A “soft” real estate market marked by oversupply gives tenants an opportunity to consider their options. This is true this year where tenants can look at negotiating a reduction of their rent or relocating to a better property. Here are five things to consider when looking to negotiate or terminate a lease.
If you are looking to potentially move or renegotiate your lease, the key is to give yourself plenty of time. While individual leases may have specific requirements in them in respect of notifying the other party of an intention to terminate or renegotiate the lease, the landlord and tenant laws in the different emirates also have their own requirements. In Abu Dhabi, a two-month notice is required for residential property and a three-month notice for commercial property. In Dubai, a written notice for any request to amend the lease is required not less than 90 days prior to the end of the contract.
It is important for tenants to do their due diligence to assess a reasonable amount of rent and find options in their budget range. There are a number of sources of information available to tenants, such as property letting websites or the Dubai Land Department’s rental increase calculator. While the perception that rents in the UAE are decreasing is fair, not all areas are decreasing at the same rate and the level of rent applicable for a property should not be presumed.
3. Additional cost
When people talk about the cost of their rental property they predominantly focus on the headline rent. However, moving is an expensive process. The costs that many people fail to factor in include agent’s fees, security deposits payable to the new landlord, moving fees, decoration costs, fees for reconnecting internet and TV and any deposits to Dewa to set up a new account.
There is also potential additional cost of repair and maintenance of the new property, especially if the new landlord is not as efficient in repair work. Many tenants we speak to find that moving to a new property can actually cost more in the first and potentially the second year when compared to staying in their previous property, even if they have negotiated a reduction in the rent. It is therefore important for all tenants to be clear on the ancillary costs they may need to pay before moving.
4. Notice provisions
A notice to either amend the terms of a lease or to terminate a lease is a formal notice under the lease contract. Where a lease specifies the manner in which a notice needs to be given to the landlord, that needs to be followed, otherwise it is arguable that a notice is invalid.
If the lease does not expressly permit the service of the notice by email, it should be sent by letter. If the lease notes an address for service of notices on the landlord, it should be delivered to that address. When delivering a notice, it is important to get a receipt of delivery. While this may seem pedantic, a tenant would not want to have a notice rejected on a technicality.
5. Maintaining relationships
Bear in mind the ongoing relationship with your Landlord if you intend to vacate. When entering into a new lease or renewal, a hard negotiation can damage the relationship between landlord and tenant. A negotiation does not need to be a battleground and parties should be realistic in their objectives. It is important to also avoid making threats where there is no intention to keep them.
Peter Greatrex is a partner in the Real Estate & Hospitality team at law firm Clyde & Co in Dubai.