Stock - Dubai skyline
Dubai Land Department's recent alliance with Emirates NBD will speed the move from post-dated rental cheques to debits from tenants' bank accounts. How soon will others follow? Image Credit: Dubai Media Office

Dubai: The UAE’s property market is moving fast to finally drop what had been standard practice for decades – of tenants issuing multiple cheques to their landlords for their annual rental payments. Going forward, all such transactions will be settled – seamlessly, as market sources say – through direct debits from tenants’ bank accounts.

It was earlier this week that Dubai Land Department confirmed an agreement with Emirates NBD as part of the process. The transition from cheques to direct debits will gain more ground in the weeks ahead. The move should also be seen in the context of the UAE de-criminalising most aspects of bouncing a cheque.

“The main positive will be rent payments debited on time without (landlords) having issues with lost cheques or irregular signatures,” said Abdullah Al Ajaji, Managing Director of Driven Properties. “The cons are yet to be determined; however, we believe defaulting on direct debit payments will not have the same impact as bounced cheques in line with recent regulations.

Stock - Al Ajaji of Driven Properties
Abdullah Al Ajaji of Driven Properties said: “If this initiative will not affect any legal proceedings for unpaid rents and is as strong as filing a case for a bounced cheque, then landlord's will prefer to adopt it to avoid issues such as irregular signatures, misplacement of cheques, or not depositing them on time." Image Credit: Supplied

Date for switch to direct debit

The real estate and banking authorities are yet to specify a clear date as to when post-dated cheques will become a thing of the past in the UAE property leasing market. Plus, it will take time for landlords to process what’s required on their part.

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One of the properties in the Driven portfolio. The project is the Sea Mirror Villa at Jumeirah Bay. Image Credit: Supplied

According to Al Ajaji, “Multiple landlords and developers may not be able to fully shift in a short period of time. And there could be many corporate tenants who will first have to account for this new service as part of their internal accounting policies. If the success rate is high, it will save developers and landlords’ time and effort, and then we will see a faster adoption.”

Covid brings on change

The pandemic too has had a part in getting landlords think of alternatives to collecting cheques. Some of the biggest developer-landlords in the UAE allowed tenants to pay rents on a monthly basis during the time, and through their bank accounts or via credit cards. Later on, helping the process was the UAE confirming the de-criminalization of bounced cheques.

And what became part of the Covid times stayed on. “(Direct debits) is more of a common practice among individual landlords with units in freehold areas,” said Adham Younis, Group CEO at D&B Properties. “I definitely think (other banks) will join the Dubai Land Department initiative. It gives an additional service to banks and creates a new level of trust between tenants, bank and landlord. The UAE definitely needs this to be in line with international best practices.”

Watch out for the fees

For the moment, the big developer-landlords do charge an additional fee for tenants wanting to do direct debit. “Sometimes, they might also require a backup post-dated cheque as a guarantee,” said Younis. “I personally believe the UAE Central Bank always had plans to bring this initiative forward. Credit also to Dubai Land Department to drive this initiative with Emirates NBD.

Adham Younis, Group CEO at D&B Properties
Adham Younis of D&B Properties said: “This should quickly spread to the other emirates once the other land departments see the benefits.”

How the Dubai Land Department & Emirates NBD deal will work:

  1. Rental cheque payments will soon be automated and digitised through enabling of rent collection using the UAE Central Bank’s Direct Debit System (UAEDDS).
  2. This will ‘benefit’ landlords and property management companies by eliminating the administrative activities required to manage post-dated cheques manually
  3. It will also offer a digital alternative to tenants for making rental payments using their bank account as well instead of issuing cheques as per current practice. This will further allow them to avail of flexible payment plans from their landlords or property management companies.
  4. Individual investors from overseas looking to purchase property in Dubai can open non-resident savings accounts with Emirates NBD, which will help in facilitating their purchase and managing the unit and rent collection.