UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper LLP
6.8 Costs Payable by a Tenant at the Start of a Lease A tenant’s liability for upfront costs should be set out in the lease agreement. The parties to a lease com - monly agree that the tenant will be responsible for paying the registration fees associated with registra - tion of the lease at the relevant registration depart - ment. Tenants are also generally responsible for the cost of opening an account for utilities and telecom - munications, and for paying for meters and connec - tions in new properties. A tenant may also be liable for the fees of any agent (such as real estate brokers) involved in the transaction. 6.9 Payment of Maintenance and Repair A commercial lease agreement may impose an obli - gation on the tenant to pay a service charge towards maintenance, repair and operation of the common property. As a default position under the Civil Code, the land - lord is responsible for keeping the property fit for its intended use and carrying out necessary repairs unless the lease validly reallocates those obligations, as is common in commercial leases, subject to man - datory law. 6.10 Payment of Utilities and Telecommunications Premises will usually be individually metered. In such cases, the tenant will usually purchase services such as electricity or water directly from suppliers. Where premises are not individually metered, leases may be inclusive of utilities and telecommunications, and the landlord may recover such costs through the service charge or a separate utility charge. 6.11 Payment of Property Taxes There is no ‘real estate tax’ as such in the UAE; how - ever, a municipality fee is payable by tenants. VAT is applicable to leases concerning commercial real estate at the standard rate of 5%, irrespective of whether the parties are UAE residents. Landlords must make it clear whether the rent is inclusive or exclusive of VAT, and it is the responsibility of the land - lord to pay any VAT to the Federal Tax Authority.
6.12 Insurance Issues A landlord will typically pay for building insurance in a multi-let property, and a tenant will insure its own contents and business risks. Where a service charge applies, the cost of the building insurance is typically recovered from tenants through the service charge. Under the Civil Code, total destruction of the leased property results in automatic rescission of the lease, while partial destruction or loss of suitability entitles the tenant, if the landlord fails to remedy within a rea- sonable time, to seek a rent reduction or rescission through the court. 6.13 Restrictions on the Use of Real Estate Leases normally specify the permitted use. If the lease is silent on this matter, the use should be consist - ent with zoning authorised for such property and the licensed activities of the tenant company. 6.14 Tenant’s Ability to Alter and Improve Real Estate Abu Dhabi and Dubai laws both require the tenant to obtain the consent of the landlord to all proposed works. The terms of a lease may also set out: • what kinds of alteration or improvement works the tenant is permitted to carry out; • when the landlord’s consent should be sought for such works; and • whether any types of works (eg, structural) are absolutely prohibited. Certain works require the consent of government authorities. In order to obtain such consent, these government authorities will require evidence of the landlord’s consent to such works. 6.15 Specific Regulations There is a maximum number of tenants who are permitted to occupy a single dwelling, which varies depending on the type and number of rooms in the dwelling. Two months’ notice for renewal or termina - tion is required for residential leases. Abu Dhabi Residential
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