Commercial leasing guidelines for tenants in Dubai

Dubai is a top destination worldwide for entrepreneurs and start-ups to establish businesses. With its strong economy, business-friendly environment, and strategic location, Dubai offers opportunities for businesses of all sizes. Knowing the legal and practical steps is important if you are a tenant looking to lease a commercial space in Dubai. In this blog, we will provide essential guidelines to help you understand Dubai's commercial leasing market and make smart decisions for your business.

Types of Commercial Lease

There are four common types of leases in Dubai.

Gross Lease

A gross lease is a standard lease in which the tenant is responsible for paying a predetermined amount each month, and the landlord pays for taxes, insurance, and maintenance.

Land Lease

In a land lease, a tenant gets a plot of the land and constructs a building for his business. Once the lease agreement expires, the landlord gets their plot back and the building.

Modified Net Lease

A modified net lease is ideal for the tenant and the landlord as they share the expenses incurred equally.

Triple-net Lease

Triple-net lease favours the landlord but is not ideal for the tenant. In this type of lease, the tenant is responsible for paying the other expenses associated with the lease, such as taxes, maintenance, and insurance.

The Basics of Commercial Lease Laws in Dubai

The commercial lease laws in Dubai protect the rights of tenants and landlords and ensure a fair leasing process. According to the law:

A commercial lease agreement must have a minimum duration of one year.

A landlord can increase the rent once in three years, which must be at most 20% of the current rent.

It is the landlord's responsibility to hand the property in good condition, while tenants must take care of it and promptly report any issues.

Tenants may terminate the lease agreement before time, but they must forfeit their security or pay a penalty.

The tenant can alter the property's interior only after obtaining No-Objection Certificates (NOC) from the landlord, building manager, Dubai Municipality, or relevant bodies.

Both parties can file a complaint at the Dubai Rental Disputes Centre in a dispute.

Eligibility Criteria for Leasing Commercial Property in Dubai

Businesses applying for leasing commercial office space must possess a valid trade licence issued by the Dubai Economic Department (DED) or a Dubai Government Free-zone if the property is in a free zone. Entrepreneurs with these licences can establish their business from an onshore or free-zone area. Previously, foreign entrepreneurs operating their businesses onshore in Dubai were required to have local partners that hold a 51% share of the company and pay 5% import duty if they import any goods for sale. After the Foreign Direct Investment Law (FDI Law) amendment, foreign ownership restrictions in specific business sectors falling under the Positive List can have 100% business ownership.

Documents Required to Lease a Commercial Property

Certain documents are required to lease a commercial property in Dubai.

Proof of business ownership

Copy of Emirates ID or Passport

Status of premises that must comply with existing plans

Copy of trade licence

Credit Score

No Objection Certificate (NOC)

Bank statements (personal and business)

Eligibility for Visa Sponsorship

The number of employment visas a business can sponsor in Dubai depends on the type of commercial space they rent. Before leasing commercial properties, list the number of employees you plan to sponsor. Companies in shared offices (Flexi-desk) can sponsor up to 3 visas, those in service offices can sponsor up to 5 visas, and for fully leased offices, the number of visas depends on the office size. You can apply for one visa for every 9 square metres of office space.

Registration of Lease Agreement

After finding the right commercial property, it is time to draft and sign the lease contract. Ejari Dubai is a government organisation that manages all real estate transactions. When signing the commercial property lease agreement, ensure it includes all the required clauses from Ejari. Also, register your contract with Ejari right after signing.

Decide Between Shell or Fitted Unit

Commercial properties are usually available as shell or core, meaning the unit is provided to tenants without fixtures or finishing. Most of the time, pantry and toilet facilities are provided in common areas of the building. With increased competition, landlords started providing huge, well-equipped units to earn better rent. A fitted unit already has the fixtures and fittings so you can move straight in.

Additional Fees

You should be aware of any additional fees you might incur as a tenant of a commercial property in Dubai. These include:

CORE Commercial's standard agency fee 

Annual property service charges

Government approval fees

Furnishing and fitting fees for shell units

Total expenses will depend upon the unit size and the fixtures you require.

Payment Channel for Leased Commercial Property

Most landlords in Dubai prefer to accept payments in the form of a cheque issued by a personal or company bank account in the UAE. As a tenant, you can negotiate the length of the lease contract and the amount paid as rent with the landlord. You can also negotiate the number of cheques in which the rent will be paid. It can vary from 1 cheque to 6-12 cheques (although this is unusual). All cheques for the entire term will be handed over to the landlord upon signing the lease contract, with any cheques that aren't to be cashed immediately post-dated to certain dates in the future.

Conclusion

Before leasing commercial space in Dubai, know the ownership and visa sponsorship rules based on office size. Always include the required Ejari clauses in your lease contract and register it with Ejari right after signing. Following the guidelines in this blog will help you secure the right commercial space and set a strong foundation for your business operations in Dubai.