Real Estate Update: Introduction of new Leasing Law in DIFC

DIFC Law No. 1 of 2020 and Leasing Regulations (“Leasing Law”) has recently been issued by the Dubai International Financial Centre (“DIFC”), to come into force on 14 January 2020.

The Leasing Law was foreshadowed by the Real Property Law (DIFC Law No. 10 of 2018), which amended the regime for the registration of leases with the Registrar of Real Property, but dealt with very limited aspects of leasing. This Leasing Law now supplements the existing Real Property Law and provides clarification to lessors and lessees of properties in the DIFC on their respective rights and obligations.

In particular, the Leasing Law sets out:

  • statutory obligations on the lessee, including to pay rent on the dates specified in the lease, to use the premises for their permitted use, not to cause nuisance or interference and to pay certain taxes and fees in respect of the premises;
  • statutory obligations on the lessor, including to ensure the lessee has quiet enjoyment of the premises and a prohibition on the lessor disconnecting utility services to the premises;
  • specific provisions for residential leases, including:
    • the introduction of a security deposit scheme whereby security deposits (not to exceed 10% of the annual rent) are to be paid to the Registrar of Real Property, which will administer the release and refund of security deposits. Any disputes in relation to security deposits must be referred to the DIFC Court or any specific tribunal that may be established (the DIFC Authority are considering the possibility of establishing a separate arm within the DIFC Courts’ Small Claims Tribunal to deal with lower value disputes);
    • preparation of condition reports to evidence the condition of the premises at handover, in any subsequent dispute between the lessor and the lessee relating to the state of repair and condition of the premises;
    • additional statutory obligations on the lessee and the lessor applicable in residential leases, including in respect to rent increases, liability for utilities and other charges, installation of fixtures, damage to residential premises and an obligation to maintain the premises. Interestingly, the obligation to maintain the residential premises in good repair during the term is placed on the landlord and the tenant’s obligation is limited to avoiding damaging the premises and keeping the premises reasonably clean;
  • a prohibition against acceptance of key-money or any consideration for the goodwill of any business in respect of retail leases;
  • provisions in relation to the termination of leases, including the various circumstances under which leases may be terminated by agreement, by court order or without court order or a lease may be surrendered (to apply retrospectively to all leases in the DIFC); and
  • the procedures to be followed for the termination or surrender of leases and the rights of a lessor over goods left at the property by a lessee on expiry or termination of a lease (to apply retrospectively to all leases in the DIFC).

How we can help

Al Tamimi & Company can provide advice on all aspects of the Leasing Law, including:

1. advising on your rights and obligations as lessor and/or lessee under the Leasing Law;

2. updating your template leasing documentation to comply with the Leasing Law;

3. providing advice in relation to any rights of termination of your lease and assisting in the enforcement of such rights of termination; and

4. providing advice generally in respect of any dispute that may arise as between the lessor and lessee.

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