Stock Rental lease agreement contract
The UAE has removed bounced cheques as a criminal offence. This will require landlords to make some changes in the way they sign new tenancy agreements. Image Credit: Shutterstock

Dubai: Landlords in the UAE will likely go into the credit history of their prospective tenants and reduce the number of cheques they take after bounced cheques was removed as a criminal offence. In fact, some landlords are even willing to offer reduced rental terms if that means the tenant is willing to pay the annual rent in full upfront or via a single cheque, market sources say.

“We had over 50 requests from landlords in just 24 hours to explain what they should do under the changed law on bounced cheques,” said Firas Al Msaddi, CEO of fam Properties. “Definitely, landlords would be far more conservative, so they will run initial checks on the tenant’s credit profile and if they don’t like what they see or can’t verify the credibility, they would entertain a lower rent for one payment.”

This altered state on leasing is being reported by other estate agents, when it comes to lease renewals. Landlords are proceeding with caution because they one leverage they had – the cheques they were holding – no longer constitutes a criminal offence if the tenant does not have sufficient funds to honour it.

What could happen immediately is landlords moving away from six-cheque – and even four-cheque - payment terms. (The UAE residential rental market is already seeing little of the 12-cheque options that many landlords had to offer during 2020 when the pandemic hit residential leasing enquiries.)

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Background checks

As with any change, landlords probably require some time to process the new circumstances. Some of them will take longer to ensure they run the full check on a likely tenant’s credit credentials. “Landlords are more likely to use a professional probity manager who can oversee the screening and the qualifying criteria of each tenant,” said Al Msaddi. “They will also need to find out whether the tenant ever had litigation before the Rental Disputes Centre over insufficient funds.”

According to Firas Al Msaddi, CEO of fam Properties, "It has become very important to check the credit history of the tenant, if he or she had bounced cheques before and to check if the tenant ever had a case with the Rental Disputes Committee before, especially in relation to insufficient payments." Image Credit: Virendra Saklani/Gulf News

Switch to holiday homes?

More landlords in Dubai could also be inclined placing their units in the short-stay rental market rather than the one-year leases. This way there is less of a need to settle any of payments via cheques, which means less of a hassle in chasing owed money.

Any new process set off by the change on the bounced cheques will eventually translate into the greater good of the property market. “This is not about making things difficult for tenants,” said Al Msaddi. “If anything, the change will make the market more transparent because these checklists will become the new norm.

“Then, of course, when tenants will understand the need to keep a clear and clean record of their credit history – at all times.”