UAE Property: 'Should I waive the penalty if my tenant can no longer afford the rent?'

Detailed summary

Question: I own a one-bedroom apartment that I rent out. My tenant renewed only three months ago but has now lost his job and says he needs to leave the UAE.The tenancy contract…

Question: I own a one-bedroom apartment that I rent out. My tenant renewed only three months ago but has now lost his job and says he needs to leave the UAE.

The tenancy contract says early termination requires two months' rent as a penalty. He has asked me to waive it because he has a family and says he genuinely cannot afford it. I'm sympathetic, but I'm also paying a mortgage and I'm worried the apartment could sit empty while I find another tenant.

What would you do? Am I being foolish if I let him leave without enforcing the penalty? DH, Dubai

Answer: There's the legal answer and then there's the answer I would give you after many years of dealing with landlords and tenants, and they aren't always exactly the same.

Let's start with the contract. If you have an agreed early termination clause requiring two months' rent, that is the basis from which the two of you negotiate. A tenant losing their job doesn't automatically erase their contractual obligations. But of course, I wouldn't immediately turn this into a dispute.

Ask the tenant when they realistically need to leave and whether they'll co-operate with viewings (presumably you will want to find an immediate replacement). Then, speak to a good local brokerage firm to establish how quickly the apartment could be re-let and at what level of rent.

Suppose your existing tenant helps you secure a replacement who moves in immediately after he leaves. If you suffer little or no financial loss, insisting on the full two-month penalty may achieve very little other than making an already difficult situation for him worse.

On the other hand, if the property is likely to sit vacant for six weeks and you'll incur cleaning, maintenance/preparation costs, or perhaps agency fees, it's therefore perfectly reasonable to negotiate compensation.

If I had to be practical and you pressed me for my view, I would release him early provided he allows viewings, returns the apartment properly, settles utilities and rent up to the agreed…

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