Claim No: XXXX
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
IN THE SMALL CLAIMS
Hearing: 13 October 2016
Judgment: 2 November 2016
JUDGMENT OF SCT JUDGE NATASHA BAKIRCI
UPONthis Claim having been called for Consultation on 29 September 2016 before SCT Officer Mahika Hart;
UPONthe parties not having reached settlement;
UPONhearing the Claimant and the Defendant’s representative;
AND UPONreading the submissions and evidence filed and recorded in the Court
IT IS HEREBY ORDERED THAT:
1.The Claimant’s claim seeking renewal of the Lease Agreement under the same terms and conditions as the previous year(s) is dismissed.
2. The Claimant’s claim regarding utilities bills is dismissed.
3. Each party shall bear their own costs.
4. The Claimant, Greta, is a tenant in Gunner building.
5. The Defendant is Gunner LLC, the Claimant’s landlord.
6. In 2011, the Claimant entered into a Lease Agreement with Gunner LLC for the rent of apartment in Gunner building, DIFC. It is common ground that from 2011 until the current dispute arose, the Lease Agreement has been renewed annually substantially on the same terms and conditions with 5% rental increases. The annual rent for the period of 27 October 2015 until 26 October 2016 was AED 57,110.
7. By email dated 16 August 2016 the Defendant’s agent informed the Claimant that “We would like to advise you that your tenancy contract with Gunner LLC pertaining to the Gunner Unit will expire on 26-Oct-2016. As per the tenancy agreement you shall vacate the unit on the 26-Oct-2016 and we will send you further information relating to the vacating procedure”. The Claimant responded that she would like to renew the Lease Agreement to which the Defendant’s agent responded “Thank you for your confirmation. Please be advised you [sic] rent for the period 2016 – 2017 will be AED 75,000/-.”
8. The Claimant then responded that she would like a renewal and for the renewal documents to be prepared. When it became clear that the Defendant and the Defendant’s agent were insisting on a rental increase to AED 75,000 per year, representing a more than 30% increase, the Claimant objected. It is common ground that such an increase was not in accordance with the RERA calculator, as required by Decree No. 13 of 2013, although the Defendant claimed that this new rent would be pursuant to a new lease agreement rather than a renewal of the previous Lease Agreement.
9. During the past year, the Claimant has also faced issues with the district cooling in her apartment, which she argued was being billed at unreasonable rates considering consumption. She stated that in 2015, the district cooling company disconnected her service and charged her an unreasonable reconnection fee.
10. On 29 September 2016 the Claimant filed a claim with the DIFC Courts Small Claims Tribunal (SCT) against the Defendant, seeking confirmation of her lease renewal at a reasonable rate in accordance with the RERA calculator and for reimbursement of unreasonable utilities billing and clearance of her pending utilities charges. Her total amount claimed was USD $ 5,623.12, equivalent to AED 20,664.97.
11. The Claimant detailed in her claim form that she was not in an equal position when negotiating with the landlord as a private individual. She was told she would either be evicted or that the new rental amount would be AED 75,000 for the next year, which is not in compliance with Decree No. 13 of 2013, which limits rental increases in Dubai and in the DIFC. She argued that Clause 3.34 of the applicable Lease Agreement has been breached by the Defendant for failure to comply with the relevant and required law. She continued that as there is no alleged sale of the unit, the Defendant is not entitled to refuse to renew the Lease Agreement, pursuant to Clause 5.1 of the Lease Agreement.
12. Furthermore, the Claimant argued that the Defendant failed to remedy her troubles regarding the unauthorised billing she endured from the district cooling utility company and the Defendant should therefore be required to reimburse her losses in this regard pursuant to Clause 4.9 of the Lease Agreement. Finally, the Claimant contends that, with regard to both the rental increase and utilities payments, the Defendant is in breach of Clause 4.3 of the Lease Agreement which protects peaceful enjoyment of the unit without unreasonable or unlawful interruption.
13. The Claimant’s subsequent submissions alleged that the Defendant has been attempting to use Clause 5.1 of the Lease Agreement as a mechanism to “avoid the concerning legislation” which serves to limit the amount of rental increase allowed when a lease agreement is renewed. She alleged that as the Lease Agreement is unclear, the dispute should be resolved in the tenant’s favour as the less sophisticated negotiating party.
14. The Claimant reiterated that Clause 5.1 of the Lease Agreement implies that the agreement will only be terminated upon sale of the apartment. Furthermore, the Claimant reiterated her arguments regarding Clause 3.34 and Clause 4.3 of the Lease Agreement. Thus, the Claimant seeks a renewed contract on the existing terms of the Lease Agreement with a maximum price of AED 59,965 for the year rather than a new lease agreement at AED 75,000 for the year, as proposed by the Defendant.
15.The Claimant further reiterated her arguments as to the unauthorised utility bills. She claims that both the Defendant and the third-party utility provider have failed to address her concerns about exaggerated utilities bills. She further claimed that the Defendant should not be able to evict her for failure to pay disputed utilities bills. The Claimant alleged that she should be reimbursed in the amount of AED 1,821.27. She also claimed her court fee of AED 984.05.
16. The Defendant indicated its intention to defend the claim, stating that it has “no intention to renew the tenancy contract which is yearly fixed term.” The Defendant argued that it is not obliged to renew the Lease Agreement and it does not wish to do so in this case.
17. Regarding the claim for reimbursement of the utility bills, the Defendant contended that the Claimant is responsible to pay all utilities as per the Lease Agreement and any complaints about the service provided should be taken up directly with the service provider.
18. First and foremost, the relevant Lease Agreement states at Clause 9.1 that the “Agreement shall be governed by the prevailing laws of the DIFC, United Arab Emirates” and that upon failure to resolve any disputes connected to the Lease Agreement, the “dispute shall be referred to the DIFC courts
19. The Claimant referred to several allegedly relevant portions of the Lease Agreement and several provisions of the Lease Agreement are relevant to the dispute, namely:
a. Clause 3.7 states that the Tenant undertakes to “[p]ay all charges for water, electricity, telephone, internet, air- conditioning, and district cooling capacity and consumption charges and the related third party billing fees”.
b. Clause 3.8 states that the Tenant undertakes to “[p]ay the district cooling bills on time and without delay. The Tenant acknowledges and agrees that the district cooling billing will be prepared and collected by a third party company. . . The Tenant has read and understood all of the terms and conditions mentioned in the End User Agreement attached to this Tenancy Agreement as Annexure 1 and he accepts the same.”
c. Clause 3.34 which states that the Landlord undertakes to “[c]omply with all rules, regulations and laws application to the Unit(s) as set by the federal, emirate, municipality . . . or other relevant authority. . . . The Tenancy agreed that it is the Tenant’s responsibility to familiarize themselves with all applicable regulations, rules and laws”.
d. Clause 4.3 which states that the Landlord undertakes to “[p]ermit the Tenant peaceful enjoyment of the Unit(s) for the Period of Tenancy without any unreasonable or unlawful interruption”.
e. Clause 5.1 which states that the “Tenant is hereby served with one (1) year written notice that this Tenancy Agreement is for one year only , in the event of the sale of the Unit(s) by the Landlord to a third party purchaser. Both Parties agree that should the Landlord decide not to sell the property to a third party purchaser as aforesaid, then the Tenancy Agreement will be renewed solely upon mutual agreement between parties and to such a period as then mutually agreed.”
f. Clause 5.5 which states that “[i]f the Tenancy Agreement is not renewed the Tenant shall vacate the Unit(s) by the Expiration Date.”
20. There are two main issues in this case. First, there is the question of whether the Defendant is required, under the relevant Lease Agreement and applicable law, to renew the Claimant’s Lease Agreement on substantially the same terms as the previous year. Second, there is the question of whether, under the Lease Agreement, the Defendant is responsible towards the Claimant for the problems she has faced with the third-party district cooling utility provider and should thus reimburse the Claimant for the costs that have ensued. I will address these two issues in turn.
A. Lease Renewal Claim
21. The relevant Government of Dubai Decree No. 43 of 2013, which serves to limit rental renewal increases does apply to rental renewals within the DIFC. This law limits the amount that a landlord can increase rent when renewing a tenancy agreement. Neither party contests the application of this law, but they disagree on the interpretation and effect of Clause 5.1 of the Lease Agreement as it interacts with Decree No. 43.
22. The Claimant contends that the first sentence of Clause 5.1 creates a limitation on the circumstances under which the Defendant can refuse to renew the Lease Agreement. Refusal for renewal can only occur, according to the Claimant, “in the even of sale” of the unit to a “third party purchaser.” The Defendant contends that no such limitation is applicable as the Clause clearly states that, “should the Landlord decide not to sell the property”, renewal of the agreement will be based “solely upon mutual agreement between the parties” and they do not agree to renew.
23. The clear and apparent interpretation of Clause 5.1 of the Lease Agreement is that the parties must come to a “mutual agreement” in order to effect renewal. As held in a previous SCT Judgment,Gervois v (1) Gittana LLC & (2) Gacinta LLC, tenants of properties in DIFC are free to contract in accordance with applicable laws in the DIFC, including negotiating such termination terms as are mutually agreeable between the landlord and tenant. There is no provision for a forced renewal and thus, the Defendant’s failure to agree on a renewal is their right. The DIFC Courts cannot order them to enter into a renewal at a certain rental price against their will unless some proof is offered that they have made an agreement as to the same.
24. The Claimant’s contention that the Defendant has offered a new lease agreement at 30% rental increase as a manoeuvre to avoid the application of Decree No. 43 is well taken and was addressed inGervois v (1) Gittana LLC & (2) Gacinta LLC. As discussed in that case, it is questionable whether the landlord’s attempt to create a new lease would qualify as a new lease or a renewal. The parties in the instant proceedings have not entered into an alleged new lease agreement. Instead, they have failed to come to an agreement for a renewal or a new lease agreement.
25. The Claimant’s contention that she is at a disadvantage in negotiating with the Defendant as an individual without legal training is also noted. While the claimant inGervois v (1) Gittana LLC & (2) Gacinta LLCwas an attorney, which the Judge
26. Therefore, the Claimant’s request to require the Defendant to renew the contract in compliance with Decree No. 43 of 2013 is dismissed. The Claimant must comply with the terms of the Lease Agreement as agreed, including the provisions of Clause 5.1 requiring that the contract terminates without mutual agreement between the parties regarding renewal.
B. District Cooling Claim
27. As regards the Claimant’s contention regarding unauthorised utilities billing, the Defendant has responded that this claim must be taken up with the third-party district cooling utility provider as the Claimant has a separate End-User Agreement with this third-party provider. The Claimant conceded during the Hearing that she had a separate agreement with the third-party provider but claimed that the Defendant should provide a remedy for her dispute with the third-party provider in order to provide “peaceful enjoyment” of the unit.
28. I refer to my previous SCT Judgment inGenie PJSC v Gellert, which held that under effectively the same lease agreement terms, a landlord/claimant could not force a tenant/defendant to pay his district cooling bills, consequently a claim should be taken up between the third-party provider and the tenant. This principle holds true even when the tenant is claiming payment from the landlord regarding district cooling. In both cases, the district cooling bills were in dispute and the appropriate remedy can only be achieved between the parties to the relevant End-User Agreement.
29. Therefore, the Claimant’s claim regarding reimbursement of her district cooling bills is dismissed as the Claimant’s proper remedy is to take up a claim against the district cooling provider for any dispute as per the End-User Agreement.
30. As per the above reasoning, the Claimant’s claim for renewal of her Lease Agreement on substantially the same terms as previously is dismissed. Her claim for reimbursement of district cooling bills is also dismissed.
31. Parties shall bear their own costs.
Date of issue: 2 November 2016