REALWorld Law

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Leases automatically renew upon expiry on the same terms where neither party serves notice of non-renewal or amendment.  If a party does not wish to renew or wishes to amend the terms of the lease, notice must be given in accordance with Article 20 of Law No. 20 of 2006 (as amended), being  two months’ notice for residential property and three months’ notice for commercial property.

During the term of a lease, the lessee can only be evicted on limited statutory grounds, including material breach (such as non‑payment of rent), unauthorised use or occupation, unlawful assignment or subletting, and, in certain circumstances, where the lessor requires the property for redevelopment or legitimate use only grounds for removing the lessee are:

• Non-payment of rent
• Unauthorized assignment
• Excessive occupation
• Unauthorized or unlawful use
• Where the lessor requires the property for redevelopment, or lessor’s legitimate use or wishes to occupy

Within the Abu Dhabi Global Market free zone

In the Abu Dhabi Global Market free zone, there is no statutory security of tenure. Upon expiry of the lease term, the lessee has no automatic right to renew and the parties are free to exit or renew the lease in accordance with its terms. The parties can therefore walk away at the end of a contractual term as per the terms of their lease.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

In order to ensure that a lessee vacates the premises on the contractual expiry date, the lessor must serve a valid notice of non‑renewal (or amendment) within the statutory time periods prescribed by Article 20 of Law No. 20 of 2006 (as amended).

Under Article 20(3), leases automatically renew upon expiry on the same terms where no such notice is served. Accordingly, if the lessor fails to serve notice within the required timeframe, the lessee will be entitled to remain in occupation and the lease will renew by operation of law.

The applicable notice periods are:

• two months’ notice for residential leases; and
• three months’ notice for commercial, industrial or professional leases.

Absent service of a valid notice, the lessor will not be able to recover possession on the contractual expiry date and must wait until the next renewal cycle or rely on statutory grounds for eviction.

Within the Abu Dhabi Global Market free zone

In the Abu Dhabi Global Market free zone, there is no security of tenure. A lessee does not have an automatic right to renew upon expiry of the lease, and the parties are free to exit the lease in accordance with its terms.

Accordingly, to ensure that the lesse vacates on the agreed expiry date, the lessor must comply with any contractual notice or termination provisions set out in the lease. In the absence of such provisions, the lease will generally terminate on its expiry date without renewal.

The ADGM Real Property Regulations 2024 provide termination and enforcement mechanisms:

1. Contractual expiry (Reg. 47). The Registrar shall register that a registered lease has expired, upon the request of either the lessor or the lessee accompanied by acceptable evidence of expiry.
2. Termination for lessee default (Reg. 48). Registering the termination of a lease does not release the lessee from liability for breach of any covenant under the lease, and the lessor may still pursue the lessee for accrued liabilities. A lessee subject to termination for default may, under Reg. 50, apply to the Court for relief from forfeiture (for non-payment of rent or any other breach), and the Court may suspend, grant, or refuse relief as it considers appropriate.
3. Surrender (Reg. 49). A lease may be wholly or partly surrendered by registering a surrender (or, for a partial surrender, a variation) executed by both lessor and lessee, with the lessor paying the applicable registration fee. On registration, the lessee's interest vests in the lessor, and any sublease becomes a direct lease from the lessor where a non-disturbance instrument has been registered or the sublessee has attorned to the lessor.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Under Article 23 of Abu Dhabi Law No 20 of 2006 concerning the Letting of Property and Regulation of the Letting Relationship between Lessors and Lessees, the lessor may seek to evict the lessee on the following statutory grounds:

• If the lessee fails to pay the rent due within the periods fixed in Article 11 (a period not exceeding 21 days from the due date agreed in writing if the property is let for residential purposes unless otherwise agreed or 30 days from the due date agreed in writing if the premises is let for commercial, industrial or vocational purpose) against a receipt indicating payment unless otherwise agreed.
• If the lessee assigns or sublets all or some of the premises except with the permission or authorization of the lessor.
• If the lessee or the sublessee allows more than the generally accepted level of occupancy.
• If the lessee uses or permits the premises to be used in a manner contrary to the tenancy contract conditions or which impairs the lessor’s interest or uses the premises for other purposes than those for which it is let.
• If the lessee uses or permits the premises to be used in a way that is detrimental to health, or constitutes a disturbance or is contrary to public order or manners.
• If the lessor wishes to demolish the premises for rebuilding, an increase in height, additions or alterations (subject to a number of conditions).
• If the lessor wishes to occupy the premises for his own purposes (provided that he does not own another habitable property within the jurisdiction of the municipality in which the premises are located subject to:
  • Serving the lessee a notice six months prior to the expiration of the tenancy contract; and
  • the lessor occupying the premises for one uninterrupted year after they are vacated by the lessee. If the lessor fails to reoccupy the premises without acceptable reasons within three months from the vacation date or occupies the premises for less than one year or lets the premises to another lessee, the original lessee can obtain an order allowing him to re-occupy and/or be paid compensation. The Rental Disputes Settlement Committee (RDSC) may determine the appropriate compensation, provided that it does not exceed one year’s rental.

  Within the Abu Dhabi Global Market free zone

  In the Abu Dhabi Global Market free zone, the Real Property Regulations 2024 provide a framework governing lease expiry, termination and enforcement (including termination for lessee default and surrender). However, unlike mainland Abu Dhabi, there is no prescribed statutory eviction regime or list of mandatory grounds for eviction. The parties are therefore free to contract as they wish, and the ability of a lessor to require a lessee to vacate prior to expiry will depend primarily on the terms of the lease and any applicable enforcement mechanisms.

  The ADGM Real Property Regulations 2024 provide termination and enforcement mechanisms:

  1. Contractual expiry (Reg. 47). The Registrar shall register that a registered lease has expired, upon the request of either the lessor or the lessee accompanied by acceptable evidence of expiry.
  2. Termination for lessee default (Reg. 48). Registering the termination of a lease does not release the lessee from liability for breach of any covenant under the lease, and the lessor may still pursue the lessee for accrued liabilities. A lessee subject to termination for default may, under Reg. 50, apply to the Court for relief from forfeiture (for non-payment of rent or any other breach), and the Court may suspend, grant, or refuse relief as it considers appropriate.
  3. Surrender (Reg. 49). A lease may be wholly or partly surrendered by registering a surrender (or, for a partial surrender, a variation) executed by both lessor and lessee, with the lessor paying the applicable registration fee. On registration, the lessee's interest vests in the lessor, and any sublease becomes a direct lease from the lessor where a non-disturbance instrument has been registered or the sublessee has attorned to the lessor.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi, competent governmental authorities may expropriate real property for public benefit pursuant to applicable laws and implementing decisions (including Abu Dhabi Law No. 19 of 2005 concerning real estate ownership and related regulatory instruments).

Where such expropriation occurs, it will override existing property rights, including leasehold interests, and may result in the termination of leases. The treatment of third‑party interests (including lessees) is typically addressed in the relevant expropriation decision or instrument governing the acquisition.

Expropriation must generally be carried out on the basis of just compensation, with the valuation and allocation of such compensation determined in accordance with the applicable legislative or administrative framework. Compensation may be payable to lessees, particularly where they hold registered or otherwise recognised rights; however, entitlement to compensation, and the apportionment between lessor and lessee, will depend on the nature of the lessee’s interest and the terms of the relevant expropriation instrument.

There are no fixed statutory timelines for the expropriation process, and the duration will depend on the relevant authority, the scope of the project, and any valuation or dispute resolution procedures that may arise.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

The parties are generally free to agree the form of security to be provided by the lessee. In practice, a lessor may require one or more of the following:

• a parent company guarantee;
• a bank guarantee; or
• a security deposit.

It is common for a lessor to require only one primary form of security (typically either a bank guarantee or a security deposit), depending on the strength of the lessee’s covenant.

In the context of commercial leases, it is less common for separate deposits to be taken specifically for damage or “breakages”, with lessors instead relying on the main security package and the contractual repair and reinstatement obligations. Although it is common for a lessor to take a security deposit from a lessee the law does not provide clear provisions on how such deposits must be held, when they can be utilized and when they must be returned. It is important, therefore, to ensure that a lease contains detailed provisions on dealing with the security deposit.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

(a) Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Leases normally specify the permitted use.

In addition, use is subject to applicable planning, zoning and licensing requirements, which may impose further restrictions.

If the lease is silent, the property should be used in a manner consistent with its intended lawful purpose and designation.

If the lease is silent, the use should be consistent with the purpose for which the property was built or according to common practice.

(b) Within the Abu Dhabi Global Market free zone

A lease may specify and restrict the permitted use of the property. Under the ADGM Real Property Regulations 2024, a lessee must use the real property in accordance with the permitted use under the lease, and that permitted use must be consistent with the permitted use for the real property under the applicable master plan.

The lessee must also not use the real property in a manner that would unreasonably cause nuisance to, or interfere with the use of, any adjoining real property, or for any purpose that is contrary to applicable law.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Most leases limit a lessee’s right to alter or improve property.

Under the legislation, changes are not permitted without the lessor’s consent (unless such changes will not damage the property). If the lessee breaches this stipulation, the lessor can compel the lessee to restore the property and pay compensation if necessary.

If the lessee cultivates or makes improvements to the property, the plants or improvements must be abandoned at the end of the term, unless otherwise agreed in writing.

Within the Abu Dhabi Global Market free zone

Within the Abu Dhabi Global Market free zone the parties are generally free to agree the extent to which alterations are permitted; however, any such works remain subject to the terms of the lease and applicable regulatory and approval requirements.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

(a) Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

The law provides that a lessee cannot assign or sublet the whole or part of the property without the lessor's prior written consent.

Assignment or subletting without the lessor’s consent may entitle the lessor to seek termination of the lease.

Where a sublease is permitted, its terms must not conflict with the head lease and the term of the sublease must not exceed that of the head lease. Subject to those limitations, the terms of a sublease may differ from those of the head lease.

(b) Within the Abu Dhabi Global Market free zone

The ADGM Real Property Regulations 2024 do not prescribe a detailed statutory regime governing assignment or subletting. Accordingly, the parties are generally free to determine the extent to which such transfers are permitted, subject to the terms of the lease and any applicable regulatory requirements.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Rent will be as agreed between the parties and does not necessarily remain the same throughout the lease term. Rent is commonly calculated on a per square foot or per square metre basis. In the case of retail property, it is also common for rent to include a turnover element linked to the lessee’s revenue. Whether rent remains fixed or varies during the term will depend on the terms of the lease.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Rents and rental increases are generally subject to agreement between the parties. However, rent increases are also regulated under Abu Dhabi law and applicable regulatory measures.

Historically, a cap on rent increases was introduced in 2006, subsequently removed in 2013, and then reintroduced pursuant to Abu Dhabi Executive Council Resolution No. 14 of 2016, which limits annual rent increases to 5% upon renewal.

As at June 2026, the Abu Dhabi Real Estate Centre (ADREC) has introduced a temporary rent freeze, reducing the permitted increase from 5% to 0% per annum across residential, commercial and industrial leases until further notice. Under this measure, rent must remain at the level set out in the most recent registered tenancy contract and no increase may be applied on renewal or, in many cases, on new leases of previously rented units.

Accordingly, while rent review mechanisms may be agreed contractually, any increase remains subject to applicable statutory caps and temporary regulatory measures.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

The United Arab Emirates introduced a VAT regime, on 1 January 2018.

VAT will be applied to leases concerning commercial real estate at the standard rate of 5% irrespective of where the parties are resident. By contrast, leases of residential property are generally exempt from VAT, although mixed-use properties may require a more detailed analysis.

VAT is due on each payment of rent as a separate supply triggered by the earlier of payment or the issue of a VAT invoice.

The Executive Regulations provide transitional rules to deal with contracts entered into prior to 1 January 2018. In the context of a commercial lease, according to the regulations, if a lease is:

• entered into prior to 1 January 2018; and
• is silent on how VAT is to be dealt with in relation to supplies made in connection with the lease;

then if prior to 1 January 2018, the lessor requested that the lessee confirm:

• whether the lessee would be registered for VAT as at 1 January 2018; and
• the extent to which the lessee expects to be able to recover tax incurred on the supplies; and
• the lessee responded to the lessor's request within 20 days of receiving the request;

then the lessor will be able to charge the lessee an amount of VAT equal to the amount the lessee is able to recover in the course of its business.

If the lessee did not respond to the lessor's request within 20 days of receiving it, then the lessor may treat the rent payable under the lease as exclusive of VAT and request that the lessee pays VAT on top.

If the lessor failed to ask the lessee or the lessee knowingly provides incorrect information to the lessor, then the rents are now inclusive of VAT. This means that the lessor has to pay the VAT to the Tax Authority out of the rents he receives.

For all commercial leases entered into after 1 January 2018 VAT is due on the rent at the standard rate of 5% and it is standard practice for leases to include appropriate VAT provisions..

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

The options available to the landlord will depend on whether the premises are located within Abu Dhabi but outside the Abu Dhabi Global Market free zone, or within the Abu Dhabi Global Market free zone, and on the remedies set out in the lease.

(a) Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Termination / recovery of possession: For property located in Abu Dhabi but outside the Abu Dhabi Global Market free zone, Abu Dhabi law gives the lessor a statutory basis to seek termination / eviction where the lessee fails to pay rent within the applicable payment period. For commercial, industrial or vocational premises, this is generally 30 days from the due date agreed in writing, unless the parties have agreed otherwise. The lessor would need to pursue the relevant claim before the Rental Disputes Settlement Committee. The Committee may give the lessee a period of respite before it is required to vacate, up to a maximum of six months.

Debt recovery: The landlord may also bring a claim to recover unpaid rent and any other sums due under the lease, together with any contractual interest, penalties or costs where recoverable under the lease and applicable law. In practice, this may be pursued alongside, or instead of, a claim for termination / recovery of possession, depending on whether the landlord’s priority is to recover the arrears, regain possession of the premises, or both.

Enforcement of security: If the landlord holds a rent deposit, bank guarantee, post-dated cheques or other form of contractual security, it may be able to apply, call on or otherwise enforce that security to recover the arrears, subject to the terms of the lease, the relevant security document and applicable law. The landlord should consider whether doing so may affect any other remedies it wishes to pursue, particularly where it also intends to terminate the lease or recover possession.

Pursue guarantor or other contractual obligor: If the tenant’s obligations are supported by a parent company guarantee, corporate guarantee, personal guarantee or other contractual support, the landlord may be able to pursue the guarantor or relevant obligor for the unpaid sums, subject to the terms of that arrangement.

(b) Within the Abu Dhabi Global Market free zone

For registered leases, the ADGM Real Property Regulations 2024 address the registration consequences of lease expiry and termination. Section 48 provides that the registration of the termination of a lease following lessee default does not release the lessee from liability for breach of any express or implied covenant under the lease. Accordingly, where non-payment of rent or another tenant default amounts to a breach of covenant under the lease, termination and registration of that termination should not, of itself, prevent the landlord from pursuing accrued claims against the lessee, subject to the lease terms, applicable law and any available court relief.

A tenant may also seek relief from forfeiture from the ADGM Courts, including where forfeiture is sought for non-payment of rent or breach of another lease term.  The Court may suspend forfeiture pending determination, grant relief on appropriate terms, or refuse relief. 

For short-term residential leases, the ADGM Real Property Regulations 2024 are more prescriptive.  A lessor may apply to the ADGM Court for an order terminating the lease before expiry where the lessee has: (i) failed to pay rent when due and not remedied the breach within 21 calendar days of written notice from the lessor; (ii) materially breached the lease and not remedied the breach within 30 calendar days of written notice from the lessor; and/or (iii) assigned or sub-let the property contrary to the lease terms and not remedied the breach within 10 calendar days of written notice from the lessor.  Accordingly, for short-term residential leases, the landlord must generally issue the relevant written notice and allow the applicable cure period to expire before applying to the Court for early termination. 

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

In addition to rent, a lessee may incur a number of initial costs depending on the terms of the lease and the nature of the property.  It is common for the lessee to be responsible for:

• utility connection and usage charges;
• any agreed security deposit and/or guarantees; and
• lease registration fees, where these are contractually allocated to the lessee.

In Abu Dhabi (outside the Abu Dhabi Global Market free zone), the lessor is responsible for registering the lease (typically through the Tawtheeq system), although the parties may agree that the lessee bears the associated costs. (See Types of Leases).

In the Abu Dhabi Global Market free zone, the lessor is responsible for registering the lease (however, the parties are free to contractually agree responsibility for payment of the registration fees) with the Abu Dhabi Global Market real property Registrar. Registration fees are currently understood to be applied on a sliding basis depending on lease term and value (including, for shorter-term leases, a fixed annual fee and, for longer-term leases, a percentage of the contract value).In addition, service charges for common services/repairs may be payable. While these were historically borne by lessors, it is increasingly common (particularly in newer developments) for leases to be structured on a “net rent” basis, with service charge contributions paid by the lessee, often as a percentage of the annual rent.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

The maintenance and repair of common areas (such as car parks, gardens and shared facilities) is typically undertaken by the lessor or building operator, with the associated costs recovered through a service charge or community charge. In many areas of Abu Dhabi, particularly within designated investment zones, properties form part of a master-planned community, where property owners are required to pay community service charges to the master developer or management entity. Again, it is up to the parties to a lease as to how this is dealt with. For example, a lessor may include its liability to community charges in its service charge or a lessor may charge separately for this. It is important for a lessee to have some practical recourse to a lessor in the event that the lessor fails to pay the community charge as ‘master developers’ in Abu Dhabi may take strong action when dealing with non-payment such as blocking access cards or preventing access to communal facilities such as car parking or swimming pools.

Within the Abu Dhabi Global Market free zone

In the Abu Dhabi Global Market free zone, the ADGM Strata Title Regulations provide for the management and maintenance of common areas and the allocation of related costs to unit owners through a service charge mechanism. The allocation of such costs as between lessor and lessee is not prescribed by law and is determined by the terms of the lease. In practice, lessee will typically bear such costs through service charge provisions or similar arrangements.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

The lessee is to carry out minor or agreed repairs. Lessors are required to keep the property fit for use and carry out repairs (excluding those that fall to the lessee) unless otherwise agreed.

If the lessor delays in carrying out repairs or cannot be contacted when the lessee attempts to notify it of the necessary repairs, the lessee can apply to the Rental Disputes Settlement Committee (RDSC) in Abu Dhabi to obtain permission to:

• carry out such repairs and deduct the expenses incurred from the rent;
• exercise the right to rescind the tenancy contract; or
• reduce the rent to the extent that the lessee cannot use the property.

The lessee should not prevent the lessor from carrying out any urgent repairs necessary to conserve the property.

Should the necessary repairs result in the lessee being unable to utilize either the whole or part of the property, the lessee can apply to the RDSC to obtain permission to:

• Rescind the lease
• Require a reimbursement of the whole or part of the rent for the duration that the lessee cannot occupy the whole or part of the property
• Extend the term to the extent of the period during which occupation by the lessee was not possible

The lessee’s rights may be deemed waived if not exercised within a reasonable period should the lessee continue to occupy the property for more than a month after the date of the loss of utility and fail to apply to the RDSC to exercise the remedies available to them, such rights are deemed to have been forfeited (unless a reasonable excuse is given).

Within the Abu Dhabi Global Market free zone

Within the Abu Dhabi Global Market free zone, ADGM law provides a general framework for lessor and lessee obligations but does not prescribe a detailed statutory allocation of repair responsibilities. Accordingly, responsibility for maintenance and repair is primarily governed by the terms of the lease, and it is important that the lease clearly allocates responsibility for both structural and non-structural repairs.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Utilities (including electricity, water and telecommunications) are typically procured and paid for directly by the lessee from the relevant service providers. In multi-let developments or larger buildings, certain services (such as district cooling, centralised telecommunications infrastructure or common utilities) may be provided centrally and the associated costs recovered from lessees through service charges or lessor billing arrangements.

Within the Abu Dhabi Global Market free zone

Within the Abu Dhabi Global Market free zone, ADGM law does not prescribe a detailed statutory allocation of responsibility for utility and telecommunications costs, and the parties are generally free to agree these matters contractually. Under the ADGM Strata Title Regulations, common expenses (which may include certain utility costs) are allocated to unit owners through a service charge mechanism. Utilities serving individual premises are typically paid directly by the occupier, although arrangements may vary in multi-let buildings. The apportionment of such costs as between lessor and lessee is not prescribed by law and is determined by the terms of the lease.

Last modified 31 Aug 2020

What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?

The lessor will typically insure the structure of the building (particularly where it is multi-let) and pay for property insurance) and a lessee will pay for its own contents insurance. The cost of the lessor’s property insurance is often recovered through the service charge. Under Abu Dhabi law there is generally a right to suspension or reduction of rent to the extent that the premises are rendered unfit for use following damage or destruction of the property.

In the Abu Dhabi Global Market (ADGM) free zone, ADGM law does not prescribe a detailed statutory allocation of insurance obligations between lessors and lessee, which means the parties are free to contract as they wish. However, the ADGM Strata Title Regulations 2015 provide for the relevant strata development management association to insure buildings against damage from fire, storms, explosion, and equipment malfunction. For leasehold property located within the ADGM, it is important that the lease addresses the consequences of damage or destruction of the premises , as there is no statutory suspension or cesser of rent provided for at la and the position will depend on the contractual provisions agreed between the parties.

Last modified 31 Aug 2020