The Dubai International Financial Centre (DIFC) is a freezone area of Dubai. As evident from the name, the DIFC was specifically built to promote international financial activities in the region. Since its establishment in 2004, this freezone has performed exceptionally and its demand continues to increase to date.
Meeting this increasing demand, the government introduced a revised DIFC leasing law in 2018. The DIFC rental leasing law is slightly different from the laws applied in other areas of Dubai.
Let’s get through the DIFC leasing law 2018 in more detail.
Leasing Law in DIFC
The DIFC Law No. 10 of 2018 was drafted by DIFC Authority (DIFCA) and has been enforced in the area since January 2020. The purpose of this law is to define the rights of the lessor and lessee. Along with this, the law is also used to resolve conflicts among the parties legally. The law is applied to all the properties (excluding service and hotel apartments) within the DIFC jurisdiction.
Here are other guidelines mentioned in the DIFC leasing law.
Necessary Postulates of Lease
According to the UAE DIFC leasing law, the lease must be in writing and should clearly mention the following aspects:
- Amount of rent that the lessee has to pay including the due dates.
- Permit that allows the usage of the leased property.
- Details of leased property along with lease plan.
- Term of lease.
- Enough details to identify the lessor and lessee.
Alongside these compulsory postulates, the lease can include other terms and conditions also. However, any term that is not effective enough or is not directly associated with the property would be removed from the lease by the authorities.
Obligation for Lessee
DIFC law for property leasing also obligates the lessee to follow certain rules and regulations. These conditions are statutory and are not required to be included in the lease itself.
- The property should only be used for the purpose mentioned in the lease and that purpose should not be illegal by any means.
- Lessee is obligated to use property premises and common areas in a way that should not affect other renters.
- The rent should be paid on the due dates mentioned in the lease. In case the date is not specified, advance quarterly instalments of rent should be paid.
- All applied taxes should be paid as per the law.
- The lessee must hand over the property in its original condition on the agreed date. To manage leased properties in DIFC adequately, you can also read our blog on property management tips.
- Any kind of alterations and fixtures in the buildings are not permitted without the consent of the landlord. However, the lessee may opt for urgent repairs and recover the cost from the lessor later.
Obligations for Lessor
Similar to lessees, lessors are also obligated to cater to the following conditions.
- Lessors should ensure that the lessee has quiet enjoyment of the property.
- Lessors are prohibited to disconnect utility services from the premises. If they did, the lessee can report it to the police or file a court case.
- Community service charges, building service charges, capacity chargers and utility installation charges should be paid by the lessor.
- The lessor can enter the property with a prior two days’ notice to the lessee. However, if the lessee is not connectable, lessors have the right to enter the property at any time.
Maintenance Obligations on Lessee and Lessor
According to the DIFC leasing law, the lessee and lessor both are responsible for the property maintenance. Here are the instructions regarding property maintenance mentioned in the law.
- The lessee is responsible for carefully using the property and avoiding any severe damage to the property. This also includes the common areas like art galleries and bars in DIFC.
- In case of any damage that is caused due to the negligence of the lessor, the lessee will not be liable for it.
- The lessor should complete a home maintenance checklist and keep the property in a well-maintained condition.
- Lessors are allowed to serve a notice to the lessee for the regular maintenance of the property. If the lessee fails to comply with the maintenance notice, the lessor can maintain the property and receive the cost from the lessee.
- If the lessee finds the maintenance notice unnecessary or unreasonable recovery cost, they can contact the DIFC court within 20 days.
Reasons for Termination of Lease
The DIFC law elaborates on the conditions that lead to lease termination. The properly defined conditions aid in maintaining a healthy tenant-landlord relationship without any legal conflicts.
Following are the situations that lead to the termination of the lease.
- Breach of the term that is mentioned in the lease agreement and the lessee fails to resolve the issue within 30 days of written notice.
- Leases will be terminated if the lessee dies, destroys the property or leaves it abandoned for more than one month.
- If the rights of both parties are vested in one individual.
- Any rent that is not paid 30 days past the due date.
In all the above-mentioned conditions, the lessor has the right to terminate the lease. However, there are a few other conditions in which the lease termination is decided by the DIFC court.
- The lessee fails to comply with the maintenance or any other obligation mentioned in the lease.
- The rent is not paid and the remedy period mentioned in the lease has also expired.
- When the lessee is declared insolvent or uses premises for illegal purposes.
The lessee also has the right to terminate the lease after the permission of DIFC courts. The conditions in which the court allows the lessee to terminate the lease are mentioned below.
- When the lessor failed to comply with the terms mentioned in the lease and was also unable to respond to the written notice by the lessee within 30 days.
- If the lessor’s property is not maintained or suitable to be used for the purposes mentioned in the lease.
This was all about the DIFC leasing law that protects the rights of lessee and lessors. The core aim of enforcing these laws and establishing freehold areas is to promote international business activities in the Emirate. Apart from DIFC, there are many other freehold property areas in Dubai. If you are also interested in investing in these areas, browse through these commercial properties for sale in Dubai and invest in a freehold area with a high ROI.
Stay tuned to UAE’s leading property blog for more information on the new leasing law of DIFC.
