Spread of the corona virus disease (Covid-19) pandemic has led to a number of economic obstacles. Especially so for the commercial properties, which is primary space for shops, restaurants and cafes that may be closed entirely or partially due to the governmental efforts to confront the epidemic. It is well known that the lease contract core is the exploitation of the benefit of the leased premise in return of the monetary payment of the lease or rent by tenant, and if the use of the leased premise has been partially or completely compromised then disputes arise between the parties to rent contract.
The UAE legislation gave it specific importance and specified special procedures to settle disputes arising from such contracts in order to shorten the dispute term as well as guarantee specialization for the judges who review such rental disputes only.
To settle these disputes, the UAE legislator has established the Dubai Rental Dispute Settlement Center (the “RDC”) issued by Decree No. (26) of 2013 as a judicial arm of Dubai Land Department to adjudicate disputes related to real estate leasing in the Emirate and inside of the Free Zones, therefore the rental disputes are in fact excluded from the competency of the Courts. The online System of RDC is an online rental disputes litigation system which provides a fully automated litigation management cycle starting from online registration, auditing, payment and documents archiving. The RDC achieved an average litigation time span to be less than 30 days.
COVID-19 impact on businesses, rental relationships and force majeure
Corona virus (COVID-19) global outbreak pandemic has substantially affected businesses of all levels in the UAE, including the aspect of renting commercial space for the entrepreneurial purposes for businesses.
The country has enacted a number of measures and governmental support to overcome the hardship of the economic situation. The Dubai Government has temporarily suspended eviction judgments related to residential and commercial facilities in the emirate in March and April, and suspended imprisonment judgement on all rental-related cases.
Contractually, rental relationships between parties of leased properties may and may not fall under the force majeure clauses within rental agreements, and enactment of force majeure clauses via courts is to be seen in practice in the near future. Force majeure under the law may require actual impossibility and not merely extreme difficulty. In addition, the seeking party to invoke the force majeure clause is required to demonstrate a causal link between the force majeure event and its failure to perform under the contract. Corona virus (COVID-19) pandemic can be considered as force majeure because it is a public incident and cannot be controlled or prevented by a company or individual. According to the definition of force majeure in law, it is possible legally for certain individuals and commercial entities that have been directly and causally affected by pandemic to use the availability of a force majeure as a justification and a grounds to the revocations of the contracts on their own. One must address whether the corona virus pandemic counts as a force majeure event under its own contract and closely examine the wordings of the force majeure provisions in such agreement.
See our recent article on this subject in the article “Can Pandemic Events be Considered as Force Majeure?” within our COVID-19 NAVIGATOR section.
What are the common methods of settling rental disputes?
Rental disputes shall be settled through RDC in two major ways: Amicable Settlement via Conciliation Department and Judicial Settlement. Arbitration settlements are subject to specific provisions of lease agreements where arbitration clause is present, and this discussion is out of the scope of this article.
- Amicable settlement
The amicable settlement of the rental disputes is carried out by the Conciliation Department, a part of the RDC, whereby rental disputes are settled amicably between parties. Settlement agreements concluded at the Conciliation Department have legally binding force, so each party has a right to implement provisions of such settlement agreements by official way of execution, if necessary.Therefore both landlord and tenant of a property, whatever the purpose of the lease is, may submit a case complaint before the RDC to settle the dispute amicably. The resulting official record can be judicially enforced. If the instances of a failed settlement the parties can fill a lawsuit before the Trial Chamber in the same center for adjudication.
- Judicial settlement
A judicial settlement of a rental dispute is carried out at the RDC, on two levels - the Trial Chamber and the Appeals Chamber.Is it permissible to resort to the main courts to settle a rental dispute?No, it is not permissible to resort to the main courts to settle disputes related to lease contracts, since RDC replaced the main courts as a jurisdiction to settle any rental dispute.
How a party may enforce the verdict issued by RDC?
The verdicts issued by RDC shall be enforced by the same Center's enforcement department, which is exclusively competent to implement the verdicts issued by the Center.
Is there a similar system in the remaining Emirates to settle the rental disputes?
Yes, in the remaining Emirates of the UAE there are judicial committees to process rental disputes similar to the Dubai’s RDC, however the committees mostly do not adopt separate amicable settlement or mediation procedures. They attempt to settle the dispute amicably at the first hearings: if conciliation is agreed then it shall be recorded in the hearing minutes and such minutes shall have the power to be enforced. If the reconciliation is not agreed, it can continue hearing the parties.
In Abu Dhabi, Sharjah, Fujairah, Umm Al Quwain and Ajman, various laws of each Emirate established committees to perform the regulation of the relationship between landlords and tenants of real estate and thus to settle rental disputes in each Emirate. The legislation provides that there are trial committees and appellate committees, and the verdicts issued by the appellate committees are final and cannot be appealed for any reasons.
In Ras Al-Khaimah specifically, there is a department at the Court of First Instance called the “Chamber of Tenancy Disputes” established to settle all rental disputes in the Emirate, and its verdicts may be appealed before the Court of Appeal.
Conclusion
Businesses globally were hit hard by widespread Corona virus with some struggling with the rentals of their commercial spaces. Despite major support from the UAE government, many would be forced to consider options of termination of the lease agreements. There are a number of venues and ways which can be utilised for this purposes, however pandemic itself is not a straightforward reason for the grounds of agreements termination. One must consider the exact wording of the contract in hand, as well as the associated requirement to prove “impossibility” to perform under pandemic situations in front of the courts.
Stay tuned to our COVID-19 NAVIGATOR section for further Insights on this subject.
