Rentals In Crisis – The Changing Landscape of Landlord and Tenant Rights
Date Posted: Wed, 22 Jul, 2020
You may have read the various media reports on the recent decisions by the Rental Dispute Committee (RDC) issued in the light of the Covid-19 crisis. We thought it might be helpful to summarise a few of the key decisions, to try to understand the current thinking of the RDC.
It’s important to note that there is still no legislation compelling a landlord to allow termination of the lease, reduce the rent or postpone collection of the rent, regardless of the circumstances in which the tenant finds himself. That said, since the outbreak of the virus in the region the RDC has clearly adopted an approach based on natural justice and fairness, rather than adhere to a strict application of the principles of the Landlord and Tenant law.
Three recent cases to consider:
Case 1 In this case the RDC ordered the waiving of the rent arrears owed by a tenant who was a professional sportsman. The sport in question was included within the activities prohibited by the Dubai Government as a precautionary measure to curb the spread of Covid-19. The rent arrears were waived in full for the period from 15 March 2020 until an official declaration to resume that activity.
The RDC considered, when making this decision, Article No. 249 of the Civil Transactions Law, which states:
If exceptional circumstances of a public nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge, in accordance with the circumstances and after weighing up the interests of each party, to reduce the oppressive obligation to a reasonable level if justice so requires, and any agreement to the contrary shall be void.
Case 2 Here the RDC ordered that the lease be rescinded, and the rent cheques returned to the tenant, on the basis that the tenant could no longer conduct his business. The tenant was providing home care services for the elderly. He demonstrated to the RDC that all of his clients had cancelled their contracts, due to the fear of infection.
The RDC considered, when making this decision, Article No. 794 of the Civil Transactions Law, which states:
It shall be permissible for either of the contracting parties, for some unforeseen reason connected with him, to require that the contract of hire be terminated and he shall then be liable for any harm sustained by the other contracting party arising out of such termination, within the limits laid down by custom.
Case 3 On this occasion the RDC accepted the argument that the loss of the tenant’s job was an unexpected event fulfilling the conditions of force majeure, and that to uphold the obligations under the lease would cause hardship tantamount to impossibility of performance. It therefore ordered the termination of the lease agreement as of the date of the RDC’s final decision.
When considering these decisions of the RDC, it is clear that there is a golden thread running through them. The RDC has shown itself to be following a certain path designed to achieve natural justice and a social balance between the conflicting parties. The overarching goal is to help all parties to move past the adverse effects out of the current crisis with minimal financial and lossand social disruption.
We are yet to see whether the RDC will continue or even expand the application of its current approach. But at this point we must not rule out the possibility that in future, rental disputes it will be decided not just on the law, but also on ancillary factors such as the nature of the tenant’s business or employment and the impact of Covid 19 on them. The RDC is effectively using relevant provisions of aligned legislation to achieve results that answer the overriding demand for fairness and protection in a current climate where those commodities are essential for the wellbeing of our society as a whole.
Taylor Wessing is an international law firm with offices in Dubai. If you would like further advice, please contact the authors.