Can a friend's cheque cover your rent in Dubai?
Thinking of using a third-party cheque for your lease? Read this first
Dubai: Need to apply for a lease on your new home but unable to provide cheques for the rent payment? There may be a possibility that you are able to submit a cheque issued by a friend or family member, but it is critical to follow best practices when getting into such an agreement.
Landlord's consent
According to Celica Escobar, a property consultant at AX Capital real estate, getting a third-party cheque for rent payment on a lease can only be done if there is an agreement between the landlord and the tenant.
Commenting on how often she encounters cases where a client requests to submit a third-party cheque, she said: “This is commonly applicable for clients new to Dubai who are hired directly by their overseas company and are experiencing delays in obtaining their Emirates ID. However, in other circumstances, I advise clients and landlords to view this option as a last resort to avoid potential risks and complications. In my experience, only about 1 in 10 clients end up providing a third-party cheque due to time constraints, such as when their temporary accommodation provided by the company is about to expire.”
This is commonly applicable for clients new to Dubai who are hired directly by their overseas company and are experiencing delays in obtaining their Emirates ID. However, in other circumstances, I advise clients and landlords to view this option as a last resort to avoid potential risks and complications.
Essential steps for using third-party cheques
Even if your landlord agrees to accept cheques issued by another person for the lease agreement, it is critical to get all the paperwork in place, as the cheques bring in a major financial liability for your friend and you.
1. Draft a detailed letter to the landlord’s bank
According to Escobar, it is advisable to draft a letter of a third-party cheque addressed to the bank of the landlord with the following format:
- Purpose of the cheque: Clear statement of why the third-party cheque is being issued, indicating the property details.
- Details of the transaction: Information about the transaction, including the amount, date, landlord's name account number, cheque numbers. Escobar advised scanning the cheques and attaching them to the letter as a best practice.
- Authorisation statement: A confirmation that the third party is authorised to issue the cheque on behalf of the account holder and stating that there are enough funds on the account for the cheque to be cleared and he will be responsible in case there's a bounced cheque.
- Contact details of the account holder: Email and local mobile number.
- Signature of the account holder.
“The letter ensures that the cheque is valid and provides clarity on the intent and authorisation behind the payment,” she said.
2. Provide identification
You would also need to attach a copy of your friend’s passport and Emirates ID.
If the cheque is coming from a company, Escobar advised adding the following documents:
- Trade licence of the company
- Emirates ID of the owner
- Third-party letter with letterhead and company stamp
- Contact details of the signatory – email and phone number
3. Make sure to add it to the contract addendum
According to Mohamed Rabih Nizam, partner and legal consultant at Dubai-based law firm Hussain Lootah, it is advisable to explicitly state in the tenancy contract that rent instalments will be paid via cheques issued by your friend.
“The contract should clearly reference the cheque number, issuer’s name, and the bank name to establish a direct link between the cheque payment and the corresponding rent instalment,” he added.
He clarified that this best practice could protect both your friend and you in case there are any changes to the lease, like early termination of the contract.
“In the event of early termination of the contract, the cheque issuer (your friend) will have the right to recover any unused cheques. Therefore, it is essential to include a clause in the contract specifying that the recovery of unused cheques is the responsibility of the cheque issuer,” he said.
In the event of early termination of the contract, the cheque issuer (your friend) will have the right to recover any unused cheques. Therefore, it is essential to include a clause in the contract specifying that the recovery of unused cheques is the responsibility of the cheque issuer.
What happens if a cheque is dishonoured?
You also need to ensure that the cheques can be encashed on the date mentioned, as a bounced cheque will cause trouble for both your friend and you.
“In the event the cheque is dishonoured, you may be held jointly liable with the issuer for the payment of any unpaid rental instalments. Also, the landlord would be entitled to seek eviction due to non-payment. However, such an eviction claim would require the landlord to serve a legal notice providing a grace period of 30 days. Should the outstanding rental payment remain unpaid after this period, the landlord may initiate an execution case against you to recover the cheque amount. This could result in the imposition of travel bans, the seizure of your assets, and the freezing of your bank accounts. Additionally, if the cheque is dishonoured due to a closed account or a signature mismatch, you may face criminal charges,” Nizam said.
I’ve given cheques for a friend’s lease – how do I protect myself?
Nizam also advised residents who wish to assist a friend or family member by providing cheques to protect their rights, as non-payment can lead to serious legal consequences.
Ideally, you should draft a formal agreement with your friend or family member, to secure your right against the tenant and to recover the amount of the cheques.
“As the issuer of the cheques, you will be held liable for the payment of the rental instalments covered by those cheques. If a cheque is dishonoured, the landlord may initiate an execution case against you to recover the cheque amount. This could result in the imposition of travel bans, the seizure of your assets, and the freezing of your bank accounts. Additionally, if the cheque is dishonoured due to a closed account or a signature mismatch, you may face criminal charges,” he said.