What is a lease agreement, and why does it matter?

For anyone interested in renting a home, understanding everything that goes into a lease agreement is vital. Signing this document is one of the most fundamental parts of renting out a property. Most importantly, a proper agreement can greatly protect you from financial burdens and lead your investment into a path of success. As a landlord, you need to protect yourself and your rental property by having a lease contract.

In this article, we will explain everything about lease contracts and why they are important. We will look at the reasons why you need one as well as the documents you must have to sign it.

1. What aspects must you include in your rental investment’s lease agreement in Dubai? 

2. Which are the main types of lease agreements? 

3. Why do you need to use a lease agreement? 

4. How is the process to register a lease agreement in Dubai? 

5. What are the required documents for signing a lease agreement in Dubai? 

6. What do you have to do to determine if a rental property is suitable for you? 

7. How can Connect Property help you rent and purchase real estate in the UAE?

1. What aspects must you include in your rental investment’s lease agreement in Dubai? 

One of the most important tips for non-experienced investors is having a solid lease agreement. It is incredibly significant in order to protect your property, the tenant’s rights, and yours. This agreement needs to set forth the responsibilities of both parties and reflect the needs of the property. However, some vital inclusions must be present in any legally compliant and enforceable lease contract in Dubai. 

First things first, you will want to have the tenant’s name with the address of the rental investment property for sale. Do not forget that all adult tenants need to be recognized on the agreement after being screened. Although, minors under 18 years have to figure in even if they are not financially responsible for the rent. In addition, you will want to put your name and contact information as the property owner. If you work with a property investment firm, share that contact data in the agreement. 

In the same way, the contract must include the start and end date, along with the instructions on what will happen at the end of the lease term. You need to incorporate information about what the tenant will be supposed to do at that moment in order to receive a full refund of the security deposit. 

A section in the lease agreement that mentions what is allowed and prohibited is essential. For example, if you do not want the tenant smoking inside, you need to clarify that in the rules and requirements section of the contract. Rules about your own conduct need to have a clause, too. If your rental investment property for sale is in an HOA, make sure that those rules are included as an addendum. 

2. Which are the main types of lease agreements? 

Lease agreements are a crucial part of the rental process since they protect equally the landlord and the tenant. As a landlord, you will have to determine what type of lease contract you should use for your rental property. Knowing the difference between them will help you decide which one is the best. There are different types of agreements you can offer tenants, such as:

2.1. Month-to-month lease agreement

These agreements automatically renew monthly until the tenant or landlord provides a 30 days notice. They are ideal for landlords looking for short-term rentals. Besides, it is easier to raise the rent cost without losing tenants or discontinue the lease without penalties if you offer this lease option.

2.2. Short-term lease agreement 

Short-term leases can last from three to six months and are excellent for landlords wanting to rent out their property to tenants for shorter terms. With this type, you can obtain a more stable income flow when compared to month-to-month leases. However, they often do not automatically renew unless the tenant requests it.

2.3. Fixed-term agreement

It is also called a long-term lease agreement and generally lasts from 12 to 15 months, depending on the landlord’s opinion. In fact, numerous landlords prefer this type since it offers a consistent income for longer terms than short-term options. 

2.4. Rent-to-own lease agreement 

These agreements occur when a buyer rents a property for a specific period of time before purchasing real estate from the landlord. There are lease option agreements that consist in buying the property as optional and lease-purchase agreements that demand that the tenant buy it once the lease finishes. It is a great way to generate rental revenue until the tenant can officially purchase the real estate property.

3. Why do you need to use a lease agreement? 

For landlords, it is very common not to use written agreements with their tenants. Just a conversation and a check can be enough to let a tenant move in. However, these oral agreements are hard to prove to a judge in case a problem comes up. Because of this, it is better not to take chances. Relying on a lease agreement is a much safer way to guarantee everyone’s expectations will be fulfilled.

A major benefit of having a written contract is that you can easily handle disputes. Without a clear agreement written on paper, small disagreements over rent checks, fees, or repairs can escalate into major legal issues. In general, lease contracts are a fundamental way to make legal processes easier, which protects the rights of both the tenant and the landlord.

Additionally, a lease agreement can help in stipulating the tenant’s responsibilities to the property. Every action the tenant takes has the potential of affecting the property’s value and insurance. The landlord should be informed of aspects that could lead to potential problems in order to fix them quickly. The document also allows tenants to know which utilities will get covered through their monthly rent and which ones they will have to pay for.

There are many other reasons that make lease agreements very important. Undoubtedly, having a contract that states the expected responsibilities leads to a much smoother renting experience. Once you successfully purchase real estate, you should use every resource available to you to protect your investment.

If you need help in starting a draft for your agreements, any property investment firm can greatly help you. An expert realtor can aid in determining the most important points the agreement should have.

4. How is the process to register a lease agreement in Dubai?

 

It is not surprising that foreigners are increasingly choosing the UAE as their new place of residence. Many of them purchase real estate in Dubai to generate income in the rental business and secure future investments, and others plan on working and staying permanently. However, foreigners often have problems with rental housing in the UAE. These problems vary as some look for apartments for rent and others tenants. 

To avoid future disputes, it is obligatory that both parties conclude a lease contract. Hence, the UAE government developed a strict registration system called Ejari to control and regulate these contracts, reducing the risk of disputes. Usually, the owner begins the process of the lease agreement registration, and the tenant completes it. They will have to pay 200 AED and choose to do the registration in any typing center or through the Dubai Land Department website. 

You will have to provide your Emirates ID and a copy of your passport and visa. If you rent the property for commercial purposes, you will need a license to conduct this activity. Then, you need to upload the required documents for the application, such as the lease agreement, copies of passports, IDs, visas of both parties, and a copy of the certificate of ownership. After the approval of the documents for the application, in 2 working days, you will obtain the certificate. 

In addition, you should consider the services of top real estate brokers to help you prepare the documents and register the contract. After registration, do not forget you will need the identification number assigned to the agreement to create an account with DEWA. 

5. What are the required documents for signing a lease agreement in Dubai? 

Once you put your rental investment property for sale, you must ensure you and your potential tenant have all the right documentation. Before finishing an agreement, confirm that both parties have handled legal requirements and that the rental period is correct. Most leases last for a year, with options for shorter terms available. Long-term rentals are usually paid fully to the owner. However, you can also have a top real estate broker taking care of those transactions. 

Regardless of the length of the agreement you have, there are documents that you will most likely always need to sign the lease agreement:

• Tenants need a copy of their passport, UAE visa, and a statement of income from an employer.
• The landlord needs a copy of the title deed or some proof of ownership. They also need a copy of their passport or residency visa as well as a copy of the ID card from the estate agent broker.

Once these vital papers are ready, both the landlord and the tenant sign the contract in the presence of a witness. If necessary, The Dubai Land Department also accepts the signature from a legal representative of the landlord through a Power of Attorney. Property investment firms that are licensed by this department can also sign the contracts for the assets they manage.

6. What do you have to do to determine if a rental property is suitable for you? 

If you are searching for a good rental investment property for sale in which to invest, you will have to consider specific criteria. If you are looking for a residential rental property, you should focus on searching within communities with properties appreciating in value, strong employment figures, and low crime rates. However, you may already have narrowed your search for real estate investment options to a given area. In that case, you need to run some basic calculations to determine how these properties will likely generate positive cash flow.

You can check out the Dubai’s most popular renting locations. We would like to add that there is plenty of information regarding this matter on our site, visit our blogs section.

One of the most challenging aspects of purchasing rental real estate is compiling a list of all expenses. A failure to take into account one ongoing expense or upfront capital can lead you to a false estimate of the price and revenue potential of the property. Usually, the list of expenses includes the agent commission, mortgage fees, repairs, advertising, property taxes, and property investment firm fees. 

It can be tough to know, in advance, all the expenses your property may require. For this reason, it is important that while you calculate the income potential, you gather as much information about properties in the UAE as possible. Besides, you can err on the conservative side of the calculations, factoring in an additional percentage of unforeseen expenses. 

Another way you can determine if a rental property is viable for you is the 1% rule. It consists in taking an estimate of your monthly income from a rental investment property and dividing it by the purchase price. Then, if the number is in the 1% range, you might have an excellent and prosperous rental property. 

7. How can Connect Property help you rent and purchase real estate in the UAE?

Our agency and property portal gives you access to many assets for sale across the UAE. Not only do we connect sellers to potential buyers by allowing them to list a property on our site. We provide both parties with the resources they need to complete their transaction.

With our advanced search tools, you can quickly find and purchase real estate that fits your needs. Look up any location, price range, and property characteristics to easily find the ideal home.

We are ready to provide you with all the real estate investment options you need, you can even compare them now! We have experts who can assist you in any decision for your investment. Whether you find an issue or need the advice to make the best possible choice, do not hesitate to contact us.

Would you like more information on the best strategies to rent your property by Connect Property? Call one of our team members at +971 43 316 688 for any questions regarding the best ways to handle a rental agreement. We are glad to provide you with any information you need if you, writse to us at contact@connectproperty.ae.

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