During the last couple of years, several towers in Dubai have burst into flames. Tamweel Tower in Jumeirah Lakes Towers in November 2012, The Torch in Marina in February 2015, Address Hotel in Downtown on New Year’s Eve 2015, Sulafa Tower in July 2016: just to name a few, big enough to make the news. Although, there was no loss of human lives, the property damages caused by the fire cannot be disregarded.
According to reports on the investigations, there was a different cause of fire in each case. However, the reason for the rapid rate of spread of each fire was the non-fire retardant cladding which was used in Dubai and in the rest of UAE for a long period, but which has been restricted from use for buildings exceeding 15 meters in height since 2013.
Most tenants will only start looking into the subject of compensation and liability after the accident has occurred. This article shall consequently address the following: compensation for damages on tenants’ property in the event of the fire; cost assumption for alternative accommodation and the tenant’s right to cancel the lease agreement.
COMPENSATION FOR DAMAGES IN THE EVENT OF FIRE
After the fire questions regarding liability for damages caused by the fire to tenants’ possessions will arise, so as regarding the possibility to receive compensation for the said damages.
In the UAE, the responsibilities of the property owner and the property developer are mostly poorly understood and the tenants expect to be covered by the insurance policy held by either the property owner or of the property developer. Generally, the property developer and the owner’s association, which represents the property owner, remain responsible for the areas in the property over which they maintain control, such as public areas. In most events, the property owner’s insurance policy will cover only the property itself and will not extend to tenant’s furniture or personal possessions. Therefore, in order to provide adequate cover, a tenant should take out his own insurance policy with individual cover.
According to the survey commissioned by Zurich insurance company in 2013, only six (6) per cent of UAE residents have adequate home insurance cover and the numbers in 2016 are not expected to have risen significantly. As a result, in an event of a fire, storm or flood most tenants will have to bear the costs for any incurred damages.
The UAE Civil Transaction Law, issued by way of Federal Law No. 5 of 1985 (“Civil Code”) regulates fire insurance coverage and the duties and liabilities of the insurance provider. According to the law, the insurer shall cover all damages caused by the fire notwithstanding the reason of the fire, provided that the damages are a direct result of the fire and have not been caused by deliberate or fraudulent actions of the insured or the beneficiary. The scope of insurance and therefore the compensation will vary, depending on the policy and the insurance company.
ASSUMPTION OF COSTS FOR EMERGENCY ACCOMMODATION
There is no legal obligation for the property owner or the property developer to provide the tenant with emergency accommodation in the event of fire or to compensate the costs for such accommodation. Generally, the costs for emergency accommodation shall be covered by the fire insurance. However, the level of the cover will depend on the type of the insurance policy taken out and the insurance company.
A tenant will however be entitled to a reduction in the rental for the period that the property is unable to be occupied, if so declared by the relevant authorities, which is dealt with herein-below.
CANCELLATION OF THE LEASE AGREEMENT
One of the most important questions the tenant will have to deal with when the apartment has been damaged by fire is the possibility to cancel the lease agreement and to claim back the post-dated-cheques or already paid rent and security deposit.
In the event that the occupancy of the apartment has been affected by the damages, the Civil Code refers to the affected occupancy as partial or permanent loss of enjoyment. One of the challenges for the tenant will be determination of the degree of loss and the definition of the loss as being of either a partial or permanent nature in order to determine his rights to cancel the lease.
In the event of total demolition and therefore inhabitancy of the property, the proof of permanent loss of enjoyment shall be easy and the tenant shall be able to execute his right to cancel the lease agreement. However, in the event of the partial loss of enjoyment it is important to determine the range of destruction and the level of the loss of “intended enjoyment”, which can range between partial inhabitancy of the unit to a defective satellite dish. In the event of the latter, the tenant will hardly be able to cancel the lease agreement on the grounds of the loss of enjoyment.
Where there is a total loss of enjoyment, the tenant shall not be liable to pay rent from the date of when the total loss has occurred, and shall be entitled to cancel the lease agreement, provided that the tenant’s situation falls within the scope of the provisions of the Civil Code. Generally, the cancellation of the lease agreement in UAE shall take place by a mutual agreement between the landlord (property owner) and the tenant or by a court order.
Provided the requirements for cancellation of the lease agreement are met, the cancellation shall be made in writing by a cancellation letter addressed to the landlord and include the following details: A description of the situation which has occurred; the grounds for cancellation and the date of the loss of enjoyment; a request for the return of all post-dated cheques and refund of prepaid rent from the date of the loss and a request for the return of the security deposit. Furthermore, the cancellation letter should include an undertaking clause containing acceptance of the listed conditions, to be signed by the landlord and returned to the tenant.
If the landlord refuses to comply or does not respond to the cancellation letter, the tenant may approach the court and ask for cancellation of the lease agreement. The rules and procedures are established by the Dubai Rental Dispute Settlement Centre, also known as Dubai Rental Committee, which has the authority of the Dubai Courts regarding all tenancy issues Dubai Rental committee may be approached directly by the tenant in order to cancel the lease agreement or to resolve any tenancy matter.
The tenant may file a complaint with the Dubai Rental Committee which shall include a request for the landlord to pay the costs incurred by the tenant and the costs of the proceedings. Should the landlord remedy the loss, the lease agreement will not be cancelled and the tenant can only claim for compensation, such as rent reduction, for the period of the loss of enjoyment.
After filing the complaint by the tenant, the Committee will try to obtain an amicable resolution. If this is not possible, the Committee will render a judgement which will state the decision, stipulate the terms of the cancellation such as repayments, return of the post-dated cheques and any further costs awarded. The judgement will be subject to an appeal within 15 days and will become final and executable thereafter.
Considering the aforementioned, it is advisable for the tenant to deal with insurance cover as early as possible, especially if the apartment is located in one of the towers completed prior to 2013. When the tenant does not have sufficient insurance cover, he might end up bearing the costs for all damages in addition to continuous rent and the costs for emergency accommodation.
Irrespective of any self-assessment of the tenant’s situation, it is always advisable to get advice from a lawyer in order to proceed with the situation efficiently and on legally safe ground.
Published in German: German Emirates Club newsletter. 19 December 2016