HH Judge Abdulqader Mousa, Chairman of Rental Disputes Center, the judicial arm of the Dubai Land Department, stated, "In order to reserve the right to get the rent paid on time, real estate owner can put in place a clause penalizing the tenant in the event of dishonoured cheque, provided that such clause is included in the tenancy contract.”
Speaking to the daily “Emarat Al-Youm”, the RDC Chairman explained, "The real estate property owner is entitled to ask for a specified sum of amount, in the event of delayed payment of the rental value, or having rental cheques bounced more than once, but the owner, taking advantage of tenant’s failure, must not exaggerate by way of imposing hefty monetary claims."
"Having clauses pertinent to the imposition of penalty over non-payment shall not be a problem as long as the tenant agrees. Lease is a legislation of contractual parties - pacta sunt servanda and the tenant, if he agrees to a certain clause, not contrary to the law, is obliged to what he or she has signed up for," he added.
"In the event of arising a legal dispute while imposing such fines, the matter is due to the judge's discretionary authority, who gives reasonable and logical value in case of a dispute over the punitive clause," he counted, underlining that the RDC judges peruse terms conditions of the lease contract between the landlord and tenant in every detail, and that the landlord shall not be let getting away with any abuse concerning the penalty clauses, but such clauses shall be interpreted to apply real value, which is proportional to the property.
Judge Mousa drew attention to a number of lawsuits brought before the RDC that had substantial financial claims against the returned cheques, and the RDC worked to settle the matter in a manner serving the interest of both parties to the lease.
Citing among other issues, he recalled a lease dispute, resulted from a punitive clause imposing on tenant a fine of AED 5,000 on every dishonoured cheque, on a monthly basis, which was rejected by the RDC, and the case was settled amicably.
The RDC Chairman referred to another legal dispute, wherein the real estate owner imposed a fine of AED 95,000 in the clause penalizing his tenant over returned cheque, which the RDC reduced to only AED 5,000. As well as a third dispute in which there were two punitive conditions, one imposing AED 5000 for each returned cheque, and the other imposing 20% of the value of the cheque in case of delayed payment.