Understanding DIFC Leasing Laws: A Comprehensive Overview

The DIFC Leasing Law in Dubai, enacted by Law No. 1 of 2020, is also known as the Leasing Law 2020. The law directly applies to leases that fall within the jurisdiction of the DIFC. 

The DIFC law was introduced to help define the lesser and lessee’s rights and its general clauses. Here are all the details that should be known about the law that can help tenants choose their landlord carefully. 

• Complete Detail About the DIFC Leasing Laws 
• FAQs

Complete Detail About the DIFC Leasing Laws 

The purpose of the DIFC Leasing Laws is to regulate the relationship between lessors and lessee, with 4 main pointers: 

• Define the rights and DIFC obligations of both parties in leased premises. 
• To provide laws for the resolution of disputes. 
• To provide a centralised system for the administration of security deposits. 
• To define the power that the Registrar holds (for leases). 

General Requirements of Leases 

Part 2 of the law discusses the general requirements of leases in its respective parts which are discussed ahead. 

Leases Must Be in Writing 

A lease needs to be in writing and set based on the: 

• Term of the lease 
• Rent that is payable by the tenant. 
• Dates of rent payment 
• The use of leased premises 
• Identity of both parties. 

Use of Leased Premises 

3 main pointers are discussed here, as follows: 

• A lessee cannot use leased premises for illegal purposes under applicable laws. 
• A tenant can only use the leased premises for the permitted use set by the lessor. 
• If other use is required, written approval must be granted by the DIFCA first. 

Requirements for Lessee 

The requirements for the lessee/tenant are listed below: 

• The tenant cannot cause any nuisance or interference. 
• Lessee can have quiet enjoyment. 
• The lessee needs to pay rent on the dates specified in the lease. 
• The tenant is liable to pay all fees in the lease, except for the lease registration fees. 

Requirements for Lessor

The requirements for the lessor stated in part 2 of the DIFC Leasing Law 2020 are as follows: 

• The lessor needs to take steps to ensure that the tenant has quiet enjoyment. 
• The lessor cannot disconnect utility services assigned to the leased premises. 

Specific Provisions for Residential Leases 

Part 3 discusses the specific provisions for residential leases including security deposits, returns, utility charges, repair notices and entry of residential premises. 

Security Deposits 

The details for security deposit clauses are listed below: 

• Payment of a security deposit is not needed unless agreed between both parties. 
• The lessor who gets the deposit holds it under trust. 
• The deposit cannot succeed in an amount of more than 10% of the annual rent in Dubai. 
• The lessor can hold onto the deposit under certain circumstances. 
• A security deposit can only be given to the lessor in case of rent not paid, damage to residential premises or breaching a contract. 

Obligations For Termination of Residential Leases

Article 26 discusses the obligations in case of termination of residential leases as follows: 

• If residential leases expire, both parties need to sign a release form. 
• If either party fails to agree, the dispute is resolved by the court. 

Refunds of Security Deposits 

As for the refunds of security deposits, the clauses are under Article 27 below: 

• The Registrar will not pay out the deposit except for an application for a refund made by other parties or the court. 
• A tenant who is entitled to a reduction of the deposit can request a repayment of the decreased portion. 
• Any deposit that is unclaimed for longer than 6 years in the Escrow account is seized by the DIFCA under article 27 clause 3. 

Application to Court by Lessee 

Article 28 discussed clauses regarding the application to the court by the lessee: 

• A lessee can apply to the court for a refund of the deposit if the lessor’s agreement is unobtainable. 
• The court cannot proceed with an order unless the tenant leaves the residential premises. 

Application To Court By Lessor 

Article 29 discusses clauses regarding application to court by lessor: 

• The lessor can apply to the court if they are unable to get the lessee’s agreement to get a deposit back. 
• If rent is unpaid and the application was made within 20 days of abandoning the premises. 

Cleanliness of Residential Premises 

Article 34 discusses the clauses regarding the cleanliness of residential premises under the DIFC Leasing Laws: 

• The Lessee needs to ensure that the residential premises are not damaged. 
• If damage is caused to the premises, it must be reported to the landlord. 
• A lessee does not need to pay for damages if it falls under Fair Wear and Tear. 

Lessee Installing Fixtures 

Article 36 discusses two clauses for the lessee installing fixtures: 

• The lessee cannot install any fixtures without the lessor’s permission. 
• Fixtures cannot be installed unless agreed beforehand. 

Urgent Repair Clauses 

Article 39 goes into detail clauses regarding urgent repairs: 

• Lessee can arrange for urgent repairs if all steps have been taken for the lessor to carry them out. 
• If the lessee does any repairs, the lessor needs to be given written notice. 

Entry Into Residential Premises 

The lessor can enter the residential premises given that it has been discussed before with the lessee. The right of entry to the lessor is granted based on these conditions:

• To show the premises to a candidate. 
• The premises need to be sold. 
• Entry is required to allow the lessor to fulfil an obligation. 
• The lessor believes that the lessee has failed to comply with their obligations. 
• For inspection of the building. 

Specific Provisions For Retail Leases 

Part 4 goes into detail about specific provisions for retail leases, and Article 49 discusses key money and the prohibition of goodwill payments: 

• The lessor should not accept the payment of key money to carry out a business on the retail premises. 

Termination of Leases 

Part 5 details the termination of leases under the DIFC leasing law and its application. 

Termination Without Court Order 

Article 53 tells the clauses that termination is carried out without a court order. A lease can be terminated for these reasons: 

• The property rights of the lessor and lessee have been appointed to one person. 
• A party has used his rights to terminate the lease. 
• The lessee has passed away (for residential leases).
• The lessee abandons the leased premises for one month. 
• The leased premises get destroyed. 

Termination With a Court Order 

A court order is required for termination of the lease for these reasons: 

• The lessee does not pay rent on the decided date. 
• The lessee does not agree to the obligations listed under the residential lease. 
• The lessee abandoned the premises for 3 months or more. 
• The premises are used for illegal reasons by the tenant. 
• If the lessee is declared insolvent. 

Miscellaneous Clauses 

Part 6 summarises miscellaneous clauses under the DIFC leasing law exercised in Dubai. A notice can be served by delivering it to the person’s address or the registered office for a corporation. 

Registrar’s Directives 

Article 65 discusses clauses for the registrar complying with this leasing law as listed below: 

• The registrar can issue directives relating to this law. 
• The registrar needs to have regard for the law’s purpose, or the Real Property Right shall not be affected negatively. 
• The registrar can provide several copies, forms, consents, certificates, execution of documents (digital and physical), and time and method of prescribed fees.

FAQs

That concludes all there is to know about the DIFC Leasing Laws in Dubai. Knowing the tenant laws and landlord rights can help form a healthy bond between the two parties. It also helps foster a healthy environment for the ones complying. 

Keep reading Property Finder blogs to learn more about Dubai laws!

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