In Abu Dhabi, a lease is a personal contract of hire, more akin to a licence and not an interest in land. Most non-owner occupiers in both the residential and commercial sectors are lessees under leases. Non-UAE nationals (and companies owned in whole or part by non-UAE nationals) may only be granted long leases (being leases for a term of 25 years or more) within one of the designated investment areas. Alternative rights of occupancy that do create rights in property are:
These rights are investment interests allowing exploitation or development as well as occupancy. Non UAE nationals may only hold these interests within one of the designated investment areas for the limited periods of time which apply.
Abu Dhabi law does not provide a clear distinction between a lease (a personal right) and a usufruct (a right in rem). The law does state that long leases (being those with a term of 25 years or more) are property rights, however, it does not clearly define the characteristics of leases with terms shorter than this. In practice, Abu Dhabi Municipality (ADM) have deemed leases for a term of more than four years granted in favour of a non-UAE national (or a company owned in whole or part by a non-UAE national) in relation to land outside an investment zone and which contain rights to sublet to be usufructuary rights (and therefore not capable of being granted to a non-UAE national outside an investment zone).
Within the Abu Dhabi Global Market free zone (which geographically covers the whole of Al Maryah Island), the following occupational interests are also recognized:
There is an obligation to register all leases within Abu Dhabi. Failure to register a lease will result in the lease being considered to be not enforceable save for the personal obligations between the parties.
All Abu Dhabi buildings and units within them being leased are required to be registered under a system known as Tawtheeq. The lessor is responsible for undertaking the registration process and for the fees, although the economic burden of such fees may be allocated between the parties under the lease.
The Tawtheeq system requires a number of details to be provided during the first phase of the registration. Once the required details are provided, the application is processed through Tawtheeq for approval by the competent Abu Dhabi authorities, being the Department of Municipalities and Transport (DMT), acting through the Abu Dhabi Real Estate Centre (ADREC)..
If the registration is approved during the first phase, the fees are payable and completion occurs.
The associated registration fees are currently understood to be as follows:
In Abu Dhabi, non-UAE national lessees are required to pay a mandatory 5% municipality fee based on their total annual rent. This fee is added to the lessee's monthly ADDC water and electricity bill, with a minimum charge of AED 450 per annum. It is automatically applied upon registering the lease in the Tawtheeq system.
The Tawtheeq online system will request a number of fields to be populated for the registration of a lease unit, including (but not limited to) particularly in the case of commercial leases:
DMT/ADREC has clarified that the lessor may attach special terms and conditions to the contract during the account opening process, which are then referred to the Legal Affairs Section at the DMT of Abu Dhabi City. If the DMT/ADREC considers that the special terms and conditions are inconsistent with the general terms of the lease and other applicable rules, the DMT/ADREC may notify its rejection of those terms to the property owner. Renewal, surrender and termination are all carried out by way of the online Tawtheeq system.
The ADGM maintains its own real property registration system, established and maintained by the Registrar under the ADGM Real Property Regulations 2024 (ADGM Land Register). It provides that:
(i) interests that are already registered;
(ii) easements or public rights of way;
(iii) rights in favour of the relevant authority;
(iv) implied easements;
(v) statutory charges;
(vi) any matter registered by the Registrar;
(vii) an equitable obligation binding the registered owner as a result of the registered owner’s own conduct; and
(viii) the interest of another registered owner where two or more persons are registered as owners of the same interest, in which case the earliest-registered interest prevails.
Last modified 31 Aug 2020
A one-year renewable term is the norm for residential properties. For commercial properties (including retail and office), lease terms of three to five years are typical, with longer terms commonly seen for industrial properties.
In the Abu Dhabi Global Market free zone (ADGM), real property may be leased for up to 99 years renewable, such that the term does not exceed 198 years. For leasehold property not within the ADGM, there is no maximum duration for a lease set out in the applicable law. However, it is not common to see long leases (generally understood to be leases with a term of over 25 years) being granted as: (i) absolute ownership is preferred in the region; and (ii) non-UAE nationals and entities may only be granted long leases (being leases with a term of 25 years or more) within one of the designated investment areas.
Last modified 31 Aug 2020
Yes (for property located outside of the Abu Dhabi Global Market free zone) and these are as follows:
There are specific rules relating to residential leases, such as maximum numbers of lessees who are permitted to occupy a single dwelling, which vary depending on whether the property is a villa or an apartment, and the number of rooms in the dwelling.
Two months’ notice for renewal or termination is required for residential leases.
Commercial leases have similar rules to those which are applicable to residential leases, with minor exceptions such as the absence of rules concerning the maximum number of individuals who can occupy the leased premises.
Three months’ notice for renewal or termination is required for commercial leases.
The number of villas that can be used as offices is restricted. Evidence that the villa can be used for office purposes should be obtained (in the form of a certificate from the Abu Dhabi Municipality). If this cannot be produced, the Abu Dhabi Municipality could take enforcement action during the term (and a rent refund might not be available).
Three months’ notice for renewal or termination is required for office leases.
These do not fall within the ambit of lessor and lessee legislation and regulations specific to hotels are awaited.
In practice, furnished or serviced apartment accommodation may be subject to separate licensing and classification requirements issued by the relevant Abu Dhabi authorities (including tourism and municipal bodies), which may address matters such as minimum unit configuration, operational facilities and permitted rental periods. These requirements are administrative in nature and may change from time to time.
Last modified 31 Aug 2020
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:
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
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:
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.
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:
Last modified 31 Aug 2020
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:
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:
Last modified 31 Aug 2020
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
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:
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
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.
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
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 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
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.
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
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
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
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:
then if prior to 1 January 2018, the lessor requested that the lessee confirm:
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
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.
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.
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
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:
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
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.
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
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:
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:
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, 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
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, 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
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
Is VAT charged on rent?
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:
then if prior to 1 January 2018, the lessor requested that the lessee confirm:
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