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Commercial leasing guidelines
12th November 2012

Dubai has become the most popular place to live among all due to several reasons like its fast growing economy, tax free business opportunities in free-zone areas and exciting leisure and entertainment activities. Moreover, Dubai is also well connected with over 100 destinations across the globe. State government and developers struggle very hard to convert this small fishing village to an upscale modern business and trade hub of the region. The emirate has become too famous among entrepreneurs around the world. Whether you are starting a new business or a reputable organization willing to expand its operations in the emirate, you may take advantage of ultra modern office space available for rent in the emirate. As there are numerous options available for tenants, it is very important to select the right commercial office space in a suitable location to establish and run your business successfully. Your office space can directly affect your business operations. To make the right choice all tenants have to be careful about a few important things, like all terms and conditions of business deal and rules and regulation of the area.

Commercial leasing guidelines

Guideline tips for choosing suitable commercial properties

Below are the few important guidelines and tips a commercial tenant must be aware to make well informed decision. Whether you are a UAE national or a foreigner, as a tenant you should know a few important things about leasing a commercial property in the business and financial hub of the region.

Who is eligible to obtain a commercial property on a lease?

Candidates applying for leasing commercial office space must possess a valid trade license issued by the Dubai Economic Department (DED) or a Dubai Government Free-zone. Entrepreneurs who possess these licensures are allowed to establish their business from an onshore or free-zone area.

What documents are required to lease a commercial property in Dubai?

Instead of possessing leading state license, tenants who are applying to obtain commercial property on rents also carry other important documents like provisional approval from emirate’s licensing authority, company manager passport whose name was mentioned on trade license, signing authority letter if the name is not mentioned on the trade license.

Tenants must know the difference between operating business onshore and free-zone

Foreign entrepreneurs operating their businesses onshore in the emirate are worked under the regulatory control of the Dubai Economic Department (DED) and essentially required to have local partners that hold 51% shares of your company. Further entrepreneurs also need to pay 5% import duty in case they import any type of goods for sale. In contrast, operating business in free-zone is more convenient in a way that it provides 100% ownership of your business and local free-zone authority becomes your partner. Additionally, you will also face some restrictions if you are willing to operate your business onshore, although they are not mandatory to follow one has to consider them.

Tenants should be aware of commercial assets are available as fitted or shell units

Commercial properties are usually available as shell or core that means property units are provided to tenants without any fixtures and finishing. Most of the time pantry and toilet facilities are provided in common areas of the building. With increased competition, landlords started providing huge and well-equipped units to earn better rents.

Must know the length of commercial tenancy contract

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. Tenants and landlords are also allowed to extend their contract for up to ten years.

How to pay rent for commercial properties in Dubai?

Most landlords in the city prefer to accept payments in the form of cheque issued by personal or company bank account in UAE. Tenants and asset owners can negotiate with each other to decide about the length of the lease contract and the amount paid as annual rent. The amount can be one cheque every year to six cheques per annum. All cheques for the entire term will be handed over to the landlord upon signing the lease contract. Moreover, tenants are also required to pay 5% amount of the total rent value as a security deposit. It is a refundable amount that the landlord will keep as a security deposit. Landlords will refund this amount after deducting the amount if any damages occur at the expiry of the lease contract.

Commercial tenants also keep in mind to pay fee and charges

All tenants always keep in mind to pay additional fees or charges for CORE Commercial’s standard agency fee at the time signing lease contract. Annual property service charges and the amount required to furnish empty office space and amount required as a fee to obtain approval from the government. Total expenses depend upon the size of the property and type of fixtures you have chosen to renovate and equip your place.

Terminating a lease early in Dubai

The landlord can demand a two-month rent as a penalty fee. The 2 months rental fee is considered as a compensation for him for the losses that may incur to him due to the failure of not meeting the contract rental period. Also, you should not stay at the premises during this period. You can try negotiating with the landlord and explain the situation to reach a solution but however, it depends upon the landlord’s decision.

Altering the interior of the property

The tenant can alter the interior of the property after obtaining Non Objection Certificates (NOC) from the landlord, building manager, Dubai Municipality or relevant bodies if you have rented out property in the free-zone, Dubai Civil Defense and Emirates Health and Safety.

How to obtain connections for electricity, cooling, and water?

Tenants have to possess a valid trade license to obtain water, electricity and cooling facilities from Dubai Electricity and Water Authority. These are basic amenities every entrepreneur has to obtain before starting his/her business.

How much time a tenant should expect to install necessary fit out?

Again it depends on the condition and size of your commercial unit. Usually, a core office of 1,000 square feet to 4,000 square feet takes six to eight months to install fit out, which is necessary to make your office space functional.

Sub-letting commercial property

Tenants can sublet their commercial property in Dubai if they have written approval from landlords.

It is good to make yourself well aware of such primary facts and follow guideline tips to choose a suitable commercial property on lease. Taking care of such issues will enable tenants to avoid confusions and scams

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