According to an article from Knight Frank, below are some tips to keep in mind when leasing commercial property in Dubai:
- Firstly, consult, consult, consult!
Commercial real estate agents have more experience within the market and are better aware of trends that will be of beneficial value.
- Location is key, whether it’s on-shore or free-zone
Location is important as it determines ownership and costs. In on-shore Dubai, it is required to share ownership with a UAE national (partner). Alternatively, foreigners operating in the free-zone retain full ownership.
- Get the required documents
A provisional approval from the relevant licensing authority is required when leasing commercial property in Dubai. It is also essential to provide proof of ownership, the status of the premises, compliance of the premises with the existing plans, and availability of the permits to use the premises.
- ASSESS, then sign.
There are four common types of contracts to settle on:
- Gross Lease: requires the tenant to pay a pre-decided rent every year, whilst the landlord is responsible for other expenses.
- Land Lease: only a part of the land is leased out to the tenant by the landlord.
- Triple-Net Lease: requires the tenant to pay rent along with any additional expenses such as taxes, insurance and maintenance charges.
- Modified Net Lease or revenue share agreement: sets forth that any expenses/profits are shared by both the parties: the tenant and the landlord.
- Terms and conditions
It is very important to make sure all the terms and conditions are mentioned in the contract to avoid any disputes in future.
- Registering lease agreements
Lease agreements between landlords and tenants must be registered through the Ejari system. This is required to connect the utility services needed for the rented property such as water, electricity, gas and telecommunications services.
- Renewing and terminating a lease
The minimum limit of tenancy contracts is 12 months, which can be renewed automatically after 12 months if both parties are willing to extend, for up to 9 years. But, in the case of terminating a lease earlier than agreed on, the landlord can demand an early termination penalty fee which should always be mentioned in the commercial terms of the contract. This is considered a compensation for any losses caused by terminating the contact prior to the agreed date.
This guide touches on the basics, which are essential, to consider prior to making any commitments when leasing commercial property in Dubai. However, it is highly advisable to engage with dedicated commercial property agent experts in the Dubai commercial environment for further guidance and information.
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