Ask the Law - Residential : January 2011

Every month, Property Magazine invite readers to have their legal questions answered by one of our experts.

This month, Jerry Parks tackles the task.

Q We are renting a villa, and have renewed the annual contract, which is due to expire in June 2011. However, we now wish to vacate the villa at the end of January and we informed the landlord of the same. The landlord recently informed us that we have to pay two months’ rent as a penalty for breaking the contract. Is it legal? We informed him three months in advance. Do we still need to pay the penalty?

A Presuming your villa is in Dubai, the relationship with your landlord will be regulated by Law No. 26 of 2007 (as amended by Law No. 33 of 2008) as well as by the terms of your lease. The law provides that where a tenant doesn’t want to renew the lease, he’s obliged to give the landlord at least 90 days’ notice prior to the expiry of the lease.

The law does not deal with the possibility of the tenant wanting to terminate prior to the end of the term, and so in those circumstances, you need to check if the lease itself addresses the issue. If there is a provision providing for a penalty payment on early termination, that implies a right for the tenant to terminate prior to the end of the term, albeit with the penalty being applied in order to compensate the landlord for loss of rental income and costs involved in securing a new tenant. Without an express clause in the lease providing for early termination, you would not be entitled to terminate before the end of the term, and your liability would stretch to the end of the agreed period.

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Lawyers Jerry Parks

This article was first published in Property Magazine and is reproduced with the kind permission of the editors.