Renting an Office in Dubai – What They Don’t Tell you
If you are about to start on the journey of renting an office in Dubai then ensure that you read this first before choosing your office space and signing your contract.
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In 2006 my company rented a property from the European Business Centre in Dubai, currently at that time controlled by Kleindienst Group. Although everything at the start of the office rental was fine it quickly went sour when in 2008 the market crashed causing us to give notice on the company as the company was no longer trading in Dubai.
This notice that was in line with the contract that stated if your company did not trade then it would no longer be required to rent the office was defined in the contract. However as part of the requirement to rent the property I was requested to deposit post dated cheques at the start of the rental for the lease term. When I had effectively given notice of the rental I had requested the cheques back I was told in no uncertain terms that my rental was not cancellable as I had signed for a lease term (even though the business ceased to trade) and that if I could not honor the cheques – (they had subsequently bounced) that I would be imprisoned until the money could be collected from me.
Now although I would personally never deal with the Kliendienst Group or the European Business Centre again and would certainly not recommend them to anyone again the key issues here was primarily one of my naivety rather than their greed.
Firstly when signing up an office rental make sure you are effectively renting it from month to month, if they require a term lease then ensure that the term lease on the office is more than manageable for you in the future. If the UAE suffers a crash again would you be able to cover off the lease payments?
Secondly always make sure there are clear terms in the lease agreement that ensures you can legally get out of the lease at any time. For example it should state that you can give notice on the office rental for any number of reasons, one of these should include your inability to pay for the office for business reasons. If you are renting an office in Dubai make sure it has reasonable exit clauses as you do not want to be held to ransom.
Never write a post-dated cheque to secure your office rental or for future lease payments, bouncing that cheque at any point in the future will mean the greedy real estate developer can hold you to ransom with these cheques. (Read our article about cheques in Dubai)
If you must secure a real estate contract with a cheque then ensure you do not sign it, follow our advice on PDC’s.
Getting the right contract terms
Make sure your contract with the real estate provider defines paybacks for the developer or operator of the real estate to you if they fail to meet any element of their contract. When we had rented the EBC building the office was without internet connection for some eight weeks, our complaints to the EBC fell on deaf ears, effectively my business was crippled for weeks and we were forced to work from a coffee shop!
Before you sign an office rental contract make sure you visit the existing tenants and ask about the performance of the landlord. Ask about any problems, and how aggressive the landlord is in securing payment when rent day is due.
It turns out that had I asked around, I would have found out that many of the people I had subsequently spoken to after having issues with this vendor had also had some serious issues with both Kiendienst Group and the European Business Centre (EBC). If I had I asked around first I would probably never have rented the property and would have saved myself years of problems and stress.
When I explained to the EBC that my company was having financial difficulties due to our large reliance on customers in the real estate sector causing us to terminate the contract we were met with a simple “We do not care” attitude and when the first cheque bounced the administrator for the EBC was in the police station the very same day.
Ask yourself what type of company you are dealing with, and ask them what their policies are for non-payment before you enter into a lease agreement with them. Ideally you want your landlord to be your business partner and supportive of your business, if they don’t have this long term approach and only seem to be focused on the money, payments and contract term – or if they hound you down when getting you to sign your lease, you may want to think again.
Of course this is my personal experience with these companies when renting an office in Dubai, and the views I am sharing are purely ones based on my own personal experience, your experience in dealing with these companies may be completely different. This is in no way a generalization of Kliendienst Group or the EBC, this was my own personal experience only.
Make sure the contract terms with the office vendor are reasonable and give you ample opportunity to end the contract for any reason within a certain term limit, ensure that if you have post dated cheques issued as a guarantee for the lease that the contract states it will return all PDC’s up to the date of termination and will not initiate any proceedings for any bounced cheques dated after the effective termination date.
Dubai is certainly a cut throat place when it comes to real estate, if you really need an office my suggestion would be to try to secure flexible office space whilst you grow your business, stay away from long term leases over 3 or 5 years, even better pay the rent month to month. There are a number of companies that provide this service for flexible office space when it comes to renting an office in Dubai.
Any time you have an issue with the service from the provider put the letter in writing and get a signed copy of the receipt, if it is enough of a problem you will at least have this written notice in your corner when it comes to ending the contract.
There are a number of ways around this – firstly you can hire a company outside of the UAE to become your financial representative, have them sign your cheques as a registered signature.