud.

Bounced cheque offenses up to AED 200,000 have been confined to fines over the past years. Cheque offenses will be decriminalised even further under the new laws, with only cases of fraud being taken before the courts. The change was made in order to enhance the effectiveness of the judicial and legislative systems.

So, what does this mean for tenants who prefer to pay using more than a single cheque? What kind of protection do landlords have?

Let's start with an overview of the new law's changes:

If funds in the account are not sufficient to clear the full amount, the cheque bearer (the landlord) can choose to accept partial payment against a cheque. The same cheque can be presented several times until the entire amount is received.

After partial payment, the cheque holder has legal recourse for the remainder of the original cheque through a civil complaint under the new statute.

If the cheque issuer asks the bank to deny encashment of the cheque before the date of encashment, or withdraws the entire account balance before the cheque is presented to the bank, or intentionally fills out a cheque in a way that prevents it from being encashed, the punishment can range from six months to two years imprisonment, as well as a fine of at least 10% of the value of the cheque, but not below AED 5,000.

We property managers, along with the landlords we represent, are keeping a close eye on the process of partial payment. We recognise that if only a portion of the funds are accessible, we can receive all available funds from the cheque issuer's account for the rent term agreed.

When a renter pays monthly, for example, there is a chance that finances for the next monthly cheque will be limited as well. This risk, together with the strengthening residential rental market, could lead to landlords abandoning monthly cheque payments in favour of quarterly instalments.

We expect that as the market matures further, landlords will increasingly turn to digital payment alternatives. Cheques, on the other hand, will continue to be advantageous due to the legal recourse option and the resulting ability to recover funds.