Terminating a Commercial Lease in the UAE – Things to Consider

With the outbreak of the COVID-19 pandemic, many businesses in the UAE have been forced to adjust to new ways of operating. One of the most significant changes has been the sh­ift to remote work, with many employees opting to work from home rather than in the office. This shift has created challenges for businesses, particularly those that rent office space, as they consider whether to terminate their leases. However, there are various legal and regulatory implications that businesses need to consider before making this decision.

The Tenancy Law

Firstly, it is essential to understand that commercial leases in the UAE are tightly regulated by law. The Tenancy Law, which sets out the rules and regulations for commercial leases, provides protection for both landlords and tenants. As such, businesses that wish to terminate a commercial lease need to follow the procedures set out in the Tenancy Law.

In most cases, this will involve providing the tenant with the required notice period, which is a minimum of 90 days, before terminating the lease agreement. However, this is not always the case and will very much depend on what your lease agreement says.

Financial Implications

Furthermore, businesses need to consider the financial implications of terminating a commercial lease. Depending on the terms of the lease agreement, there may be penalties or charges for terminating the lease early. It is essential to factor in these costs when weighing the costs and benefits of terminating the lease.

Businesses also need to be aware that any defaults on rental payments will be reported to the UAE Credit Bureau. This can negatively impact their credit rating, making it more challenging to obtain credit or financing in the future. Therefore, businesses should carefully consider the impact of terminating a lease on their credit rating before making any decisions.

In some cases, businesses may be eligible for support measures introduced by the UAE government to help businesses during the COVID-19 pandemic. These measures include rent relief and financial support programs, which can help to reduce the financial impact of the pandemic. Businesses should explore these options before making any decisions about terminating a lease.

Conclusion

In conclusion, businesses looking to terminate their commercial leases in the UAE due to the shift to remote work must carefully consider the legal and regulatory implications.

It is crucial to adhere to the procedures outlined in the Tenancy Law, including providing the required notice period and paying any penalties or charges. Additionally, businesses should take into account the financial and credit rating consequences of terminating a lease and explore support measures introduced by the UAE government.

In cases of doubt, seeking advice from a lawyer who can provide expert guidance and ensure all legal and regulatory requirements are met is highly recommended. That’s where our expertise comes into play.

If you’re a business owner struggling with terminating your commercial lease in the UAE, don’t face the legal and financial implications alone. Moorgate Advisory, the leading Middle East lawyers, can help guide you through the process. With a wide range of legal services for businesses, including assistance with Tenancy law and government support measures, you can trust our expert guidance to protect your business interests. Don’t wait until it’s too late; contact us today!