New Mortgage Law, Early Termination of Lease, Employee Early Resignation, & more.

Host
There’s just so much more to hear. Our podcast is available at DubaiI1038.com. Ludmilla Yamalova joins us in the studio for Drive Live, Talks Legal. And it’s very nice to see you. Welcome back.

Ludmilla
Good to be here as always.

Host
So, questions for Ludmilla of a legal nature—it can be about real estate, employment, legal status, marriage, or whatever it is. Get in touch.

Host 2
I don’t know. I didn’t know where you were going there.

Host
I wasn’t sure either, but we got there in the end… kind of.

Host 2
Did we?

Host
Not really. It was like nails on the cliff edge or something. That’s where I was hanging on. But, if you want to talk to Ludmilla, text us at 4001, use the free app for no cost, or call 423-1010. Pete’s already texted in.

Host 2
Pete has. We’ve also got a couple of questions from last week to address. But first, I wanted to start with something new, Ludmilla. We’re hearing about a potential new mortgage regulation law for Dubai. Details are sparse, but let’s discuss what we do know.

Ludmilla
Yes, indeed. This new mortgage law, once issued, would apply specifically to Dubai. It’s important to note that it’s still in the discussion phase. Dubai currently has a mortgage law that dates back to around 2008. Regulators now feel it needs updating.

The proposed law aims to provide alternative forms of financing or funding. Right now, the Dubai mortgage market is almost exclusively reliant on banks. Banks are the only entities able to provide mortgages and register their rights to a property through the Land Department.

In other jurisdictions, you have alternative financing options like real estate funds or private equity funds. These entities can collaborate with developers, offering more flexibility. Developers won’t need to rely solely on off-plan sales, which can be volatile.

Host
So, this is aimed at revitalizing the sector. Dubai’s market is dynamic, and a lot has changed since 2008. Does the draft law address mechanisms like “lease to own”?

Ludmilla
Yes, “lease to own” has been discussed. It exists in other jurisdictions and can help first-time buyers or those unable to afford a down payment immediately. Under this scheme, a tenant pays rent at slightly higher rates, with those payments contributing toward a future down payment or purchase.

The issue is that, currently, contracts like these can’t be officially registered with the Land Department. The property remains in the landlord’s name until the purchase is completed. If the new law allows for such registrations, it would provide security for both landlords and tenants.

Host 2
It sounds like there’s potential for real transformation. What about foreclosure laws? Are there any updates?

Ludmilla
Currently, there’s no voluntary foreclosure option in Dubai. In other jurisdictions, if a homeowner can’t continue payments, they can surrender the property and walk away, forfeiting their down payment and any equity.

Here, foreclosure must go through the courts. Banks can’t simply take ownership of the property or sell it independently. This makes the process lengthy and resource-intensive. It’s an area that could benefit greatly from reform.

Host
Exciting developments ahead, it seems. Now, let’s jump into some listener questions.

Host
Alright, let’s get to the listener questions. If you have a legal query for Ludmilla, whether it’s about real estate, employment, or personal legal matters, text us at 4001 or call us at 423-1010. Ludmilla, here’s the first question.

Host 2
Pete has texted in with a query about residential leasing. He asks, “Is it safer to take a company check or a personal check from a tenant when renting out a property?”

Ludmilla
That’s a great question. It depends on who the tenant is. If the tenant is a company, the checks should come from the company. If it’s an individual renting the property, the checks should ideally come from the individual. It’s important that the entity signing the lease agreement aligns with the one issuing the checks.

The main concern Pete may be hinting at is the enforceability of bounced checks. Historically, bounced checks carried criminal consequences in Dubai, and it was easier to hold individuals accountable. However, with recent updates—such as the Attorney General’s decree in Dubai—bounced checks below AED 200,000 no longer lead to imprisonment, only financial penalties. So, whether the checks come from a company or an individual, the same enforcement process would apply for smaller amounts.

Host
Thanks, Ludmilla. A listener named Sue texted in with a question about bank loans for a deceased person. She asks, “What happens to the bank loans of someone who passes away in the UAE? Do the spouse or family inherit the loan? The deceased is Muslim.”

Ludmilla
In the UAE, personal loans do not transfer to the family members or heirs. Instead, the liability is tied to the estate of the deceased. If the person has assets, creditors like banks can claim their dues from the estate before the remaining assets are distributed to the heirs under Sharia law.

However, if the estate doesn’t have sufficient funds to cover the debts, the liability does not pass on to the family. It essentially lapses. That said, creditors must formally register their claims with the Sharia court handling the estate. They won’t be automatically notified.

Host 2
Good to know. Let’s move to Ahmed, who’s on the line. Ahmed, thanks for waiting. What’s your question for Ludmilla?

Ahmed
Hi, good afternoon. I’ve signed a lease for an apartment I planned to move into next month. But now it looks like I may need to relocate out of Dubai for work shortly after moving in. If I terminate the lease early, would I have to pay a penalty?

Ludmilla
Thanks for the question, Ahmed. In short, the penalty for early termination depends on the terms of your lease agreement. The UAE rental laws do not prescribe a fixed penalty for ending a lease early. Instead, the contract governs this situation.

Check your lease agreement to see if it includes a penalty clause for early termination. If it does, the specified penalty amount will apply. However, if the penalty seems excessive or unfair, you could challenge it through the Rental Dispute Center (RDC).

From a practical perspective, consider negotiating with your landlord. If you haven’t moved in yet, and they can find a new tenant quickly, they may agree to a reduced penalty or no penalty at all.

Ahmed
Got it. That makes sense. I’ll take another look at my lease and try to negotiate with the landlord. Thanks, Ludmilla.

Host
Great question, Ahmed. Let’s move on to Sophia, who’s also on the line. Sophia, good afternoon. What’s your query?

Sophia
Hi, thank you. My landlord has left the country, and I’m unsure how to handle the situation. I’m planning to move out soon. How can I ensure everything is in order, and what about recovering my security deposit?

Ludmilla
That’s a tricky situation, Sophia, but here’s what you can do. First, ensure you document everything related to your move-out process. Take photos of the property showing its condition, settle any outstanding utility bills, and disconnect services like DEWA or district cooling.

If you can’t reach your landlord, you can return the keys to the Land Department and notify them of your move-out. This creates a formal record that you’ve vacated the property.

Regarding the security deposit, unfortunately, if the landlord is unreachable, it may be difficult to recover the funds. You could file a case at the Rental Dispute Center, but keep in mind that pursuing legal action may not be cost-effective if the deposit amount is small.

Sophia
I see. That’s helpful, though a bit disappointing about the deposit. Thank you for the advice.

Host
Thanks for calling, Sophia. Now, we have a text from Christie, who asks, “Can an employer keep 45 days’ salary if I resign before the end of a fixed-term contract?”

Ludmilla
Good question, Christie. According to UAE labor law, employers can claim up to 45 days of salary as compensation if an employee resigns before the end of a fixed-term contract. However, employers cannot automatically withhold this amount. They would need to file a claim with the Ministry of Human Resources and Emiratisation (MOHRE) or the labor court to recover it.

If your employer is withholding your salary without a court order, you can file a complaint with MOHRE.

Host
That’s all we have time for today! Ludmilla, as always, it’s been a pleasure.

Ludmilla
Thank you. Always happy to help.

Host
If you have more legal questions, you can reach out to Ludmilla Yamalova at Yamalova & Plewka in JLT. Stay tuned for more on Drive Live.