GUIDES & MANUALS

1. Tenancy Law

In 2006, Law No (20) was implemented to regulate the relationship between landlords and tenants on matters such as rent increases and eviction. Before the updated Law (4) of 2010, Abu Dhabi landlords could not request tenants to leave upon expiration of their tenancy contract. What Law No. (4) introduced was that a landlord now had legal rights to ask a tenant to vacate a property upon expiry of the tenancy contract and could reject renewal. A rent cap of 5% applied at that time, however tenants could be subject to that 5% increase upon renewal without warning.

In 2012, the Abu Dhabi Executive Council Decision Law No (32) stated that the 5% rent cap was lifted, giving landlords the freedom to increase prices as they saw best, this clearly was not in the favor of tenants. However, it also introduced rules on required notice periods; if a landlord wants to ask the tenant to leave or increase the price (or make any other amendment to the tenancy contract,) they have to give the tenant a 2 month heads up, by sending through a NOE (Notice of Eviction) or Notice stating the suggested amendment, defining the change they wanted to enforce. For commercial properties, a 3 months’ notice period was required. It’s important to note that if the landlord does not provide any notice for eviction or price increase within the time period mentioned above, the contract would automatically be renewed for the same rate and terms.

In regard to registration of tenancy contracts, resolution (4) of 2011 introduced rules and procedures for landlords to register their tenancy contracts with the Municipality, known as the Abu Dhabi Municipality’s TAWTHEEQ system, in order to maintain a register of tenancy contracts that did not previously exist.

The Abu Dhabi Landlord and Tenancy relationships are governed mainly by Law No (20) of 2006 Concerning the Rent of Places and Regulating the Rental Relation Between Landlords and Tenants in the Emirate of Abu Dhabi “Tenancy Law”.

The main updates since Law No (20) of 2006, that had the most relevance to the Tenancy Law are:

• Law No. (4) of 2010 on Amending certain provisions of Law No. (20) of 2006 Concerning Leases and Organizing the Relationship between Landlords and Tenants in the Emirate of Abu Dhabi. Before 9 November 2010, this amendment confirms that a landlord may not request that a tenant vacates a property upon expiry of his lease. This deadline was further extended three times subject to annual rent increases being capped at 5%.
• Resolution No. 4 of 2011 on Rules and Procedures of Registration of Lease Contracts in the Emirate of Abu Dhabi. The following has been enacted:
• The resolution introduces a system whereby the Municipality shall establish and maintain a Tenancy Contracts Register, which shall include all pertinent data relating to the leased property. Moreover, all Tenancy Contracts existing at or entered into after the effective date of the provisions of this Resolution shall be registered with the Municipality.
• The Competent Authorities i.e Municipality shall only consider Tenancy Contracts registered under the provisions of this Resolution. Any transaction, which requires a Tenancy Contract shall not be accepted and shall be suspended unless such contract is registered in the Concerned Municipality.

All Landlords shall register their properties and all effective Tenancy Contracts with the Municipality.

This Resolution applies to both Residential and Commercial units. Hence, all units from 2011 onwards must be registered under the Abu Dhabi Municipality’s TAWTHEEQ system.

Why is it a must to register you Abu Dhabi tenancy contract in the TAWTHEEQ system?

The contract is necessary to hook up utilities at Abu Dhabi Distribution Company or apply for a parking spot with Mawaqif, the capital’s car parking system.

Administrative Resolution No. 12 of 2012 Concerning the Controls of Residential Unit Occupancy in the Emirate of Abu Dhabi. This resolution provides restrictions on occupancy of residential units. The restrictions on residential occupancy in Abu Dhabi:

• The number of the residential unit’s occupants shall be specified in proportion to the area and the area allocated for each occupant of such a unit shall not be less than 14 m² of the total area of the residential unit (children and housemaids excluded)
• In all cases, the number of the occupants of the single room of the residential unit may not exceed three persons (children and housemaids excluded)
• It shall be prohibited to use the halls and corridors of the residential unit as bedrooms.
• It shall be prohibited to divide the residential unit for the purposes of leasing, unless if such division is made by a prior permission of the competent authority.
• It shall be prohibited for more than one family to share a single residential unit.

It shall be prohibited for families who occupy a residential unit to allow persons who are not related to the family by kinship to share the residential unit (children and housemaids excluded)

​The Abu Dhabi Tenancy Law is divided as follows:

• The obligations of the Landlord as per Articles 6,7 and 8
• The obligations of the Tenant as per Articles 11-15
• Expiry of Tenancy Contracts as per Article 20-22
• Grounds for Eviction of the Tenant under Article 23
• Establishment of the Rent Dispute Settlement Committee 24-32

2. Procedure

The procedure for Tenancy Contracts starts with the moment the Landlord and the Tenant agree to form a contractual relationship between them. This occurs when the parties agree on:

• The period of the tenancy: There is no prescribed period for tenancy as per the law. This is completely between the landlord and the tenant. The norm for residential properties is that the period is for a duration of one year.
• Otherwise prescribed in the contract between the Landlord and the Tenant. For example, the Landlord may clearly stipulate in the contract that at the end of the tenancy he wants the tenant to vacate the property.
• The Landlord or the Tenant fail to fulfill their obligations under the Tenancy Law. For example, the tenant fails to pay the rent due or the landlord fails to hand over the property in a suitable condition.
• The Landlord sends a Notice for Eviction “NOE” to the Tenant two months prior to the date of the lease’s expiry in the case of residential properties; and three months prior to the to the date of the lease’s expiry in the case of properties for commercial, industrial or professional purposes (Article 20(3) of the Tenancy Law).

For commercial properties, it is advisable for the parties to sign Tenancy Contracts that are more than one year in duration so as to allow for enough time to complete any necessary fit outs required, and so the time invested in set-up of business operations may truly be enjoyed by the occupant for an extended period.

The tenancy contract should state:

• A rent price, usually within the range of the Rent Index
• Furnished or unfurnished

Payment terms: The standard payment terms are usually one, two or quarterly payments depending on the preference of the Landlords. Having said that, many landlords are more likely to agree to a lower rent price if the tenant makes one full payment for the property in advance. Once the initial terms are agreed upon, the Parties will then sign a Tenancy Contract.

Registering a Tenancy Contract in Abu Dhabi depends on the type of party you are dealing with. If you are dealing with the Landlord directly, you have to follow the following procedure:

• Ensure the Landlord has registered his property with the Abu Dhabi Municipality “ADM” by checking the property registration certificate.
• Have the individual Landlord draw up a Tenancy Contract for your review. Check all the terms and conditions especially with regards to the period of tenancy, rent amounts, maintenance and other charges.

Note: The Landlord does not need to attest the Tenancy Contract with the ADM.

If you are dealing with a Property Management Company “PMC”, the procedure will be as follows:

• The PMC will collect your passport copy and residency details and then submit the information to the ADM with the agreed rent.
• The ADM will then send the PMC a confirmation to proceed with a Tenancy Contract which will be signed by the company and the Tenant in the 3 copies.
• Each party signs the contract and the PMC will send a copy to the ADM for registration purposes.

Note: If a dispute arises between the PMC and the Tenant, no application can be submitted to the Rent Dispute Settlement Committee unless there is a registered tenancy contract by the ADM. Hence, it is in the interest of both parties to ensure that a tenancy contract is signed and registered before the tenant moves to the property.

3. Eviction

On matters on Eviction in Abu Dhabi, as per Article 20 of the Tenancy Law:

• A lease shall be valid until the end of the specified term, which may be renewed for another term or other terms subject to the mutual agreement of both parties.
• In the event the lease term expires and the tenant remains in the property with the landlord’s knowledge and without any objection by the landlord, the lease shall automatically be renewed for a similar term and under the same conditions.

Prior to November 2012 the cases for eviction were subject to the strict conditions that were set out in Article 23 of the Tenancy Law. However, after the implementation of the Abu Dhabi Executive Council Decision No. 32 for 2012, this has changed completely. In the event the Landlord does not wish to renew the lease, or wishes to amend the conditions of the lease, the Landlord only has to notify the Tenant in writing:

• two months prior to the date of the lease’s expiry in the case of residential properties; and
• three months prior to the to the date of the lease’s expiry in the case of properties for commercial, industrial or professional purposes.

This puts the current Tenants in a difficult position as the Landlord now has the upper hand in deciding whether he wants the Tenant to the remain in the property or not.

4. Abu Dhabi Rent Caps

On 13 December 2016, Abu Dhabi Executive Council Resolution No. 14 of 2016 on Lease Agreements of Premises (“Resolution No. 14”) reintroduced as annual 5% rent cap.

A rent cap on leases in Abu Dhabi had first been introduced by Law No. 20 of 2006 on the Leasing of Spaces and Regulation of the Relationship between Landlords and Tenants in the Emirate of Abu Dhabi (“Landlords and Tenant Law”) as amended. The rent cap was later abolished on 9 November 2013 but now as a result of Resolution No. 14, annual 5% cap has been reintroduced with effect from 13 December 2016.

Resolution No. 14 amends Article 16 of the Landlords and Tenant Law and applies to residential, commercial and industrial leases alike.

The Landlord and Tenant Law allows the parties to a lease to agree and fix the rent for the lease term. If the rent is not fixed then the landlord has the right to an annual rent increase. The right is now subject to a maximum annual increase of 5% of the existing rent. The rent cap may be increased, reduced or cancelled from time to time by the Chairman of the Executive Council as he considers appropriate (Article 16.2 of the Landlord and Tenant Law as amended). A tenant may ask the Abu Dhabi Rent Committee to determine the rent where a landlord asks for an increase which exceeds the rent cap (Article 16.5 of the Landlord and Tenant Law as amended).

While the decision to cap rentals was not expected (as the rental market in Abu Dhabi has been witnessing a fall in rents since early 2016), it is welcomed as it provides greater stability and protection for tenants in Abu Dhabi.

5. Rent Disputes

The Rent Dispute Settlement Committee “RDSC”, located in Al Nahyan Complex, is a competent authority to hear all rent disputes in Abu Dhabi. Most of the rent disputes involve evictions and rent increases.

Note: If the Landlord files a rent dispute case because the tenant failed to pay the rent due within the agreed date, the Tenant may settle the rent during the dispute claim and the case will be automatically dropped thereby allowing the Tenant to keep leasing the property.

6. Procedure

There are four stages that a dispute may go through with the RDSC. The disputing parties may choose to settle the case at any stage throughout the dispute:

• Arbitration & Reconciliation Department: This is the first stage where the landlord and tenant convene to resolve rental disputes amicably after one of the party’s files a complaint.
• Court of First Instance: This court will hear the claims brought out between in the Parties in a hearing format. The Parties will bring forward their claims in the form of a memorandum.
• Court of Appeal: available after issuance of the judgment from the Court of First Instance. Only claims worth more than AED 100,000 can be filed here and an application for appeal must be made within 15 days of obtaining the judgment from the Court of First Instance.
• Court of Cassation: this department is for cases that are valued at more than AED 500,000. An application for the Court of Cassation must be filed within 30 days of obtaining a judgment from the Court of Appeal.
• Enforcement Department: to enforce decisions of the First Instance and Appeal Courts. This is the stage where the winning party may be able to pressure the other party to pay the adjudged amounts through various legal means.
   

7. Fees & Documentation

• Abu Dhabi Distribution Company (ADDC) collects municipality fees on behalf of the Department of Municipal Affairs and Transport. The fee is calculated as 3% of your rental contract’s value, with a minimum amount to pay of AED 450. Although the total fee applies from the first day of the rental contract, the annual fees are broken down into monthly instalments to make your payments easier. You’ll receive a municipality fees bill each month, in addition to your water and electricity bills.
• Rental contracts are valid for one year, after which they can be renewed for another year or terminated. Under Abu Dhabi tenancy laws, a tenancy contract does not terminate automatically. Instead, it renews on the same terms until you or the landlord agree to change the terms or end it. If the landlord wants to evict you or increase the rent, he must give you two months’ notice before the end of the contract; likewise, if you want to move out of the property you must give two months’ notice. Have your official lease re-registered online via ADM’s Tawtheeq system (adm.gov.ae) for Dhs.160
• From January 2018, a 5% value-added tax (VAT) on property transactions is expected to impact only big-ticket investors and those dealing with commercial properties in the UAE, while residential deals, including rentals, will remain tax exempt. Residential properties are taxable on first sale, exempt on subsequent sale, while rental is treated as exempt. The UAE's Ministry of Finance has yet to issue specific guidance in relation to VAT on residential and commercial property.
• If you renew your lease through an agency or management company they may charge an administration fee, although not all of them do so. Your lease should stipulate the charge. Agency commissions are usually 2 to 5% of the first annual rent. That’s a standard. In any case, the renewal fee should be agreed by all parties beforehand.
• Copies of cheques, if any, that were submitted to the Landlord. Keep an eye out for the remainder period of the Tenancy Contract should you wish to increase the rent or evict the tenant within the applicable notice period.
• Ensure the property is in suitable condition for handover i.e. provide regular maintenance to the property
• Have a clear and simple Tenancy Contract encompassing all the standard terms and conditions.
• Maintain a positive relationship with your Landlord i.e. pay rent on time, maintain the property by performing small repairs.
• Keep an eye out for the remaining duration of the lease in the event the landlord wishes to increase the rent or send you a notice for eviction.
• Have a clear and simple Tenancy Contract encompassing all the standard terms and conditions.