I am the owner of a children's nursery in Jumeirah Lakes Towers and my business has been shut since March, as required by the authorities. It is possible that we can reopen the nursery in September but that will mean that it's been closed for a total of six months.
My landlord won't give us a rent reduction and has only agreed to delay the deposit of rental cheques. However, if my cheques are returned by the bank, what is the next step? I am looking for a reduction in rent – not to vacate. Is there any hope for a rent reduction? VK, Dubai
Given your current lack of income due to the Covid-19 pandemic, I see you have three potential outcomes/scenarios.
Firstly, you say your landlord is not willing to give you any rent waiver and will only defer the rent date. This in itself is a form of help because legally he doesn’t have to give away the rent. Morally, however, it is a different story, especially as the loss of your income is not of your doing or control. Therefore, it is imperative that you keep talking to each other to try to find a solution. Remember though that your issue is not your landlord's fault, so try to be fair.
If the communication comes to a stalemate, the only way to settle it would be to file a case at the Rental Dispute Settlement Committee (RDSC) in Dubai. The RDSC will look to both of you to find a solution because it is not in anybody’s interest to terminate the lease. It is possible, therefore, that a rent reduction or waiver of rent corresponding to the number of months you have not operated may be granted by a judge of the committee. I stress that the actual outcome will only be determined by the judge at the time, and I am giving my opinion based on good practice and experience.
Your last scenario may not actually be what you want and that is to potentially cancel the contract by stating force majeure. A force majeure is tricky legal terminology that is often used when the performance of a contract is impossible to carry out due to an event such as a pandemic or "act of God". Determining force majeure can be a legal minefield and one in which I suggest you seek proper legal advice should you wish to go down this route.
Due to unforeseen circumstances that were not around when you signed your contract, you could potentially request cancellation of the agreement along with its obligations/penalties as you are not able to fulfil your performance as laid out.
Many contracts, however, make it abundantly clear that a party seeking relief may not use a force majeure event to claim relief for payment obligations. Unforeseen circumstances of a public loss is better than a force majeure clause. Perhaps you could ask the judge at the RDSC to look at your contract and make it more reasonable to amend or terminate the agreement as an unforeseen situation such as the Covid-19 pandemic has prevented you from performing.
Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for more than 35 years in London and Dubai.
The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com
