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 fixed monthly amount, and the landlord covers taxes, insurance, and maintenance.

Land Lease

In a land lease, a tenant is given a plot of land and is allowed to construct a building for their 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 leases favour the landlord but are 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 every three years, but the increase must be no more than 20% of the current rent.

It is the landlord's responsibility to hand over the property in good condition, while tenants are responsible for taking care of it and reporting any issues promptly.

Tenants may terminate the lease agreement before the time, but they must forfeit their security deposit 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 the event of a dispute.

Eligibility Criteria for Leasing Commercial Property in Dubai

Businesses applying for 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 located in a free zone. Entrepreneurs with these licences can establish their business in an onshore or free-zone area. Previously, foreign entrepreneurs operating businesses onshore in Dubai were required to have local partners who held a 51% share of the company and paid 5% import duty on any goods imported for sale. After the amendment to the Foreign Direct Investment Law (FDI Law), foreign ownership restrictions in specific business sectors listed under the Positive List can have 100% business ownership.

The steps involved in leasing commercial property in Dubai are:

Business Registration

To lease commercial property in Dubai, you need a valid trade license from the Department of Economic Development (DED) or a free zone authority. First, choose your business activity and legal structure, such as an LLC or sole proprietorship, and then register your trade name. Apply for initial approval and prepare documents such as passport copies and business plans. Some authorities may also ask for a draft lease agreement.

Ejari Registration

After signing the lease agreement with your landlord, you must register it through the Ejari system. This system ensures transparency and legal protection for both parties. Once registered, you'll receive an Ejari certificate, which is required to set up utilities and other official services.

Financial Documentation

Landlords usually ask for proof that your business is financially stable. They may ask you to submit financial statements showing bank balances, or provide bank guarantees or post-dated cheques to confirm your ability to meet the rental obligations.

Zoning Compliance

Check that your business type is allowed in the area where you want to rent. Different zones in Dubai have different rules, so ensure the location is approved for your type of activity before signing any agreement.

Insurance Coverage

Depending on your business, you may need insurance such as property coverage, liability insurance, or workers’ compensation. Ensure that you purchase all necessary policies to protect your business and comply with any lease or legal requirements.

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. 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.

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 the common areas of the building. With increased competition, landlords began providing large, well-equipped units to earn higher rent. A fitted unit already has the fixtures and fittings so that 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 on 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 rent amount with your 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 are not to be cashed immediately being post-dated to certain dates in the future.

Conclusion

Before leasing commercial space in Dubai, familiarise yourself with 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.