How to Sublease or Assign a Commercial Unit in Dubai: Legal Basics
Subleasing or assigning a commercial unit in Dubai allows businesses to manage costs, downsize, or transfer operations, but it strictly requires the landlord’s written consent under Article 24 of Law No. 26 of 2007. While subleasing involves a tenant renting part or all of the property to a third party while retaining liability, assignment transfers the entire lease interest and obligations to a new tenant. Navigating these processes requires adherence to RERA regulations and proper Ejari registration.
Understanding the Landscape: Sublease vs. Assignment
In the dynamic commercial market of the UAE, business needs change rapidly. You might find your current office is too large for your team, or conversely, you might be selling your business and need to transfer the premises to the new owner. Understanding the legal mechanism for these changes is crucial to avoid penalties or eviction.
The Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA) provide a structured framework for these transactions. However, confusion often arises regarding the difference between a sublease and an assignment.
What is a Sublease?
A sublease occurs when the original tenant (the head tenant) rents out a portion or the entirety of the leased premises to a third party (the sub-tenant).
Liability: The original tenant remains fully liable to the landlord for rent and property condition.
Relationship: The sub-tenant pays rent to the original tenant, not the landlord.
Duration: The sublease cannot extend beyond the term of the main lease.
What is an Assignment?
An assignment is the transfer of the tenant’s entire interest in the lease to a new party (the assignee). This is common when a business is sold.
Liability: Typically, the original tenant steps out, and the new tenant takes over all obligations, including rent payment directly to the landlord.
Relationship: A direct relationship is established between the landlord and the new tenant.
Duration: The assignee takes over the remaining term of the existing lease.
The Legal Framework: Article 24 and Landlord Consent
The cornerstone of commercial subleasing in Dubai is Article 24 of Law No. 26 of 2007 (Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai).
The law states clearly: “Unless otherwise agreed in the tenancy contract, the Tenant shall not assign the use of or sub-lease the Real Property to third parties unless written consent of the Landlord is obtained.”
Why Written Consent is Non-Negotiable
Verbal agreements do not hold weight in Dubai’s rental dispute center. If a tenant subleases a property without a No Objection Certificate (NOC) or written clause in the contract:
Eviction: The landlord has the right to demand eviction of both the tenant and the sub-tenant.
Penalties: The tenant may face financial penalties or forfeiture of their security deposit.
Legal Action: The sub-tenant may sue the head tenant for misrepresentation.
For businesses looking for properties for rent in Dubai, it is vital to negotiate a subleasing clause upfront if you anticipate future changes in your space requirements.
Step-by-Step Guide to Subleasing Commercial Space
If you have decided to sublease part of your office or warehouse, following a compliant process ensures security for all parties involved.
1. Review Your Head Lease
Before taking any action, examine your current tenancy contract. Does it explicitly prohibit subleasing? Even if it does not mention it, the default position of the law requires permission. If the contract explicitly forbids it, you will have a harder negotiation ahead.
2. Obtain the Landlord’s NOC
You must formally request permission from the landlord. This request should include details of the proposed sub-tenant and the terms of the sublease.
Tip: Landlords are more likely to agree if you have a strong track record of timely payments. Our property management experts often mediate these requests to ensure professional communication.
3. Vet the Sub-Tenant
You remain liable for the rent. Therefore, you must vet the sub-tenant as rigorously as a landlord would. Check their trade license, financial standing, and business activity. Ensure their business activity is compatible with the zoning of the building.
4. Draft the Sublease Agreement
This contract should mirror the terms of the head lease regarding restrictions (e.g., noise, working hours, use of common areas). It must clearly state that it is a sublease subject to the head lease.
5. Ejari Registration
Many assume only the main lease needs Ejari. However, subleases should also be registered to protect the sub-tenant’s rights, especially for commercial trade license issuance. The Dubai Land Department provides mechanisms for registering these relationships, provided the primary lease is valid and consent is documented.
Step-by-Step Guide to Assigning a Lease
Lease assignment usually happens during the sale of a business or asset acquisition. This process is more final than subleasing.
1. Valuation and Agreement
The outgoing tenant and incoming tenant agree on the terms. If the lease has favorable terms (e.g., below-market rent), the outgoing tenant might charge a “key money” or premium, though this is subject to market conditions.
2. Landlord Approval
The landlord must approve the new tenant. They will check the new tenant’s creditworthiness. The landlord may request a new contract signed directly with the new tenant rather than a simple assignment deed.
3. Settling Dues
All outstanding bills (DEWA, district cooling, service charges) must be cleared by the outgoing tenant before the transfer can be finalized.
4. Transfer of Security Deposit
Usually, the landlord refunds the outgoing tenant (after inspection) and collects a new deposit from the incoming tenant. Alternatively, the deposit can be assigned to the new tenant via a written agreement.
Comparison: Sublease vs. Assignment
| Feature | Sublease | Assignment |
| Primary Relationship | Tenant & Sub-tenant | Landlord & New Tenant |
| Liability | Original Tenant remains liable | New Tenant assumes liability |
| Rent Payment | Sub-tenant pays Original Tenant | New Tenant pays Landlord |
| Lease Term | Limited to Head Lease duration | Remainder of existing term (or new lease) |
| Best For | Sharing space / Temporary downsizing | Selling business / Permanent exit |
Common Pitfalls and How to Avoid Them
Even with clear laws, commercial tenants often face challenges. Here are the most common issues we see in the market.
The “Silent” Sublease
Some tenants try to rent out desks or warehouse space without informing the landlord to save on administrative hassle. This is a breach of contract. If the landlord discovers this, they can file for immediate eviction.
Incompatible Trade Licenses
In Dubai, the Department of Economy and Tourism (DET) requires a valid lease (Ejari) to issue or renew a trade license. If a sub-tenant cannot register their Ejari because the head tenant didn’t get permission, the sub-tenant cannot get their trade license. This creates a legal gridlock.
Hidden Costs
Subleasing or assigning often incurs fees:
Landlord Administrative Fee: Landlords often charge an admin fee for issuing an NOC.
Agency Fees: If you use an agent to find a sub-tenant.
Ejari Fees: Registration costs apply to the new contract.
Commercial Scenarios in Dubai
To better understand how this works in practice, consider these typical market scenarios.
Scenario A: The Tech Startup
A tech company leased a 5,000 sq. ft. office in Business Bay but shifted to a hybrid work model. They have 2,000 sq. ft. of unused space.
Action: They secure an NOC from the landlord and sublease the extra wing to a graphic design agency.
Result: The tech company offsets their overheads, and the design agency gets a prime location without a massive deposit.
Scenario B: The Restaurant Sale
A café owner in Jumeirah Lake Towers (JLT) is selling their business. The buyer wants the location because of the fit-out.
Action: The lease is assigned to the buyer.
Result: The seller exits cleanly, and the buyer takes over the remaining 3 years of the lease.
Why Partner with West Gate Dubai
Navigating commercial real estate laws requires local expertise. Whether you are a landlord wanting to protect your asset or a tenant needing to exit a lease, professional guidance is essential.
At West Gate Dubai, we specialize in bridging the gap between legal requirements and commercial goals. Our team can assist with:
Tenant Acquisition: Finding reliable sub-tenants or assignees for your commercial space.
Lease Negotiation: Structuring agreements that protect your interests.
Market Analysis: Determining the fair market value of your lease.
We encourage you to explore our list of off-plan projects in Dubai if you are looking to reinvest your capital into assets that offer high appreciation potential. Additionally, our Contact Us page is the gateway to speaking with a dedicated advisor who understands the nuances of commercial assignments.
While we feature a curated selection of properties online, we have a lot more properties available that are not listed publicly. Please fill out the form on our website, and a professional Agent will contact you to discuss your specific requirements.
FAQs
1. Can a landlord unreasonably withhold consent to sublease?
Generally, landlords have the discretion to grant or deny consent. However, if the lease agreement states that consent “shall not be unreasonably withheld,” the landlord must provide a valid reason for refusal, such as the financial instability of the proposed sub-tenant.
2. Does the sub-tenant need their own insurance?
Yes, it is highly recommended. The head tenant’s insurance typically covers their own liability and assets. The sub-tenant should secure their own policy to cover their contents, trade license requirements, and third-party liability within the shared space.
3. What happens to the sublease if the main lease is terminated?
If the head lease is terminated (e.g., due to non-payment by the head tenant), the sublease is usually extinguished as well. This is a significant risk for sub-tenants. In some cases, the sub-tenant may negotiate directly with the landlord to take over the lease, but this is not guaranteed.
4. Can I sublease a property registered under an off-plan contract?
Subleasing usually applies to handed-over properties with a valid title deed and Ejari. For properties for sale in Dubai that are still off-plan, you generally cannot sublease until the unit is completed and handed over, as there is no physical space to occupy.
5. Are there limits on how much rent I can charge a sub-tenant?
Unless the head lease restricts it or specific rent control laws apply to the zone, the head tenant can charge market rates. However, profiting significantly from a sublease without the landlord’s knowledge can sometimes lead to disputes, so transparency is advisable.
Take the Next Step
Successfully subleasing or assigning a commercial unit requires more than just a handshake; it demands compliance with Dubai’s rigorous legal standards. Don’t risk fines or eviction by navigating this alone.
If you need assistance managing your current lease or are looking for new opportunities, our team is ready to help. Please fill out the form on our Contact Us page, and a professional Agent will contact you to guide you through the process, ensuring your business transition is smooth and compliant.
