Landlords love a good tenant, one who treats the property with respect, pays rent on time and maintains good relations with the landlord and other tenants. However, unexpected changes in the tenant’s financial situation and other personal circumstances could bring an end to the harmonious relationship. Then the landlord ends up dealing with bouncing cheques or tenants fleeing without paying outstanding rent.
Suraj Rajshekar, General Manager at Rocky Real Estate, says there are different reasons tenants abscond and cheques bounce, including bankruptcy, criminal offence, job loss and family issues, to name a few.
Laura Adams, Managing Director of Carlton Real Estate, says: “It is very difficult to confirm that a tenant has actually disappeared or has just taken an extended leave, but if cheques start bouncing, then there is reason for concern.”
Bouncing cheques and properties unoccupied for long periods should immediately ring an alarm for any landlord, as retrieving the losses is a difficult process. If the tenant has indeed absconded, the property cannot generate revenue until the landlord is able to legally repossess it and put it back on the market.
Property Weekly investigates the steps to take should this happen.
Track the tenant
It is essential for the landlord to collect a tenant’s contact details at the time of signing the contract. “The first step in this situation is to try contacting the tenant over the phone or through e-mail,” says Brian Finn, Real Estate Agent at Lannhill. “If unsuccessful, the next best thing to do is to get the building’s logbook from security and see if anyone has been in the place over the past few weeks. Also, check if there were visitors or deliveries to the apartment or villa.”
If a property is managed by a broker, the same process should be followed.
“Every tenant must provide a residence visa before renting a property in Dubai, and the name of the company where the tenant works should be on the visa. However, if the landlord or broker still fails to get in touch with the tenant, the problem needs to be reported,” says Finn.
File a case
When all attempts to chase the tenant fail, there are legal channels to terminate the tenancy contract and retrieve the losses. “The tenancy law under Article 25 allows the landlord to terminate the lease if the tenant breaches the lease by not paying the rent or for other breaches,” says Mohammed Kawasmi, Head of Property — Northern Emirates at Al Tamimi and Company. “A lawyer could be appointed to represent the landlord before the Rent Committee. The landlord can also file the case and appear before the Rent Committee without a lawyer.”
Finn says, “Every rental contract in Dubai is over a 12-month period and is paid for in advance with post-dated cheques by the tenant or the tenant’s employer. If these cheques are not honoured, you must report it to Dubai Police and the Real Estate Regulatory Agency of the Dubai Land Department. A notice from Dubai Courts will then be couriered to the property, with a copy sent to the tenant’s e-mail address.”
Time and cost
Generally, a landlord can regain the property within six months, but, following the implementation of the Ejari system, authorities have said this will be reduced dramatically, says Adams.
“The cost of recovering the property varies, depending on what proof the landlord has of the tenant absconding, such as a letter from the tenant’s employer confirming that the tenant has left the company or the country. If the landlord has no proof, the authorities will need to do their own investigation,” she says.
“Also, while Ejari is still new, we are hoping the costs will be further reduced. If the landlord uses a lawyer, the fee to get the clearance to enter and lease the property is anything up to Dh20,000.”
Kawasmi further explains: “The fee for filing a case for eviction at the Rent Committee is 3.5 per cent of the annual rent or a maximum amount of Dh20,000, and for claiming the rent, it is 3.5 per cent of the claim amount or a maximum of Dh15,000.
“However, the Rent Committee does not compensate the landlord for the attorney’s fee. Recently, a new committee has been formed and has started to work, hence there may be a change in the above-mentioned costs.”
The landlord can only enter the property and lease it after getting approval from Dubai Courts, says Adams.
“The landlord must not enter the apartment until authorised by the court, otherwise, if the tenant does come back, the landlord can be accused of entering the property without permission and this can lead to many problems. If the property is rented as a company accommodation, the easiest route is to ask the employer or sponsor to send a letter confirming that they no longer need the apartment.”
Right to lease
The landlord can relet the property only after the Rent Committee makes a decision to end the tenancy contract and allow the landlord to take possession of the property, says Rajshekar. “Once possession is taken, the landlord does a valuation of the tenant’s belongings in the property and provides a list to the committee,” he says.
“Once the Rent Committee approves, the landlord can sell the belongings to compensate for the loss of rent and property damage. However, the landlord can only relet the property once the investigation and lawful procedures of the Rent Committee are completed and approval is received.”
Utility bills
Rajshekar continues: “The landlord is also responsible for paying the outstanding utility bill, which can be covered by the proceeds from the sale of the tenant’s belongings, as the landlord needs to clear all outstanding payments against the property to be able to relet it.”
Kawasmi says recovering unpaid rent is different from one case to another. “For example, some tenants may leave the country and do not leave any assets in UAE. In this case, it is difficult to recover the rent. The landlord may obtain an arrest warrant against the tenant, who will then be arrested upon arrival in the UAE.
“The landlord may consider executing the court’s judgment in the tenant’s home country, if it is a big amount and worth paying all the related legal expenses. The landlord has the right to attach any assets belonging to the tenant such as bank accounts, cars or real estate by executing the judgment according to the rules of law,” says Kawasmi.
