Is it legal for landlords to charge such penalty and under which rule?

Question:

Dear adviser, I am a tenant in a building in Dubai since last 5 years, each year renewing the contract. During current renewal from 1st January 2015, I am interested to renew the contract for 6 months only instead of full year (until June), & informed the landlord 6 months in advance that this is my last renewal.  The landlord informed by phone that if I am not renewing for full one year, I should pay 15% penalty.  My question: is it legal for landlords to charge such penalty and under which rule?

Answer:

Thank you for your email.

Unless you are renting on a short term basis all other leases are for a minimum of 1 year. As you wish to terminate your lease early there is normally a penalty equivalent to 2months rent for breaching the lease. This is on the assumption that the remainder of the rent is being refunded. This penalty should form part of your agreement at the beginning of the tenancy. If no such clause exists then it is down to pure negotiation on your part as to what is deemed fair for compensation for you to breach your contract.

I hope this has helped.

The above answer has been brought to you by Mario Volpi who is the Managing Director of Ocean View Real Estate in Dubai. Mario has 30 years of property industry experience in Dubai and London.

The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice.

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One thought on “Is it legal for landlords to charge such penalty and under which rule?

  1. Hello,
    Need advise.
    We requested the landlord through our broker if we could break lease early as we are relocating. Landlord agreed on the following conditions:
    1. Find them a tenant so they don’t loose the rent for a single day
    2. Take care of all maintenance charges for the new tenant to move in
    The above two conditions were met based on the understanding and confirmation from landlord’s office that they would waive our 2 months penalty and only charge AED 1000.00 for breaking the lease. After waiting for 90 days for getting our refund check, the landlord deducted the 2 months penalty. Upon checking with the landlord, they said it is company policy and the breakdown they gave us was a mistake.
    Had I known, I would not have moved out of the property. They got all that they wanted and did not bear any loss and I got 2 months penalty… not fair.
    There is no such clause in the tenancy contract for the 2 month penalty. All it says is that they are not obliged to refund anything.
    Should I take this to RERA and file a case against them?
    Appreciate your advise.

    Thanks

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