Commercial leasing guidelines for tenants in Dubai

Dubai is a thriving commercial hub that attracts entrepreneurs, start-ups, and established businesses from all over the world. With a robust economy, a business-friendly environment, and a strategic location, Dubai offers opportunities for businesses of all sizes. If you are a tenant looking to lease a commercial space in Dubai, it is important to understand the legal and practical considerations that come with the process. In this blog post, we will provide you with essential guidelines to help you navigate the commercial leasing market in Dubai and make informed decisions that meet your business needs.

Tips for choosing suitable commercial properties

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 Dubai. Here are our top things that a commercial tenant should know. 

Eligibility 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.

Know which documents are required to lease a commercial property in Dubai

There are certain documents that will be required to lease a commercial property in Dubai. For instance, you should have provisional approval from the Emirate's licensing authority, a trade license and a passport copy of the individual mentioned on the trade license. 

You should also understand the difference between operating a business onshore and in a free-zone. Foreign entrepreneurs operating their businesses onshore in Dubai are under the regulatory control of the Dubai Economic Department (DED) and are required to have local partners that hold 51% share of the company. Plus, entrepreneurs have to pay 5% import duty if they import any goods for sale. In contrast, operating a business in a free zone allows 100% ownership of your business and the local free-zone authority becomes your partner. 

Decide whether you want a fitted or shell unit

Commercial properties are usually available as shell or core which means the unit is 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. A fitted unit has the fixtures and fittings adding already, so you can move straight in. 

Know the length of the commercial tenancy contract

The minimum limit of tenancy contracts is 12 months which can be renewed automatically after 12 months if both parties are willing to extend. Tenants and landlords are also allowed to extend the contract for up to ten years.

How to pay rent for commercial properties in Dubai?

Most landlords in Dubai prefer to accept payments in the form of a cheque issued by a personal or company bank account in UAE. 

As a tenant, you can negotiate the length of the lease contract and the amount paid as rent with the landlord. You can also negotiate the number of cheques in which the rent will be paid. This can vary from 1 cheque all the way up to 6-12 cheques (although this is unusual). All cheques for the entire term will be handed over to the landlord upon signing the lease contract, with any cheques that aren't to be cashed immediately post-dated to certain dates in the future. 

Understand any fees and charges that might be incurred

You should be aware of any additional fees that you might incur as a tenant of a commercial property in Dubai. These typically include: 

• CORE Commercial’s standard agency fee 
• Annual property service charges
• Government approval fees
• Furnishing and fitting fees - particularly for shell units

Total expenses will depend upon the size of the unit and the fixtures that you require. 

Terminating a lease early in Dubai

If you wish to terminate a commercial lease early in Dubai, this will usually incur a fee. The landlord can demand two months' rent as a penalty fee. This fee is considered compensation for any losses that they may incur due to the failure to meet the contract rental period. You will be required to vacate the property immediately and cannot stay in the property during this 2-month period. However, the exact terms of this are at the discretion of the landlord, so try to negotiate with them and explain the situation to see if a better solution can be reached.

Altering the interior of the property

The tenant can alter the interior of the property only after obtaining Non-Objection Certificates (NOC) from the relevant parties. This includes 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. 

How long does a fit-out take?

This depends heavily on the condition and size of your commercial unit, but could take as much as 6-8 months for a full fit-out. Ensure you speak to a reliable and trusted fit-out company, like Design Fit, who can advise on prices and timescales.

Sub-letting commercial property

Tenants can only sublet their commercial property in Dubai if they have written approval from the landlord. If you choose to sub-let a commercial property then you should be very careful to understand what this entails. 

Start your commercial property search

If you're looking to rent a commercial property in Dubai, then head to our partner, CRC Property's website, where you'll discover an amazing selection of commercial properties.