Property | UAE

Things you should know before signing a new lease

Thinking of moving to a new pad? Well, don’t even pick up a pen to sign that lease until you’ve read our checklist

  • By Binesh Panicker, Property magazine
  • Published: 11:41 August 1, 2011
  • Property

11 things tenants should know
  • Image Credit: Supplied picture
  • Ensure there are provisions in the contract for unforeseen issues such as power or water leaks, which can be a major cause of concern sometimes.

By now, we all know that Dubai is a tenants’ market. With the demand-supply equation tilted strongly against the landlords, tenants are in a position to be more aggressive in negotiating rent and facilities. However, the fact remains that tenants are not fully equipped to demand what could rightly be theirs because of lack of awareness. Property, in association with Ludmila Yamalova, managing partner, Yamalova Plewka JLT, brings you the low-down on what every tenant in this market must know

1. Ask for a customised tenancy contract
Remember, a standard tenancy contract does not really exist. “Whenever you enter into a negotiation with a landlord or real estate agent, just make it very clear that you want a contract that is specifically drafted for you,” says Ludmila. “There is a standard tenancy contract commonly used in Dubai, but that’s only a template. You can draft your own or make changes to it. The existing template is a one-page document which is limited and unhelpful. Today, tenants have the leverage to dictate or set their own terms. Some landlords and real estate agents will tell you it is not done that way. The truth is they don’t want it to be done that way.”

2. Read the contract closely before you sign
Ludmila advises tenants to read the contract thoroughly. “You must read the contract and if you don’t understand it, then don’t sign it,” she says. It is better to include a termination clause in the contract so that it becomes easier for both parties to terminate the deal if the need arises. Generally, the exit clause comprises the notice period and the penalty payable to the landlord. “You have to be fair and the term should allow you to terminate the contract with some sort of penalty. During the notice period, you should also give the landlord access to the property so that he can show it to other clients. If the landlord finds another tenant during the notice period, then he may not want to penalise you. Not every landlord wants to penalise just because they can,” says Ludmila.

3. Get the contract registered
Make sure the contracts are registered. Many people think it is the landlord’s responsibility to do it but this is unrealistic. Tenants should also be aware of this process. It is important — if anything goes wrong, you are not allowed to file a case against the landlord if the tenancy contract is not registered.

4. Have your deposit held in an escrow account
Many landlords ask for a guarantee deposit but at the same time refuse to return the deposit to the tenants when they vacate. “It is better to make sure that the deposit is held in an escrow account or with a real estate agent or lawyers,” says Ludmila. “Damages are bound to happen in the unit that you stay in and it is only fair that landlords have a security deposit which they can use for maintenance. Try to document everything.” Documentation is a vital aspect as there may be unforeseen situations where the landlord is unavailable and there is something wrong with the air conditioning or electricity. In such a situation, the tenant should be able to get the work done and then the cost should be reimbursed by the landlord. The whole process will be smooth if it is properly documented in the contract. “Another thing is to have the authority to deal with the service management company on behalf of the landlord. Get some sort of authorisation or power of attorney from the landlord,” adds Ludmila.

5. Never pay in one cheque
During the boom time, tenants used to pay rent for the whole year in advance as the sector was dominated by single cheque payments. However, when the market crashed and the demand for units came down drastically, landlords and real estate agents were forced to accept more cheques — some even offering payment option in many as 12 cheques. “Landlords can no longer dictate the terms as they used to. As a legal practitioner, my strongest advice is never pay in one cheque,” Ludmila says. She advises those who pay in one cheque to ask for a guarantee deposit from the landlord so that they can be held accountable for any damage or disturbance that may come up before the end of the lease. “You have to decide whether the guarantee deposit will be held with the real estate agency or the lawyers who are involved in it or an escrow account. While there are no escrow services in the UAE as such, real estate agents and lawyers can hold investment funds,” she explains.

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6. Know your landlord
Make sure you know everything about your landlord because in the UAE many of them are absentee landlords who are represented either by licensed real estate agents or somebody else acting on behalf of the landlord. This actually means that you very rarely deal with the landlord directly. Ludmila says it is a problem if you don’t have the landlord’s contact details. “You are entitled to get this info and I suggest you don’t sign any kind of contract before you receive this information. You should also be provided with a copy of the landlord’s passport and visa page, and more importantly contact details,” she explains.  If a situation arises, without the details of the landlord it is not possible to file a suit against the landlord or lodge a complaint with the rent committee, simply because without the physical address the notice cannot be served. Tenants also need to make sure these contact details belong to the landlord and not some of his representatives or real estate agents, which is the case most of the time.

7. Get proof of authorisation
In Dubai, it is very rare for tenants to deal with the landlord directly, so it is imperative that whoever you are dealing with should show you some proof that he or she is authorised to conduct the transactions and dealings on behalf of the landlord. “For example, if it is a real estate company, you need to see some kind of documents that show that this company is authorised to act on behalf of the landlord. If it is a representative of the landlord, then a power of attorney, which is a legally binding document, is an absolute must,” says  Ludmila.

8. Document expenses in the contract
Tenants should make sure that they look at all the expenses such as water and electricity bills, housing fees, air conditioning/chiller/district cooling charges and service fees. “Generally, service fees are paid by the landlord while some others want to pass it on to the tenants,” says Ludmila. The issue of service charges must be discussed with the landlord in advance as it is something which will affect the tenants directly. If the landlord doesn’t pay the service fees, then the tenant’s rights to the property or amenities could be curtailed.  Before signing the deal, the tenant and the landlord should make a decision as to who will pay the Dewa (Dubai Water and Electricity Authority) bill, which also includes the housing fee which is 5 per cent of the annual rent — a substantial amount.  “Air conditioning is a big expense too and you need to decide who will pay for it because if you don’t pay and the landlord doesn’t pay either, it gets cut off” says Ludmila. “You need to discuss instruments such as access cards, parking access cards and parking numbers. If these get lost, how can you get a replacement? These are some of the issues that need to be addressed.”

9. Plan for the unexpected
There should be provisions in the contract for unforeseen issues such as power or water leaks, which can be a major cause of concern sometimes. Tenants need to discuss with their landlord who will be responsible in case of such an event. Ludmila recollects the plight of one of her clients who was forced to pay Dh10,000 every month as a Dewa bill because of some leaks. “Ultimately it affects the tenants and it is their name that is there on the Dewa account. Landlords may return this amount after finding out what the issue is but that’s only a hope. That’s why  I insist on taking a deposit from the landlord as well.”

10. Make sure all  bills have been settled
Ludmila advises tenants to conduct proper due diligence before they sign the deal and money exchanges hands. “Make sure all the accounts are settled by the previous tenant. There are many instances when tenants go to set up utility or telecom accounts only to find that the previous tenants haven’t paid their dues.” In such cases, the new tenants will be on a hook because on the one hand the dues of the previous tenant are standing unpaid while on the other the new lease agreement has been signed and deposit paid, she adds.

11. Have automatic provisions in the contract
Having automatic provisions in the tenancy contract allows the tenant to take appropriate decisions in case of any problem related to the unit even in the absence of the landlord. “Try to make an automatic provision where if the landlord doesn’t respond in two weeks, then the tenant gets the right to contact the contractors,” Ludmila concludes.

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