The Dubai Land Department (DLD) has released a new unified lease form, which serves as a mandatory tenancy contract starting this month. The move aims to create a more transparent market with measurable standards. The new form has been designed to regulate relationships between all parties involved in real estate transactions and guarantees their rights.
Reaction from real estate stakeholders has been mainly positive as the new system eliminates “clauses that contradicted current laws,” according to Mario Volpi, chief sales officer of brokerage firm Kensington.
“In the past, agents, along with landlords and tenants, were using tenancy contracts that in part were in total contradiction with the law,” Volpi tells PW.
Indian banker Harmeet Kalra, 43, who has invested in a rental property, says the unified contract leaves out any ambiguity. “It clearly states the responsibilities of a tenant and an owner,” says Kalra, who lives in a leased property.
However, the standardised contract could also greatly limit the room for negotiation between the landlord and tenant.
“On the downside, it may exclude terms both parties are agreeable to and that don’t conflict with law, but don’t seem to be written into the agreement,” points out Zarah Evans, managing partner of Exclusive Links Real Estate.
Sallie Bowtell, partner at law firm Trowers & Hamlins, says the new regulations also simplify the process as a contract is auto-generated after providing relevant information online. “It follows a simpler process that is more transparent,” says Bowtell. However, she also notes that the standardised contract is limited in scope. “The tenancy contract is not in itself sufficient to govern more complex landlord and tenant relationships,” she says.
Here are eight benefits of the new system from the point of view of various property stakeholders.
1. Guards tenants
Raza Ur Rahman, financial controller | tenant
It is an effective step by the authorities that will protect tenants’ rights. I’ve lived in the same building in Springs 12 for three years. In the first two years of my stay, it was difficult for me to define and identify precisely the responsibilities of the landlord and tenants related to property maintenance. My agreement states that minor maintenance is the job of the tenant and major maintenance is for the owner, but you can easily classify one into the other.
So a unified agreement system that clarifies the obligations of the tenant and landlord is very useful. I also hope the new draft will be complete enough to address other concerns, such as how much advance payment is required when renting a unit, the security deposit, etc. Even if it does not state the exact amount, at least from the responsibility part, it should make things clearer on what additional money the landlord is eligible to collect from the tenant at the time of leasing or renewing a tenancy.
2. Boosts confidence
Harmeet Kalra, banker | landlord and tenant
I have invested in a property in Dubai that I have rented out. I stay in a rented apartment, hence I play a dual role of both landlord and tenant. I personally feel that this will provide a sound regulatory framework by ensuring that both the landlord and tenant are governed by applicable laws, including rental law. It clearly states the responsibilities of a tenant and owner, without leaving any ambiguity or interpretation thereafter. On one hand, I feel it provides me additional rights being a landlord to get the flat evicted if certain clauses are breached by the tenant. On the other hand, it clarifies that it is a landlord’s responsibility to carry out any maintenance repair work or damage or defect, which is impacting on the wellbeing of the tenant, unless it was agreed otherwise when signing the contract. Whether as a landlord or a tenant, I know my rights are protected and chances of malpractice are reduced. Moreover, with the increased confidence in the system, international investors will invest more, which will improve the real estate market and it will appreciate the value of my investment.
3. Removes ambiguity
Mario Volpi, chief sales officer, Kensington Exclusive Properties | broker
In the past, agents, landlords and tenants were using tenancy contracts that in part were in total contradiction of the law. This unified contract will ensure clarity for all parties and is just one of the many steps the Real Estate Regulatory Agency (Rera) and the Dubai Land Department are taking to add transparency to the market. Previously, tenancy contracts were hard to police, as there were many variations used, from the “blue and green” ones that were shop-bought, to handwritten documents between the parties. The rental law has been amended and updated over the years, but no changes were made to the contracts in use. In most cases, an addendum will add clarity to clauses, enabling the contract to be bespoke to a particular property.
4. Stronger regulation
Zarah Evans, managing partner, Exclusive Links Real Estate | broker
Apart from the obvious update in appearance, this new agreement will now take into consideration all the new laws. This should potentially avoid some rental disputes as the current tenancy agreement can somewhat contradict some updates that have taken place. On the downside, it may exclude terms that both parties are agreeable to and that do not conflict with law, but don’t seem to be written into the agreement. An example is an early termination clause, which should be added to an agreement as an option. Another example: when an owner agrees to cover the AC chiller costs or the Dubai Electricity and Water Authority (Dewa) bill. While this is not [prescribed by] law, if both parties agree then it must be included as a clause.
5. Saves time
Umer Ijaz, property consultant, SPF Realty | broker
The main benefits ensured by Ejari are uniformity with a standardised rental contract, and ease of use as it saves time preparing the contracts and receipts. The new contract now states the permitted use of a leased property, whether residential, commercial or industrial, which was not specified in the previous contract format. It will state clearly that the tenant cannot transfer or sublease the property unless the owner legally permits it. The lease will clarify which party is responsible for the costs. For example, the new contract makes it clear which party is responsible for the cost of fit-out and which party must remove the works upon lease expiry. The terms concerning subleasing, maintenance issues and utility payments were previously unclear.
6. Prevents disputes
Suraj Rajshekar, general manager, Rocky Real Estate | broker
The new tenancy contract is a fairly drafted agreement that considers both the landlord and tenant as equal and both their concerns are included. Tenants should no longer worry about the owner putting too many clauses in the contract, which has happened in the past when landlords prepare lopsided agreements, placing several unnecessary norms in the addendum. Often the tenant would sign the agreement without thoroughly reading it, hence, when a lease is prematurely terminated both parties would end up in a dispute. Moreover, in such cases, the rent committee would pass verdict as per the agreement. With the unified contract, it is likely to put several situations of conflict between the landlord and tenant to rest.
7. Simple registration
Sallie Bowtell, partner, Trowers & Hamlins | lawyer
The new system is as simple as logging on to the Rera website, inserting the particulars and getting an auto-generated standard contract. It follows a simpler process that is more transparent, a factor that heavily influences investment [activity]. However, the tenancy contract is not in itself sufficient to govern more complex landlord-and-tenant relationships as it does not touch on standard terms such as timing and frequency of payment. The standard form is a very useful tool for simpler transactions such as residential leases, although we still expect to see special conditions inserted, and as a cover sheet simplifying the registration process for all other types of leases.
8. Consistency
Philip Sequeira, head of property regulatory, Hadef and Partners | lawyer
The simplified format essentially allows the authorities to capture the key leasing data in a uniform manner. Both the landlord and tenant should be aware that one size does not fit all, hence, the importance of a list of “additional terms”, which will cover commercial and legal risks. To avoid conflict, the commercial understanding between the landlord and the tenant should be enforceable and not in conflict with the law. For example, the uniform contract does not deal with who pays service charges under the jointly owned property (JOP) law, maintenance, repair, painting or redecoration.
