How soon will post-dated rental cheques to landlords become a thing of the past?
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.
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.
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.”
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.”
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.
Sign up for the Daily Briefing
Get the latest news and updates straight to your inbox