BSA Ahmad Bin Hezeem & Associates

When your rented apartment goes up in smoke

When your rented apartment goes up in smoke

October, 2015
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In the aftermath of last year’s Torch Tower blaze in the Dubai Marina amongst other recent fires in Dubai and other Emirates, a number of questions have been raised regarding the rights of tenants where their apartment has been damaged in a fire. It is particularly difficult for tenants when they have to move out of a leased apartment after a fire whilst the landlord has an advance rent payment and is holding further rent cheques.

From a legal perspective there are various provisions within the laws which refer to loss of enjoyment of a leased property. The difficulty for tenants in these circumstances arises in determining exactly what constitutes a permanent or a partial loss of enjoyment, when a lease is automatically cancelled, or what procedure must be followed to cancel a lease if the process is not automatic, the date until rent will be payable and how a tenant may recover any advance rent paid and the return of post-dated cheques in the hands of the landlord after the lease has been cancelled.

The first question a tenant must ask when faced with damage to their apartment is whether or not the damage to the apartment has reduced their “enjoyment” of it. Naturally, in the event that the apartment is completely gutted by the fire and is uninhabitable, this is easy to prove, as it would be in a situation where the local authorities would issue a ban on the return of tenants to their apartments for safety reasons. In these circumstances the lease agreement may be cancelled relatively simply.

In a scenario were the “loss of enjoyment” of the leased apartment is partial, this creates an element of uncertainty over what type of test should be applied to determine a partial loss. A partial loss of enjoyment could be interpreted as being the loss of the use of a portion of the apartment or the appliances therein, the partial loss of utility services, the loss of parking facilities and even the loss of use of the recreational facilities associated with the apartment building, or even be interpreted as remotely as the loss of satellite television to the apartment. It is important here to consider the specific wording in both the relevant provisions of the Civil Transactions Law No 5 of 1985 (“the Civil Code”) stating that the partial loss of enjoyment must be of such a nature “as to affect the enjoyment intended”. The “enjoyment intended” of a lease agreement is the ability of the tenant to use the leased premises for the purpose set out in the lease agreement task management online. The standard residential lease agreements in Dubai usually state that the apartment will be used by the tenant as a residential apartment, and this wording determines “the enjoyment intended”. It is only when the apartment is no longer in a fit condition to be used for residential purposes that the tenant will be able to cancel the lease agreement.

Where there is a total loss of enjoyment by the tenant of the leased apartment the provisions of the Civil Code clearly state that the tenant shall not be liable to pay rent from the date of the event that caused the loss of enjoyment, such as in the event that an apartment is completely gutted by the fire.

Where there is partial loss of enjoyment by the tenant, the Civil Code differentiates between instances where fire damage has caused the partial loss of enjoyment from situations where the partial loss of enjoyment is imposed upon the tenant by the actions of a competent authority. In the first instance the tenant is obliged to pay the rent up until the date of the cancellation of the lease agreement and applies where a competent authority has not imposed a ban on the occupation of an apartment, but cancellation is effected through the actions of the tenant as set out hereinbelow, while in the second instance the tenant is only obliged to pay rent up until the date when they notify the landlord of the situation subsequent to being advised by a competent authority that there is a ban on their occupation of the apartment.

How can a lease be cancelled?

It should be noted that lease agreements in the UAE are not automatically cancelled in the types of circumstances discussed and may only be cancelled either by both the landlord and tenant agreeing, or by order of the relevant courts.

In all the above scenarios, the first step in the cancellation process of a lease agreement will be to establish whether the tenant’s situation falls within the scope of the above provisions of the Civil Code. Should the tenant’s circumstances qualify for cancellation of the lease agreement, the next step will be to address a letter to the landlord explaining the situation in relative detail and informing the landlord of the grounds upon which cancellation is sought, the date upon which the loss of enjoyment occurred, and requesting the return of all post dated rent cheques, and the refund of prepaid rent from the appropriate date as determined by the Civil Code and any deposit paid.

It is important to obtain and keep proof of receipt of the letter by the landlord (the best way is usually to have the letter delivered by courier). If the landlord agrees to the cancellation of the lease, a confirmation of the cancellation should be obtained in writing and preferably signed by both landlord and tenant. The confirmation should include the terms of the cancellation, clearly indicating the commencement date of the loss of enjoyment, the date of cancellation and an undertaking from the landlord to return any prepaid rent (including therein the calculated apportioned amount, if possible), to repay any deposit paid and also return any post dated cheques still in the landlord’s possession.

What if the landlord refuses?

In the event of a negative response or indeed no response from the landlord to the initial letter seeking cancellation, a tenant may commence the process of having the lease agreement formally cancelled by order of the court. The current practice and procedures followed in pursuing cancellation of a lease agreement on behalf of a tenant are laid down by the Dubai Rental Disputes Settlement Centre (the “Dubai Rental Committee”), who has the authority of the Dubai Courts with regard to all tenancy issues in Dubai.

Approach to the Dubai Rental Committee is available directly to tenants to resolve all tenancy matters and as is the portal to legally obtain the cancellation of a lease agreement, the repayment of prepaid rent, the repayment of any deposit paid and to order the return post dated cheques, amongst others, and even in the event of the landlord agreeing to the cancellation of the lease agreement but failing to make any repayments or the return of the cheques as per the cancellation agreement.

The procedure is to file a complaint with the Dubai Rental Committee seeking the required relief allowed in accordance with the Civil Code as mentioned above. In order to file the complaint there are a number of documents required and formalities to follow. Prior to the lodgment of the complaint, it is advisable to visit a typing centre, where the appropriate documents and complaint can be prepared in Arabic and also have any supporting documents, such as correspondence to the landlord, translated into Arabic as these will be required by the Dubai Rental Committee. One must ensure that all the details of the complaint and all demands and required relief are fully and correctly set out in the complaint, including the request that the landlord pay the costs incurred by the tenant and any costs of the proceedings. It must be noted that should the loss of enjoyment have been remedied by the landlord by the date of the complaint being lodged, the tenant will not be able to cancel the lease agreement but will merely have a claim for compensation for the period of the loss of enjoyment, such as a reduction of rental. The prepared complaint may then be filed with the Dubai Rental Committee, and upon proof of payment of their fees of 3.5% of the value of the yearly rent amount as reflected on the lease agreement (limited to a maximum of AED 20,000), a date upon which the complaint will be heard will be given to the tenant. The date of the initial hearing should be within 30 days of lodgment of the complaint. At the initial hearing the Committee judges will firstly try obtain an amicable resolution between the tenant and the landlord, however in the event of no mutual agreement, the judges will summarily adjudicate upon the complaint. There are specific and detailed formalities in the event that the Landlord does not attend the hearing; rather than going into detail here, it is sufficient to say that the same decision by the Dubai Rental Committee is obtainable.

The order of the Dubai Rental Committee will clearly state their decision and stipulate the terms of the cancellation including any repayments ordered, the return of cheques and an order regarding any costs awarded. The judgment of the Dubai Rental Committee is subject to an appeal procedure within 15 days, however after such date the decision is final and the appropriate order by the Dubai Rental Committee is executable.

Can a tenant stop payment of uncashed rent cheques?

The filing of a complaint before the Dubai Rental Committee does not authorise the tenant to instruct their bank to stop payment on the post dated cheques issued to the landlord. In the event that a post dated cheque is due to be presented for payment before the date of the Dubai Rental Committee hearing, the tenant can consider approaching the department of the Dubai Rental Committee that deals with urgent matters and obtain from them a letter instructing the landlord not to present the post dated cheque till the hearing is finalised.

This letter would then have to be served on the landlord and from the date of service would act as an interim measure cautioning the landlord not to present the cheque for payment on the due date. This would still not authorise the tenant to instruct the bank to stop payment of the cheque and the tenant should ensure that there are sufficient funds in the account in the event that the landlord does present the cheque for payment, so not as to get caught up in unnecessary criminal prosecution due to the cheque being returned unpaid to the landlord.

Conclusion

As can be gleaned from the above, a rather untenable situation may arise where a tenant finds himself in the situation that he has to endure additional expenses in procuring the lease of a new apartment whilst still having financial obligations under an existing lease agreement pending cancellation, on penalty of a possible criminal prosecution. The situation and procedures in this situation should be well managed by the tenant and it is advisable to consult a legal representative to assist in situations where there is a possibility of a dispute with the landlord, in the event of the landlord being absent and where there is a possibility of criminal prosecution.

 

Published: October 2015
Title: When your rented apartment goes up in smoke
Practice: Real Estate 
Author(s): John Peacock

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