What Is Key Money In Dubai? (Solution)

• Key Money payment in Dubai, the UAE, is a kind of the insurance for the owners of real property, which they grant on lease. Such a deposit guarantees the property owner, that in the case of the early termination of the lease contract or in the case of damaging the property, the caused losses will be reimbursed.

What means key money?

Key money is a fee paid to a manager, a landlord, or even a current tenant to secure a lease on a residential rental property. The term is sometimes used to refer to a security deposit. However, in some competitive rental markets, key money is simply a gratuity or a bribe.

What is key money in UAE?

In the recent past, we have had to encounter an obstacle in acquiring commercial properties. This obstacle, as it is referred to in local parlance, is key money. This amount is to be paid before signing for a shop and is both non-refundable and without any documentary proof.

Is key money refundable?

In the United States, it is common to require key money in the form of a security deposit. If neither happens, the money is refunded (typically with statutory interest) when the tenant vacates.

How much is a key of money?

Typical practice is 1-3 months of rent, but it can sometimes be the equivalent of six months of rent or more. The fee is entirely up to the discretion of the landlord.

Is key money taxable?

For taxation purposes, if key money is properly allocated to the business, should that allocation appear in the lease or an ancillary document, which raises additional questions. If not in the lease, key money provisions are unenforceable and illegal.

What is key money in lease?

Key money is any sort of non-refundable benefit, usually money, paid in exchange for the granting, renewal, extension or assignment of a retail lease. Lease terms that require the tenant to pay key money are void.

Is key money an asset?

We have accounted for key money payments as an intangible asset under SFAS No.

What is key money restaurant?

Basically, key money is an amount paid to the existing tenant to buy them out of their lease. In addition to getting the seller to assign over its lease, the amount paid will usually entitle the purchaser to all of the furniture, fixtures and equipment within the restaurant.

Why does Japan have key money?

The dreaded reikin (礼金) or ‘key money’ is a non-refundable fee that dates back to the Kanto Earthquake. Much of Tokyo was destroyed by the earthquake and so landlords were in an enviable position of choosing who they rented their property to.

Is key money legal in Japan?

Yes, if you can charge key money then you should as it is not illegal and Japanese renters are accustomed to the practice. However, it usually only applies to high-rent properties or newer units or those in prime locations. Currently, the typical key money payment is equal to one month of rent.

What is key money UK?

key money in British English noun. a fee payment required from a new tenant of a house or flat before moving in. Collins English Dictionary.

What is key money in New York City?

“Key money is when you pay a landlord money (usually under the table) to secure an apartment,” says renters rights attorney Sam Himmelstein, who notes that sometimes, it was supers, building managers, or even the tenants themselves who demanded the cash.

What is

Interesting tidbits include: The income from foreign capital investments accounts for nearly 60% of the UAE’s gross domestic product (GDP). Version in its entirety There are several unusual traditions and definitions that are unique to the local economy that apply to foreign citizens who enter into civil law relationships involving real estate in the United Arab Emirates. These traditions and definitions are applicable to foreign citizens who enter into civil law relationships involving real estate in the United Arab Emirates.

So, what exactly does this idea imply, and what are the legal ramifications of using it?

Key Money in Dubai, UAE

In the United Arab Emirates, the term “Key Money” refers to a certain sum of money that is given to the landowner at the time of lease signing. In particular, it should be noted that this sum is in addition to the rent and serves as a form of guarantor and sign of the transfer of the right to possession of the real estate property. It is not necessary to return the amount that was entered as Key Money at the end of the lease term to the lessor if the lease term has expired.

Key Money: what is the essence of the guarantee payment

In reality, the Key Money payment is a payment that serves as a guarantee to the property’s owner that the terms of the transaction will be followed as agreed. In other words, this payment acts as an assurance that the tenant will not abruptly cancel the lease before the end of the agreed-upon period of the lease agreement. In most cases, the amount of this payment is equivalent to the amount of rent paid for a few months. Due to the fact that the Key Money payment contributes to the reduction of the total rental fee, the property that is leased without the Key Money payment will be significantly more expensive.

It is possible that at the end of the lease term, the property owner will require another guarantee payment to be made to him or her.

There have been instances where the new owner has also demanded that the guarantee payment be made again.

These factors include the typical rental rate for real estate, the location of the property, and the availability of urban infrastructure.

Conclusion

The payment of Key Money in Dubai, United Arab Emirates, is a type of insurance for the owners of real estate, which they give on lease. In the event of an early termination of the lease contract or in the event of property damage, a security deposit assures the property owner that any losses incurred will be reimbursed to them in full.

Such a strategy provides appropriate security for legal owners while also serving as an example of how to establish contemporary and polite market relationships.

We will help you to open:

Powered by a third-party service

More articles from “DubaiUAE business news”:

The image has been used only for illustration reasons. Image courtesy of Shutterstock Dubai: The term ‘key money’ may be used in the context of a rental agreement that you are going to enter into. What precisely is it, and what should you do if you are required to deposit some key money with a landlord are two questions you should ask. A Gulf News reader was confronted with a similar circumstance and wrote in to seek guidance. “Could you kindly tell me what ‘key money’ is?” he inquired of her.

Is this normal?

If that’s the case, how much may the landlord charge me?

Gatina confirmed that it is legal.

What is key money?

Generally speaking, key money is defined as a charge paid to a management or a landlord in order to secure a lease on a residential or commercial property. The phrase “security deposit” is frequently used to refer to this type of deposit. In reality, the key money is a payment that serves as an assurance to the property’s owner that the terms of the deal would be followed to the letter. As a result of this payment, the tenant is guaranteed that the lease will not be terminated before the agreed-upon time period.

Not legal

Gatina also discussed the rental legislation in the United Arab Emirates, as well as what a person should do if they are requested for key money. Because such a practice is not controlled by law in the UAE, it is not allowed for landlords, developers, or brokers to demand key money from tenants. Dubai Land Department (DLD) does not support or promote this type of behavior in any form. You have the option of filing a complaint with the Real Estate Regulatory Agency (RERA) against such persons or businesses that demand ‘key money,'” she continued.

In the UAE, such practice is not regulated by any law, hence it is not legal to ask for key money either by landlords, developers or brokers.

– Raluca Gatina, Partner and Legal Director of Elnaggar Advocates, a law practice situated in the United Arab Emirates.

How to file a complaint with RERA

– Raluca Gatina, Partner and Legal Director of Elnaggar Advocates, a legal practice situated in Dubai, United Arab Emirates

Neighbourhood watch: Key money or reimbursement?

What exactly do people mean when they talk about “key money”? This has been a word that has been thrown about a lot in the real estate industry. It is more commonly encountered in the commercial sector, such as in offices or showrooms, than in other sectors. Normally, when a property is located in a triple A location and a tenant intends to relocate, the landlord may want a specific amount of money from the incoming renter, which is in addition to the rent. The phrase may be connected with extortion or anything equally ugly, and it frequently elicits resentment from the prospective renter because of this association.

• Occasionally, the exiting tenant may merely be asking compensation for his or her investment in upgrades, which might include anything from a false ceiling to office furniture and other items.
• This request is viewed as payment for upgrades by the exiting tenant, while it is viewed as key money by the new renter.
• It is possible that the new tenant will simply have to repeat the operation at a higher expense if the previous renter installed an air conditioner or placed floor tiles, for example.
• This is not a significant sum of money.
• There are comparable complications that arise in villas when the evicting renter tries to recover the costs of assets such as the garden, carpets, drapes or floor tiles.
• While it is frequently stated that connecting collateral transactions is prohibited, this is just a question of private talks between two parties.
• Although the agent is frequently involved in the associated talks at the request of one of the parties, there is no reason why the two tenants cannot negotiate directly in order to establish a mutually beneficial agreement without the involvement of a third party.
• When you achieve a mutual agreement only to discover that the landlord has intentions to rent to a third party, you have wasted your time and money on the process.

A person’s capital outlay is likely to be recovered in part if the property is in high demand and the market is strong, but there is no assurance that they will recoup the entire amount.

It is illegal for developers or landlords to ask ‘key money’

The image has been used solely for the purpose of illustration.

A contract will be deemed concluded if all parties agree on the conditions provided for in the brokerage agreement.

Published at 6:00 p.m. on Sunday, October 30th, 2016. The most recent update was made on Monday, January 2, 2017, at 5:29 PM. My work entails searching for profitable areas to develop my employer’s business in all seven emirates of the United Arab Emirates. Our company has recently encountered a stumbling block in our efforts to acquire commercial real estate sites. This impediment, as it is referred to in the local slang, is known as key money. This payment must be paid before to entering a contract with a store and is non-refundable and does not require the production of any documentation.

1. Where in the legislation does it say that developers or landlords or even brokers may charge this money, which is often between Dh50,000 and Dh500,000, is my issue.
2. So it is against the law for developers, landlords, or brokers to ask for “key money,” even if this may be a common practice in the real estate market today.
3. It follows from Article 28(1) of Law No.
4. Unless all parties express agreement on the terms and circumstances specified in the brokerage agreement, the deal is presumed completed.” A complaint against such persons or corporations requesting ‘key money’ can be filed with the land department and/or the Real Estate Regulatory Agency.
5. In order to be compensated for his brokerage services, a real estate broker must first and foremost get the signatures of both parties to a binding contract.
6. Every month, an employee is entitled to two days of annual leave.
7. Following seven months of continuous employment with my present workplace, I have requested a 14-day paid vacation from the company.
8. My knowledge of UAE labor rules leads me to believe that I am eligible for 14 days of unpaid time off.
9. If an employee has completed six months of work but less than one year of service, he or she is entitled to two days of annual leave per month.
10. 8 of 1980, governing employment relations in the United Arab Emirates (the ‘Employment Law’), this is permitted.

When a worker’s employment is ended, he or she is entitled to yearly leave for any portion of the previous year in which the service was terminated.” It should be noted that yearly leave accrues from the date of employment at the rate of two days leave each month, as specified in the aforementioned article of legislation, but may only be taken advantage of once six months of service has been completed.

1. We will presume that your employer has not taken into account your first six months of employment and has computed your yearly leave based on the completion of six months of employment.
2. Annual leave will be calculated from the date of hire, but it will not be available until the employee has completed six months of work with the organization.
3. Understand the law.
4. Employees are not required to cover the costs of recruitment.
5. Is it possible for an employer to recoup the costs of a visa and labor connected with a particular employee if an employee is terminated during his probationary period due to poor performance or fired due to misconduct during this period?
6. In accordance with Article 6(a) of Ministerial Order No.

He holds legal qualifications to practice law in Dubai, the United Kingdom, Singapore, and India, among other places. Readers can submit their inquiries to:[email protected] or send them to Legal View, Khaleej Times, PO Box 11243, Dubai, for a complete list of his firm’s contact information.

‘Key money’ only way out?

Published on Saturday, May 28th, 2005 at 10:31 a.m. The most recent edit was made on Thursday, April 2, 2015, at 8:33 PM. Those who have been following the trend for a long time, on the other hand, claim that the ‘key money’ is no longer restricted to the ‘give and take’ of government-allotted housing to people of a specific income group alone, but can be used with virtually any type of housing that is relatively immune to frequent rent increases. As a long-time resident of Dubai explains: “Demand and supply are the driving forces, and there are those who are prepared to pay out ‘key money’ provided it benefits them economically in the long run.” “To the taker, it’s like a bonus, and it may be in the form of cash or goods.” For the giver, it is an investment that will provide a return in the long term.” Although it is widely known that it should not be tolerated, it is also well acknowledged that it is mainly accepted.

1. When the grouse runs something like this: do tenants have any protection or rights against yearly rent hikes, it’s very important to consider this.
2. The private sector is in charge of providing accommodation for the expatriates in the country.
3. However, as a result of the economic growth, the private sector is solely interested in investing in luxury housing, resulting in a reduction in the building of homes for low-income families.
4. Now, let us return to the grouse: Is there any kind of safeguard?
5. Despite the fact that the rent committee may intercede in his favor, the landlord may be able to obtain his money back by reneging on the contract the next month.
6. “Dubai is no longer the El Dorado that it once was, despite the fact that the glitter has only grown more dazzling with time.
7. “Transporting beds and luggage to Ajman, Ras Al Khaimah, Fujairah, and even Umm Al Quwain has only resulted in higher rentals in those emirates as well,” says Azad, a Pakistani who works as a showroom employee.

“Eight individuals are crammed into a 12×10-foot room, sleeping one on top of the other in bunker beds.

“We’re herded together like animals in a corral.” The only thing that matters to the landlord is the rent.

“You should see how chaotic things are in the mornings.” Azad’s ‘landlord’ is also an expatriate who rented the apartment from a real estate firm with the intention of subletting it to as many people as he could find.

Not only in Karama, but almost everywhere else as well, rents have been steadily increasing.

Furthermore, incomes for expatriates have not kept pace with inflation.

Rents in Dubai are in response to the demand for housing, which is currently just over a million dollars a month and is predicted to treble in the next seven to ten years.

Each emirate is given the authority to adopt its own set of regulations.

The rate of intake of new inhabitants considerably outstrips the availability of housing, driving up the rents in this emirate as well, which was formerly considered a shelter for people searching for affordable or inexpensive housing before the global financial crisis.

It’s no surprise that ‘key money’ plays such an important role.

The Economics of Key Money

Recently, articles regarding ‘key money’ have appeared in the Gulf News newspaper. When I looked at a café, the asking price was broken down into three categories: décor, goodwill, and key money. I’d never heard of key money before, but it’s something I’ve learnt a lot about in the years afterwards. Landlords are prohibited from raising the rent by an unreasonable amount in Dubai, thanks to the presence of the Rent Commission. The difficulty, of course, is that the Rent Commission’s definition of ‘excessive’ tends to change from year to year, making it difficult to apply consistently.

• Prior to 2003, ‘extreme’ meant’more than 10 percent per two years,’ according to what I was informed.
• According to them, considering the state of the Dubai economy, 100 percent was not ‘excessive.’ As a result, the buyer should not have been required to pay any key money.
• For example, flats in my building rented for a variety of costs, depending on the location.
• He has made his livelihood off key money for the last ten years, using an outdated definition of excessive as “10 percent every two years,” and he has done so for the previous ten years (not in my building, but in several other apartment buildings in Dubai).
• The previous renters were quite pleased with Farook’s services since they were legally bound to pay out the entire lease (having issued post-dated cheques for the entire amount), and Farook absolved them of that obligation entirely.
• Farook would then charge the new renters a fee known as ‘key money’ (and also sub-lease the flat to them for a price midway between the old price and the current rent).
• Farook, on the other hand, would be overjoyed.
• It’s referred to as ‘key money’ in the United Arab Emirates.

(I once tried to locate someone like Farook in New York City, where 30-year residents may be paying less than $100 in a building where new tenants must pay $3,000, but I had no success, and I couldn’t find anything with a rent that was less than my monthly wage.) Recently, the key money business in Dubai has become much more difficult, as rents have increased dramatically, and are permitted to rise (for the time being) by 15 percent per year.

• As a result, people no longer see the point in paying key money when they can rent for the same price directly from the landlord without paying key money.
• He attempted to sell me a school in Sharjah for around €4,500,000 (the school cannot be sold to non-residents, so that would have been €4,500,000 in pure profit, shared between Farook, some of his cousins, and a few citizens of the United Kingdom).
• Even the fact that I don’t actually have €200,000 (let alone €4,500,000) appears to have escaped his notice, as he believes that all Westerners must obviously be in a position to deem Croesus a pauper by definition.
• The English contract made it crystal evident that they were trying to sell the firm to some Arabs before they came up with the idea of selling it to me (and they hadn’t bothered to switch the English contract for an Arabic one).
• Another profitable venture that Farook is now engaged in is the collection of key money for a number of unadvertised flats that only he is aware of.
• Farook, on the other hand, has lived in Dubai for a long time and knows where to locate good deals.
• Customer’s believe they are receiving a 25% discount on a Dubai apartment (after all, he isn’t going to let them sublet it without making a profit, is he?) and are willing to pay the key money.
• One thing that strikes me as odd is that Farook does not appear to be doing anything in the new, freehold neighborhoods.
• Because of the 15 percent cap on rent increases, landlords are unable to legally raise the price over €1,150; nonetheless, new tenants are offering as much as €2,000 in exchange for their occupancy.

As a result, some long-term renters and business owners will attempt to recover the money owed to them. Farook, on the other hand, is not one of them, according to what he’s told me in confidence.

Key money falls but busy areas going for premium

Although key-money rates in Dubai have fallen as a result of the economic slump, they are still as high as Dh1 million per store in high-traffic locations such as Naif Road in Deira and Fahidi Street in Bur Dubai, according to the Dubai Financial Services Authority. When a new renter or shop owner pays a premium to a current tenant or trader who has been operating a business in the same location for a number of years, this is referred to as “key-money.” Before the real estate market began to be affected by the global financial crisis six months ago, rates were increasing, according to estate agents who spoke to Emirates Business.

• Abdul Naser, Manager of Hira Properties, which specializes in the sale of residential units and retail stores, claimed that shops are now being swapped for Dh1 million key money in the most prominent retail market locations in Dubai, even as recently as this week.
• Key-money has, on the other hand, almost completely vanished from non-prime locations and several sections of the Northern Emirates, according to the expert.
• Whoever wants to relocate shops using key-money will be a loser from now on.” “Traders are ready to pay a premium for the greatest sites,” according to another real estate representative.
• The key-money rate in the Gold Souq region has dropped from Dh2m per business to Dh1m per shop, a reduction of 50%.
• “A grocery store owner was seeking Dh300,000 as a down payment in order to sell his store,” stated another agent.
• When renting a modest studio apartment in Deira, people used to have to pay Dh5,000 as key-money, but currently there are no such requirements.
• This used to be shared by the office personnel, but the fee has now been eliminated as well,” says the author.
• In his words, “rent levels in Dubai and Sharjah have fallen down, and as a result, renters are fleeing Ajman.” “At this point, no one is asking for crucial money.” The agents want to keep their present renters, even if it means lowering the rent.
• With respect to rental property, current tenants pay cheaper rents than new tenants; hence, an individual investing in key-money to take over a shop benefits from the opportunity to operate a company in a prominent location while paying a reduced rent.

With the Emirates Business 24|7 daily email, you can stay on top of the latest business news from across the area. To sign up for the newsletter, please visit the following link. Follow Emirates 24|7 on Google News to stay up to date.

What Is Key Money?

A sum paid to a management, a landlord, or even a present tenant in order to obtain a lease on a residential rental property is referred to as key money. The phrase is sometimes used to refer to a deposit held as a kind of security. Although it is considered “key money” in some rental markets, in others it is just considered “gratuity” or “bribe.” Charging key money for commercial real estate agreements may be permissible in specific circumstances, provided that it is explicitly stated in the lease for the property.

Understanding Key Money

The term “key money” has varied connotations in different regions of the world, including the United States.

Key Takeaways

• The term “key money” is occasionally used to refer to a security deposit. Sometimes it’s a bribe, and other times it’s not. In a difficult market, key money might take the form of an under-the-table payment in exchange for an apartment lease. In many business leasing arrangements, the payment of key money is legal and appropriate
• But, in others, it is not.

In certain jurisdictions, key money is considered to be identical with a security deposit. It is the payment of the equivalent of one or two months’ rent, which is due at the time of signing the lease. States have different laws regarding this, but in general, this money must be held in escrow and returned to the leaseholder, along with interest, when the lease term finishes. It is only in the event that the tenant destroys the property or fails to pay the rent that the landlord may withhold payment of part or all of the security deposit.

When Key Money Is a Bribe

It is common practice in several cities for prospective tenants to pay key money to a property owner or management, a building superintendent, or even a present tenant in order to secure a rental agreement. In such instances, the key money is used as a bribe to guarantee that the prospective tenant’s application is chosen above the applications of other applicants. This strategy is restricted to cities with low vacancy rates and high rental costs, particularly if some rents are subject to price limits that make them all the more attractive to prospective tenants.

Demands for key money in return for apartment leases were previously prevalent in New York City, despite the fact that it was against the law.

Although the city’s rent stabilization regulations are still in effect, it appears that the practice of giving key money is no longer widespread.

Key Money for Commercial Property

In New York City, according to the real estate website brickunderground.com, the payment of key money for commercial real estate is still common practice, and in this particular instance, it is completely legal and ethical. In exchange for the payment of key money, the holder of an advantageously priced long-term commercial lease may transfer the lease to a new tenant. Especially prevalent is the situation in which a prior tenant transfers ownership of an existing restaurant, which has previously been fully prepared for operation as a restaurant, among other things.

In an article on the legal website LegalEagle, it is stated that requesting key money may be permissible if it is expressly put into the lease for the property. In certain countries, such as Japan and Mexico, it is standard practice to provide a landlord a sum of money in exchange for a key.

What is key money Dubai?

Money in Dubai and the United Arab Emirates (UAE) is important. The phrase “Key Money” in the United Arab Emirates refers to a certain sum of money that is given to the landowner at the time of signing the lease. In particular, it should be noted that this sum is in addition to the rent and serves as a form of guarantor and sign of the transfer of the right to possession of the real estate property. More information may be found on it. What is Japan’s “key money” has also been questioned. In Japan, key money is a monetary contribution made by a new renter to the landlord of a rental property.

Also understand what factors influence the magnitude of significant money payments.

Currently, the key money paid in connection with nursing home leases can range from $10,000 to $14,000 per bed, depending on the facility.

It is included in Other intangible assets because it represents expenditure associated with acquiring existing operating lease agreements for stores in countries where there is an active market for key money (e.g., regularly published transaction prices) and because it represents expenditure associated with acquiring existing operating lease agreements for stores.

What exactly is “key money” in New York City?

Ready Operational Restaurant

We are concerned about your health and safety, which is why all of our viewings and meetings are conducted in accordance with COVID-19 safety standards.” FEATURES OF THE PROPERTY: • Basement parking • Central air conditioning • View of the community -Parking is provided for an additional fee. -A view of the sea or water Banking and ATM services are available, as is a business center, as is a children’s daycare and a children’s play area. -Metropolitan station -Mosque -Communal park -Parking available to the public -Transportation through public transportation restaurants, shops, and walking trails” Restaurants, Shops, and Walking Trails” 1st Floor, Jumeirah Business Center (JLT) – ESSENTIAL MONEY: Rs.

• – Sole Proprietorship It is currently rented for AED 95K/year and is available for negotiation.
• For further information, contact Alina Potseluyeva 22561 on +971 501030885 / 04 392 8831 or visit her website.
• No.
• Don’t miss out on our READY BUYERS and TENANTS in the Palm Jumeirah, Jumeirah Park, JBR, Dubai Marina, JLT, Emirates Living, and Downtown Burj Al Arab areas of Dubai.

“We place a high priority on your health and safety, which is why all of our viewings and meetings are conducted in accordance with COVID-19 safety standards.” FEATURES OF THE PROPERTY: • Basement parking • Central air conditioning • View of the community -Private parking-View of the sea or water Banking and ATM services, a business center, a children’s nursery, a children’s play area, a metro station, and a mosque are all available.

-Public park-Public parking-Public parking -Transportation through public transportation -Restaurants -Shops-Trails for walking A ready-to-run restaurant with a key money of $175,00/-commercial value.

Retail Showroom / Shop

The Jumeirah Lake Towers in Dubai is the location. Emirates of the United Arab Emirates Please pass this information along to:

Details

Retail Showroom / Shop is the type of establishment. 674 SQFT / 674 SQFT (63 SQMT) AED95,000 (AED95,000 per annum) is the annual rent. Rent is due on a quarterly basis. AED 500 as a refundable security deposit On the phone, talk about it.

Amenities

The Jumeirah Business Center 1, JLT, is the location of the key money: 175,000/-. There are five working visas available. – Completely functional restaurant. – Sole Proprietorship – The property is being rented for AED 95K/year. – Negotiations are welcome. – Offered for sale as a fully operational business. For further information, contact Alina Potseluyeva 22561 on +971 501030885 / 04 392 8831 or visit her website. AP-R-21259RERA Permit No: 0520075704 Reference No: AP-R-21259 Sellers and landlords should be aware of the following: Create a listing for all of your available properties with Aston Pearl so that we can sell or rent them for you as soon as possible!

Real Estate Services Provided by Aston Pearl include:- Residential Sales and Leasing Sales and lettings of commercial real estate Service Providers for Property Management Service Providers in the Mortgage Industry Real Estate Appraisal and Valuation Services Sales of Real Estate on a Global Scale Hotels are constructed structures.

-Communal park -Parking available to the public -Transportation through public transportation -Restaurants -Shops-Trails for walking

Additional InformationConditions

Name of the company Aston Pearl Real Estate BrokerReady Operational Restaurant |KEY MONEY175,000/-,Jumeirah Business Center 1 Address of the property

Enquire Now

It’s a scenario that’s all too common. Your rental agreement is coming to an end, and you have decided to vacate the premises. Perhaps you want to return to your hometown or just wish to relocate to a more convenient location where you will have more space to work from home. In any case, a removal company arrives to pack up your possessions, and you get one last look around before they go for the day. You hand over the keys to the property and wait for the return of your security deposit since the cabinets are empty and everything appears to be clean and neat.

• Instead, your landlord sends you an email to advise you that he has discovered damage to the property and that he will be using your deposit to pay for the repairs and repainting.
• Despite the fact that the renter has taken good care of the apartment or villa, according to Harry Tregoning, an estate agent at Tregoning Property in Dubai, this is a common occurrence.
• Likewise, Ben Compton, managing partner of Compton Partners Estate Agents in Abu Dhabi, expressed his approval.
• Normal wear and tear is acceptable and should not result in the forfeiture of the deposit.
• According to his observations, renters seldom receive their entire security deposit refunded.
• As a result, if you discovered it freshly painted and cleaned, you must ensure that it remains freshly painted and cleaned.” Because you can control the expense, we advocate doing the work yourself.

However, you run the risk of your landlord coming back and stating, “that’s not done to the needed quality, I’m going to have it done again,” which means you’ll wind up paying twice for the work.

Planning pays off

Harry Tregoning suggests that you take your own photographs of the house as soon as you move in, in order to identify any concerns as soon as possible. Pawan Singh is a contributor to The National. Mr Tregoning stated that it is for this reason that it is critical to properly arrange your leave. “Have a meeting with your landlord two weeks before you want to move out so that you can communicate your expectations,” he said. “You need to have a rational dialogue in advance because, once you hand over the keys, you’ve basically forfeited your advantage.” It is true that it is not always possible to meet your landlord because they may be based in another country.

1. It is critical to begin preparing as soon as possible.
2. Prepare your own inventory with pictures and deliver it to your landlord on the same day to ensure that everything is timestamped.
3. Although your estate agent may charge you a fee for a professional check-in report, depending on the value of your deposit, it may be money well spent.
4. This might pile up over time.
5. “We would always urge that the renter completes the task themselves,” Mr Compton stated.

Dealing with a rogue landlord

Normal wear and tear is to be expected, and should not result in the renter forfeiting his or her security deposit money. Courtesy LuxuryProperty.com These recommendations from estate agents should be sufficient to ensure that you receive your deposit back from a decent landlord. But what happens if your landlord continues to refuse? Depending on the emirate, there are different steps to follow. In Abu Dhabi, the whole procedure may now be completed online through the website of the Abu Dhabi Judicial Department.

More information can be found at There will be no hearing on this matter.

• Instead, if the judge is satisfied with the evidence he will issue a payment order within three days.
• A complaint can be filed online with the Judicial Section’s enforcement department in the event that a landlord continues to refuse to release the deposit to the complainant.
• The Real Estate Regulatory Authority (Rera), which is a component of the Land Department, regulates the property market in Dubai.
• The Arbitration Department will try to resolve the case within 15 days, but if that is unsuccessful, then a lawsuit will need to be filed.
• Mr Compton claimed that, in practice, many renters do not follow through with the grievance process.
• “You’re likely to have to go to hearings, now they might be done on Zoom, but sometimes you might need to go to court several times.

It’s a pain.” The United Arab Emirates has tight rules requiring landlords to repay the deposit provided the renter has not harmed the property, according to the legislation. Courtesy LuxuryProperty.com

Ten tips to help you get your deposit back

1. Before signing your tenancy agreement, make sure you have thoroughly read everything. Seek out sections that specify the terms and conditions of the security deposit. Take photographs of the property as soon as you arrive, paying particular attention to any damage. Look for cracks in the ceilings and damaged tiles on the floor, as well as any other problems. Send these photographs to your landlord so that they can be kept on file. Before you leave, schedule a meeting with your landlord to discuss what needs to be done before you go. Bring in your own professionals to touch up the markings on the walls or, if required, have the entire property painted
2. Leave the home in good condition and return after the removalists have completed their work since they may leave flooring in poor condition. It is important not to leave any furniture behind since your landlord may charge you to have it removed. Before you leave the property, make sure to pay all of your expenses. Check to see that the water has been turned off and that there are no leaking pipes. If you are afraid that your landlord may be dishonest and you live in Dubai, you may provide your keys to Rera, who will keep them until you receive your deposit back. Make a decision on the inconvenience factor and if it is worth your time to battle for the recovery of a little deposit.

Deposit dispute helplines

Call the Rental Disputes Settlement Centre on 800 4488 if you need any more assistance in Dubai. Call the Rent Dispute Settlement Committee on 800 2353 in Abu Dhabi if you are having a problem with your rent.

Hotels and leisure: Key terms for hotel management agreements – Issue 6 – Key money

A series of short briefing papers indicating essential points for discussion while negotiating the terms of a hotel management agreement is being published. This is the sixth in the series (the HMA). ‘Key money’ is the subject of this briefing, and we will discuss how it is normally structured, as well as the important issues that go beyond the strictly economic incentives that such provisions might give.

What is key money?

A key money payment is an upfront payment made by a hotel operator or franchisor to a hotel owner in order to ensure the signing of a hotel management agreement (HMA) or a franchise agreement. It is more probable that key money will be a factor in high-end projects (where there is rivalry amongst operators for access to certain crucial markets or showpiece buildings) or when franchisors are attempting to grow their brand. In its most basic definition, key money is a cash commitment made by the operator to the proprietor.

It is possible to spend considerable quantities of money on key money, with high-end projects requiring several million pounds in key money.

‘Burn off’ clauses, which waive an owner’s duty to repay key money on a pro rata basis throughout the course of the first term of the HMA/franchise agreement, are used in some cases to ensure that key money is reimbursed by owners.

Despite this, the provision of key money continues to be appealing to project owners seeking to mitigate some of the risks associated with the project, as well as to banks when underwriting a loan.

Structure

If you want to get the most out of your key money payments and burn off provisions, you should carefully evaluate how you structure them in the context of the appropriate tax countries of the owner and operator as well as the location of your hotel property from a tax viewpoint.

Alternatives

Considering that the payment of key money is, in essence, an investment by the operator into the owner’s hotel project, there are a variety of alternatives that can result in a comparable commercial conclusion, including (but not limited to) the following.

• An exemption from payment of technical services costs (which are normally paid prior to the opening of a hotel)
• Investment by the operator in a minority stake in the SPV that owns the hotel firm (with buyout rights and other relevant safeguards)
• Purchase of off-plan condominium units in the project’s owner’s real estate component (or funding the purchase of such units)
• Mezzanine financing (in which the operator lends the owner a portion of the capital necessary to complete the development)
• Construction financing

Such financial incentives will aid the owner in his efforts to raise funds for the development of the hotel. As long as money (or the cost of acquiring funds) is not a primary factor, a structure in which base and incentive fees are changed to more closely match the parties will have the same financial impact throughout the course of the partnership. The primary advantage of such key money provisions and the alternatives discussed above (as opposed to a simple adjustment in base/incentive fees) is that they reduce the financial burden on the hotel owner by allowing funds to be made available to him or her during the period in which the hotel is being constructed or renovated (and will not be cash generative).

When it comes to the latter years of hotel operation, whether that burden is increased through a more aggressive charge regime will rely on the relevant negotiation stance at the time of concluding the Hotel Management Agreement.

Facilitating development

Unsecuring the necessary money is one of the most difficult aspects of getting a hotel project “off the ground.” For the purpose of determining suitable loan levels, lenders will carefully examine financial models and assumptions. When the operator provides incentives, the operator’s standing in lenders’ eyes can be improved, allowing the project to be seen by a larger pool of possible lenders and, as a consequence, allowing for more competitive interest rates. Incentives that have the ability to strengthen the position of the owner might include the following:

• For the project’s initial post-opening term, an income guarantee backed by the operator is provided to the owner. If a specific level or amount of money is earned, a priority payment to the owner will be made before any management fees are paid. Lenders are given priority in receiving incentive fees.

Risks

From the standpoint of the operator, the balance of the financial load between hotel management and development through the use of key money or other incentives alters the risk profile of a transaction in several ways. An bankrupt owner of an underdeveloped hotel project is not a very appealing prospect for potential investors. Such dangers can be mitigated by the use of assurances and other forms of comfort (which could for example include the timing of payment of incentives by the operator, and the taking of security).

Conclusions

The use of key money may be an extremely effective bargaining technique for a company seeking to obtain a high-profile project for its name recognition. It is also likely to appeal to owners who are searching for novel methods to fund the development stage of their scheme, and it has the potential to significantly alter the risk profile of a deal for both the operator and any potential lenders involved. However, the parties should explore other possibilities that may result in a comparable economic conclusion at the heads of terms stage, particularly in light of the potential tax consequences involved with the payment of critical money.

For more information

In all parts of the hotel and leisure business, our worldwide law practice has extensive expertise, and we have advised hotel owners, developers, lenders, and many of the world’s leading hotel and leisure operators on all aspects of their operations. With the help of our broad worldwide network of attorneys, we are able to provide a co-ordinated legal solution for our customers that addresses all areas of their legal needs – from a single project boutique hotel development to the purchase of a multijurisdictional hotel portfolio.

Our global offices can provide you with the skills and knowledge you need to succeed in this rapidly expanding and varied industry.