_Your Guide to Leasing Commercial Property in Dubai

First off, CONSULT, CONSULT & CONSULT
Dedicated commercial real estate agents are more experienced within the market and are familiar with the dynamics of each sub-market of the city. They keep track of trends that can be of beneficial knowledge. It’s also important to set requirements and then ask the agent questions about the status of the premises and whether it meets the business objectives.

LOCATION IS KEY: On-shore and free-zone
Location not only plays a key role in complementing a business type, but also determining ownership and costs. It is required to share ownership with a UAE national partner, if you are operating a business onshore in Dubai. Alternatively, foreigners retain 100 percent ownership in Dubai’s free zones. In addition, it is important to note that commercial property in Dubai is divided into certain types and purposes. This means, as an example, office premises cannot be used for retail shops, and vice versa.

Get the required documents
When leasing commercial property in Dubai, one must attain a provisional approval from the relevant licensing authority. This is usually the so called ‘’initial approval’’ trade license issued by the Dubai Economic Department (DED) or a Dubai Government Free zone. It is also essential to provide proof of ownership, the status of the premises, compliance of the premises with the existing plans, availability of the permits to use the premises.

ASSESS, then sign. There are multiple factors at play when leasing commercial property in Dubai, but there are four common types of contracts to settle on:

• A Gross Lease which requires the tenant to pay a pre-decided rent every year, whilst the landlord is responsible for other expenses such as insurance and maintenance charges (not commonly used in Dubai office market).
• In a Land Lease only a part of the land is leased out to the tenant by the landlord. The tenant is permitted to construct a building for the business purpose. At the end of the tenure, the landlord is given the land in addition to the constructed building (built to suit solutions are generally used of long leases that exceed 9 years’ tenure)
• The Triple-Net Lease requires the tenant to pay rent along with any additional expenses such as taxes, insurance and maintenance charges (most commonly used in Dubai office market)
• The Modified Net Lease or revenue share agreement sets forth that any expenses/profits are shared by both the parties: the tenant and the landlord (increasingly used for flexible space operators).

Terms and conditions
This might be an obvious guideline. Nonetheless, 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. Registration of lease contracts is compulsory to connect the utility services needed for the rented property. This includes water, electricity, gas and telecommunications services. Different rules and regulations may apply for specific free zones such as DIFC.

Renewing and terminating a lease
The minimum limit of tenancy contracts is 12 months, which can be renewed automatically after 12 months if both the 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 a 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, but it is essential, prior to making any commitments, to delve further into the dos and don’ts when leasing commercial property in Dubai. Hence, it is highly advisable to engage with dedicated commercial property agents experts in the Dubai commercial environment, which is where our commercial experts come in to play.

Looking for advice from a commercial leasing expert?

Contact

Umberto Bevilacqua - Commercial Agent 

Naomi Martin - Commercial Agent