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All the subtleties of renting commercial real estate in Dubai

Все тонкости аренды коммерческой недвижимости в Дубае

Dubai’s popularity as a major Middle Eastern business and industrial center is constantly growing. Favorable business environment, flexible tax policy, high standard of living attract entrepreneurs from different countries. To open their own business, merchants need premises: office, warehouse, exhibition, etc. This article is about how to choose and rent commercial real estate in Dubai, what documents will be needed for this, as well as about the difficulties that you may encounter in the process of concluding a contract.

Where to start

To get the right to rent commercial real estate, you need to register your business in the UAE and get a business license. In accordance with the amendments to the Law on Commercial Organizations, business opportunities for foreigners have significantly expanded. More than 1000 types of industrial and commercial activities have become available to them. You can register a new company in the Dubai Economic Department (DED) or in any of the fifty-plus free zones. At the stage of registration of the license, the businessman will be able to get acquainted with the list of available options for commercial real estate.

How to choose a suitable location

For each type of activity there are different requirements for the location of the main areas. For example, if an enterprise is engaged in the production of something, it will need to import raw materials, as well as export finished products, so it is important that there are convenient access roads nearby. It is better if the property is located near the port – the main transport hub for communication with abroad. If we are talking about a rehabilitation medical clinic, then it is better to place it away from the city noise, closer to nature, so that there is more greenery around.

Depending on the business development plans for the future, additional land may be needed for the construction of new facilities.

It is also important that there is a convenient parking nearby with enough places for staff and customers and that pedestrians can freely move in any desired direction

Types of offices and types of visas for employees

Office

According to local rules, the number of resident visas that an employer has the right to provide to its employees depends on the area of the office and its type. So, an area of 9 “squares” entitles you to one visa (this is called Physical space). Renting an office of the Flexi desk type will allow you to get 3 permits to stay in the country. More than three visas can be obtained if the office space is of the type of Serviced office, but its area also matters (the larger it is, the more permits).

What documents will be needed

Strict requirements are imposed on rented premises. It is forbidden to use them for other purposes, for example, an office for a warehouse or vice versa, you can not live in the same place where you work. All this is strictly controlled. But first you need to document:

  • business ownership;
  • permission to use real estate;
  • compliance of the premises with the plans for its use.

If the tenant plans to rebuild the interior spaces, including the organization of partitions to create individual workplaces, this should be stated before signing the contract and make an appropriate clause in it. Also, the contract should include information about the terms of the lease, the physical address of the premises, the date of signing the contract.

In addition to these documents, the landlord may require:

  • passport of the owner of the company;
  • preliminary approval for the issuance of a license from an authorized state agency;
  • letters of recommendation from previous landlords;
  • business plan;
  • a certificate from the bank about the account status;
  • corporate and personal financial reports.

The legitimacy of the completed commercial real estate lease transaction is confirmed by the Ejari document.

How to plan your budget

Businessman

Before signing the agreement, the future tenant should carefully calculate the budget. The purchase of premises on lease requires not only monthly contributions, but also the deposit of a certain amount to a guaranteed bank account. In addition, over time, the rent may increase, which should also be taken into account. To calculate the possible risks of cost growth, you can use the RERA calculator.

It is also worth understanding the difference between the legal concepts of “rent” and “leasing”, since the contracts for them differ in terms and amount of payment.A simple lease agreement is concluded for 12 months, after which it is automatically extended. Leasing agreements are different, but they are united by longer validity periods (up to 99 years):

  1. Modified-net lease assumes the distribution of costs between the parties upon their agreement. This is the most convenient form of contract for both parties.
  2. Gross lease. In accordance with it, the tenant pays a fixed amount to the landlord on a monthly basis. The latter assumes the payment of taxes, repair costs, maintenance of the object, etc.
  3. Land lease gives the lessee the right to build on the leased plot. After the end of the Lend Lease agreement, the owner of the plot receives it back with all the buildings erected.
  4. Triple-net lease. Its terms are beneficial to the owner of the property, but not beneficial to the tenant, since the latter must assume the payment of all related expenses, taxes, insurance, maintenance of communications.

Actions after the conclusion of the contract

If the object is renovated, furnished, and redevelopment is not planned, then it remains only to connect water and electricity and take out insurance to cover the costs in case of damage to the property.

If you plan to equip the interior space, then you need to:

  • verify the legality of such actions;
  • get permission from the owner, developer or municipality.

Sometimes interior design requires the services of a designer. It is necessary to be prepared for the fact that interior decoration with an area of 90 to 380 “squares” on average lasts 6-8 months.

Sublease

Субаренда

It is permissible to sublet a rented commercial space if there is a written permission from the owner of the object. If the sublease is planned in advance, it is better to include this clause in the lease agreement from the very beginning. This will protect you from possible controversial issues and legal incidents.

How to terminate the lease agreement ahead of time

The lease agreement can be terminated at any time. But we must be prepared for the fact that the owner of the object will have to pay a penalty. It is usually equal to the amount of rent for 2 months. Sometimes unforeseen circumstances arise when it is necessary to terminate the contract. If you warn the landlord in advance and present a good reason, the amount of the penalty can be significantly reduced.

Features of making payments

  1. Payment for the rental of commercial real estate in Dubai is made only by bank checks from the personal account of the tenant or the company.
  2. The number of checks to be provided per year is fixed in the contract: usually there are 4 or 6.
  3. The tenant has the right to pay the rent in one check immediately for the year, while he must pay another 5% of the contractual amount to cover administrative and technical expenses for the maintenance of the premises.
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Vladimir Sviridov
Vladimir Sviridov
General Manager RLC Consulting
With a Postgraduate Masters in Finance from The, Moscow State University, Russia. Vladimir started his professional career as an auditor of the financial sector of EY. After that, he worked for several years in senior positions in corporate banking. In 2018-2021, he managed the finances of a large agricultural holding, and is currently responsible for strategic planning, corporate partnership and financial management in the role of General Manager of RLC Consulting GROUP in the UAE.

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