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Moving Out When the Lease is Still Active in Dubai: How to ENSURE you do not Have to Pay the Penalty for Violating the Lease?

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Kontheti Subramanya Sai Lakshmi Anuhya

Published on July 14, 2023, 17:41:00

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Real Estate Regulatory Agency,

A tenancy contract is a rental agreement between a tenant and Landlord that must be signed before receiving the keys to the Property. A tenancy contract is mainly a legally binding agreement that allows the tenants to use the Property for a set period.

According to Article 4 of the Dubai Tenancy Law, the relationship between the Landlord and the tenant will be protected by a written Lease Contract that should be signed by both parties. The Real Estate Regulatory Agency (RERA) will record any lease agreements for real property that are subject to the provisions of this statute, as well as any amendments to those requirements. Unless a Lease Contract is registered with RERA under the applicable laws, companies are not permitted to investigate a dispute or claim or take any action regarding it. Article 6 of the Dubai Tenancy Law states that if a Rental Contract's term expires but the tenant continues to live in the Property without the Landlord's approval, the Lease Contract will be renewed for one year.

 According to Article 7 of Law No. (26) of 2007, neither the Landlord nor the tenant may cancel the lease agreement without the other party's approval. Initially, tenants and landlords in Dubai were required to provide a 90-day notice if the rental agreement was not renewed.

However, with the passage of Law, Law No. (33) of 2008, which changed several provisions of Law 26 of 2007, the 90-day notice period is no longer necessary if either party does not intend to extend the lease. Instead, this rule was revised in Dubai to give precedence to the requirements contained in rental agreements. Therefore, tenants need to be informed of the notice time stipulated in the rental agreement. Instead, Dubai's rental law has been modified to emphasize the terms of leasing agreements. Therefore, tenants must ensure they are aware of the notice period provided in the rental agreement. 

In case of early termination

As per Article 7 of the Dubai Tenancy Law, the tenancy agreement cannot be ended unilaterally by any party, but it can be mutually terminated by the tenant and the Landlord throughout the length of the agreement. According to Article 4 (1) of the modified Dubai Tenancy Law, the tenancy agreement binds both the Landlord and the tenant. A tenant must comply with the stipulations of the lease agreement and, in rare instances, may be obliged to pay two months' rent as a penalty for early termination of the agreement.

Unless a particular early termination clause is incorporated in the lease, the Landlord is not compelled by law to repay any rent to a tenant who decides to vacate the premises early. In the emirates of Dubai, there is no common law or guiding concept governing the termination of a lease early. The tenant should instead request contract wording that provides a notice time and penalty amount in the case of early termination. Law 26 of 2007 of the Real Estate Regulatory Authority, which regulates landlord-tenant interactions, does not have an item allowing for early contract cancellation but rather governs the relationship between the parties during the duration of the contract. Tenants must be informed that the Dubai tenancy law does not permit early lease cancellation. The rental law applies to landlord-tenant relationships solely for the duration of the contract.

 Recommendations for Resolving Damages Due to an Early Lease Termination

The first advice would be to locate an early termination clause in the rental agreement. Tenants must ensure that an escape provision is included when entering a lease. This will save them a great deal of time and work if they find themselves in the position of needing to terminate a lease agreement early. If the rental agreement in Dubai does not include a clause for early termination, the Landlord has the right to seek reimbursement for the tenant's early dismissal and breach of contract. 

This implies that if the tenant wishes to terminate the lease agreement early, they may be required to lose the rent for the remaining time of the contract or pay the Landlord some form of compensation.

One must contact the Landlord if such a clause is missing from the rental agreement. Following this, the individual can explain the reasons for the lease termination. Alternately, the tenant can offer to find a new tenant for the Landlord to minimize financial loss. The tenant will likely be compelled to reimburse the Landlord if they are unable to locate a replacement tenant quickly. 

In conclusion, a tenant must make sure there is an early termination clause in the rental contract. In a case where the rental contract does not have the clause, the tenant can try to escape the penalty for early termination by negotiating with the Landlord and finding the Landlord a replacement tenant.

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