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Covid-19: Can the penalty for early termination of tenancy contract be waived?

Dubai - You may negotiate with your landlord if your salary has been reduced because of the pandemic.

Question: What are my legal options if my landlord forces me to pay a penalty of three months' rent while cancelling the contract. My husband and I have been getting reduced salaries since July.

Pursuant to your queries, we assume that you are residing in a rented apartment in Dubai and your tenancy contract mentions that you need to pay three months’ rent in the event of early termination.

Therefore, the provisions of Law No. (26) of 2007 Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai (the Dubai Tenancy Law) and Law No. (33) of 2008 Amending Law No. (26) of 2007 Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai (the Amended Dubai Tenancy Law) are applicable. Further, due to the current pandemic, the provisions of the Federal Law No. (5) of 1985 on the Civil Transactions Law of the United Arab Emirates (the Civil Transactions Law) may apply, too.

A landlord or a tenant may not unilaterally terminate the tenancy contract. It may be terminated mutually during the term of the tenancy contract. This is in accordance with Article 7 of the Dubai Tenancy Law, which states: “Where a lease contract is valid, it may not be unilaterally terminated during its term by the landlord or the tenant. It can only be terminated by mutual consent or in accordance with the provisions of this law.”

The terms and conditions mentioned in the tenancy contract are applicable to both the landlord and the tenant. This is in accordance with Article 4 (1) of the Amended Dubai Tenancy Law, which states: “The contractual relationship between a landlord and tenant will be regulated by a tenancy contract detailing, in a manner allowing no room for uncertainty, a description of the leased real property, the purpose of the tenancy, the term of the tenancy contract, the rent and payment method, and the name of the owner of the real property, if the landlord is not the owner.”

Further, Article 19 of the Dubai Tenancy Law mentions that the tenant must pay the rent on due dates. In the event of non-payment of rent by the tenant, the landlord may seek the tenant’s eviction in accordance with Article 25 (1) (a) of the Amended Dubai Tenancy law.

Based on the aforementioned provisions of law, as a tenant, you should fulfil the obligations mentioned in your tenancy contract and you may have to pay the three months’ rent as penalty for early termination. However, due to the current Covid-19 pandemic, local authorities have urged both landlords and tenants to come to a consensus related to changes in the terms of the existing tenancy contract.

Both the landlord and the tenant may mutually agree to a reduction in rent; early termination of the tenancy contract; rent-free period options; or any other concessions on the grounds of the pandemic.

The Dubai Tenancy Law and the Amended Dubai Tenancy Law are silent in relation to the termination of the tenancy contract due to force majeure. In simple words, force majeure means ‘unforeseeable circumstances that prevent someone from fulfilling a contract’.

The pandemic may be considered as an unforeseeable circumstance and, therefore, based on this, you may be able to terminate the tenancy contract with your landlord unilaterally. This is in accordance with Article 273 (1) of the Civil Transactions Law which states: “In contracts binding on both parties, if force majeure supervenes which makes the performance of the contract impossible, the corresponding obligation shall cease, and the contract shall be automatically cancelled.”

You may personally approach and negotiate with your landlord and explain to him that it is not possible for you to pay the penalty due to your current financial situation. Provide him with the copy of your salary reduction letter issued by your employer or the amended employment contract to substantiate your claim of early termination.

If the landlord does not agree with your request, you may then approach the Rental Dispute Centre (RDC) in the emirate of Dubai and file a complaint against your landlord for not agreeing on the early termination of your tenancy contract without payment of any penalty.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.