Host
Drive Live at 5:11 – It’s Understanding Property. If you have a question about property, get in touch as early as possible. Maybe it’s about a contract you’re about to sign, renewing your rent for another year, or renegotiating with your landlord within the 90-day notice period. Whatever’s on your mind, reach out to us at 4001, via the free app, or by calling 423 1010.
For broader legal questions, such as HR or employment-related issues, we usually tackle those tomorrow during our Career Connect segment from 5 to 6 PM. For this hour, the focus is legal and property-related. Ludmila Yamalova joins us for the next 45 to 50 minutes on Understanding Property.
Ludmila Yamalova
It’s great to be here as always!
Host
So, let’s dive right into our new weekly segment: Ludmila’s VAT Update. Every week, there’s either something new about the impending VAT introduction or clarifications on existing points. What’s the latest this week?
Ludmila Yamalova
To be precise, I haven’t learned anything entirely new since last week, but there have been some interesting stories that take the VAT discussion further. One article from Zawya stood out to me, which highlights how VAT might apply to commercial leases.
As per statements from officials at the Ministry of Finance, commercial leases (not residential ones) will be subject to VAT once the law is implemented. This means every commercial lease will cost 5% more. The question is: Who pays the extra 5%?
For example, if someone has a five-year commercial lease and January 1, 2024, marks the beginning of the second year, does the landlord have the right to pass on this extra cost to the tenant, or will they have to bear the burden themselves? Until the law is formalized, we don’t have a definitive answer, but it’s already creating challenges.
Landlords are now renegotiating leases to include VAT clauses. But here’s the key: a contract can only be amended if both parties agree. So if a landlord asks the tenant to bear the VAT cost and the tenant refuses, the landlord might have to absorb it.
Host
That seems like a potential area for disputes, especially since landlords will effectively become tax collectors.
Ludmila Yamalova
Exactly. Even if a tenant doesn’t pay the VAT stipulated in their lease, the landlord still has a legal obligation to pay it to the government. They could end up paying it out of pocket and then suing the tenant to recover the cost. To protect themselves, landlords should consider collecting the VAT upfront.
Host
That’s insightful. Another VAT question came in earlier: Will VAT apply to the housing fees included in DEWA bills?
Ludmila Yamalova
Good question. Housing fees, typically tied to residential properties, are not subject to VAT under the current guidelines. So, for now, no, VAT won’t apply to housing fees.
Host
And one last VAT-related query: Does VAT apply to everyone, including UAE nationals and expats?
Ludmila Yamalova
Yes, VAT applies across the board to businesses established here. Ultimately, it’s the businesses that collect VAT from their customers, whether nationals or expats.
Host
That wraps up this week’s Ludmila’s VAT Update. Understanding Property continues with more property-related legal advice. Ludmila, you’re here for the full hour, so let’s jump into our next listener question.
Host
A listener asks: Will VAT be applicable in the DIFC or other free zones with different legal systems?
Ludmila Yamalova
Great question! We don’t have a clear answer yet. While DIFC operates under a common law system, other free zones are governed by civil law. For now, it’s uncertain whether VAT will apply to these jurisdictions.
Host
Another listener, Ali, asks: Isn’t VAT offset between collections and payments, so companies only pay the margin to the government?
Ludmila Yamalova
Correct! Businesses pay VAT on their purchases (input VAT) and collect VAT from their customers (output VAT). They then subtract the input VAT from the output VAT and pay the difference to the government.
Host
Fascinating insights, Ludmila. Stay with us – we’ll be back after the break to tackle more property-related legal questions on Understanding Property.
This is Drive Live on Dubai Eye 103.8. Stay tuned!
Host
Welcome back to Understanding Property on Drive Live. Ludmila Yamalova is here with us, answering your property-related legal questions. Let’s dive right back in.
We had a question from Giles earlier: Will VAT be applicable in the DIFC since it has a different jurisdiction and legal framework?
Ludmila Yamalova
This is a common question, especially for free zones like DIFC. While DIFC operates under its own legal framework, we don’t yet have clarity on how VAT will be applied there or in other free zones. These details will become clearer once the VAT law is finalized.
Host
Ali has also texted in, asking: If I own a hotel apartment, which is considered commercial property, will my rental income be subject to VAT?
Ludmila Yamalova
Yes, rental income from hotel apartments is subject to VAT since these properties are classified as commercial. The landlord would collect VAT from tenants and remit it to the government.
Host
That seems to be a recurring theme. Speaking of landlords, we have an interesting query here: My landlord has been uncontactable for two years. I’ve been depositing rent with RERA. They’re now asking me to send the landlord an email and provide a read receipt. Am I legally required to do this?
Ludmila Yamalova
Legally, you’re not required to send an email or provide a read receipt unless there’s a court case compelling you to do so. However, RERA may be requesting this as a practical measure to update their records. While it’s not legally binding, it’s a relatively simple step that might help resolve the situation.
Host
It’s incredible that landlords can go missing for years! What’s your advice in such cases?
Ludmila Yamalova
Tenants should continue paying rent – either to RERA or another designated entity – to show they’ve fulfilled their contractual obligations. This way, if the landlord resurfaces, the tenant has a clear record of compliance.
Host
That’s solid advice. Let’s move on to another question. Walid says: I live in a building owned by a bank, but it was sold to a new real estate company. The new management refuses to provide maintenance unless I pay upfront. They’ve also told me they don’t have my security deposit. How can I get my money back?
Ludmila Yamalova
This is a tricky situation, but here’s the key: when a building is sold, the new owner inherits all liabilities tied to it, including security deposits. The new landlord cannot legally claim they don’t have your deposit – they must honor the terms of your original tenancy agreement.
As for maintenance, check your contract. If the landlord is responsible for maintenance and refuses to provide it, you can file a complaint with RERA.
Host
It’s reassuring to know tenants have options. Another question we received earlier is from Saeed: If I’ve repaid my home loan but the developer has delayed delivering the property for eight years, can I stop paying and default on the remaining balance?
Ludmila Yamalova
This is a complicated case. If you’ve repaid your loan in full, your relationship with the bank is settled. However, your issue now lies with the developer. You may be able to file a breach of contract claim against the developer, citing undue delays. If successful, you could seek compensation for the financial and emotional burden caused.
The bigger concern here is whether the developer is still operational. If they’ve defaulted or disappeared, it becomes challenging to recover your investment, even with a favorable court ruling.
Host
A harsh reality for some investors, unfortunately. Another question from Karam: My brother and I jointly own three apartments. Can we create a long-term power of attorney (POA) granting each other authority to manage the properties?
Ludmila Yamalova
Yes, you can create a long-term POA, but there are a few considerations:
- Term: A POA can remain valid indefinitely unless revoked. However, some authorities may not accept older POAs and may ask for a “refreshed” version, especially for critical actions like property sales.
- Scope: Be specific in the POA about the actions permitted – for example, renting, selling, or any other property-related legal matters.
- Selling: If you want the POA to include the authority to sell a property, you’ll need to show the original title deed when notarizing the POA. This ensures transparency and prevents misuse.
Host
That’s great advice. It’s essential to keep these nuances in mind to avoid future complications.
We have time for one last question. Ibrahim asks: I want to sell an online business but don’t have a trade license. Can I still proceed?
Ludmila Yamalova
In the UAE, any business activity – including online businesses – must operate under a valid trade license. Selling a business without one could lead to penalties. I recommend obtaining the proper trade license first and then proceeding with the sale to ensure everything is above board.
Host
That wraps up this week’s Understanding Property. Ludmila, thank you as always for your expert insights.
Ludmila Yamalova
Thank you! It’s always a pleasure to help demystify these topics.
Host
This has been Understanding Property on Drive Live with Ludmila Yamalova. If you missed anything or have more questions, tune in next week or text us at 4001. Stay with us – more to come on Dubai Eye 103.8!