Claim No. SCT 266/2023
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai
IN THE SMALL CLAIMS LEASING TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE NASSIR AL NASSER
BETWEEN
MORIG
Claimant/Defendant in Counterclaim
and
MIKIR
Defendant/Claimant in Counterclaim
| Hearing : | 19 October 2023 |
|---|---|
| Judgment : | 2 November 2023 |
JUDGMENT OF H.E. JUSTICE NASSIR AL NASSER
UPON this claim having been called for a hearing with the Claimant’s representative and the Defendant in attendance
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. The Claimant’s claim shall be dismissed.
2. The Claimant shall pay the Defendant the sum of AED 77,552.24.
3. The Claimant shall pay the Defendant overstay rent at the daily rate of AED 460.27 which shall accrue from 5 October 2023 until the date of evacuation from the Unit.
4. The Claimant shall immediately vacate the Unit.
5. The Claimant shall pay the Defendant the Court filing fee in the sum of AED 6,058.42.
Issued by:
Hayley Norton
SCT Judge and Assistant Registrar
Date of issue: 2 November 2022
At: 3pm
THE REASONS
The Parties
1. The Claimant is Morig (the “Claimant”), an individual who signed a lease agreement with the Defendant for Unit No. 1, , DIFC, Dubai, UAE (the “Unit”).
2. The Defendant is Mikir (the “Defendant”), the owner of the Unit.
Background and the Preceding History
3. The underlying dispute arises over a lease agreement dated 29 April 2021 for the tenancy period of 1 May 2021 to 31 May 2022 (the “Agreement”). The Agreement was later allegedly renewed on 1 June 2022 with the tenancy period expiring on 31 May 2023 (the “Renewed Agreement”). As per the Renewed Agreement, the rent of the Unit for 1 year was allegedly set out to be in the sum of AED 160,000 to be paid over six (6) cheques.
4. On 18 July 2023, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) claiming that the Defendant is refusing to honour the terms of the Renewed Agreement.
5. On 18 August 2023, the Defendant filed an acknowledgment of service with an intention to defend all of the claim.
6. A Consultation was held before SCT Judge Hayley Norton on 24 and 28 August 2023, however the parties failed to reach an amicable solution.
7. On 4 October 2023, the Defendant filed a counterclaim claiming the total sum of AED 121,086.25 for unpaid rent and seeking an order for the Claimant to vacate the Unit (the “Counterclaim”).
8. In line with the processes and procedures of the SCT this matter was referred to me for determination pursuant to a hearing that was scheduled before me on 19 October 2023 (the “Hearing”).
The Claim
9. The Claimant submits that the Renewed Agreement entered into by the parties maintained the same terms of the previous Agreement however there was an increase in rent to the sum of AED 160,000.
10. The Claimant submits that prior to renewal, the Defendant provided the Claimant with a handwritten document of the outstanding rental arrears and requested that the arrears be settled in order to renew the tenancy. As per the Defendant’s calculations, the Claimant was due to pay the Defendant rental arrears in the sum of AED 213,500 (the “Rental Arrears”).
11. The Claimant provided evidence to the Court to show that on 3 and 4 July 2023, the Claimant transferred the total sum of AED 200,000 to the Defendant. In addition, the Claimant submits that it also transferred the sum of AED 80,000 through his broker, Mahut, to the Defendant as payment for rent and a security deposit as per the terms of the Renewed Agreement.
12. The Claimant submits that it introduced a new tenant to occupy the Unit who would be responsible for the Claimant’s business. By way of WhatsApp conversations, the Claimant submits that the Defendant agreed upon the new tenant and requested that the Claimant clear the remaining outstanding balance of the Rental Arrears. The new tenant provided a copy of the cheques to the Defendant to renew the Agreement.
13. On 8 July 2023, by way of a WhatsApp message, the Defendant sent the new tenant a message which stated:
“any news for tenancy contract??? you will rent from what time??? Day by day, time quickly. You start from June??? Because Morig not pay AED 13,500 + June and July and Empower Fee.”
14. In response, the new tenant confirmed that whatever payment is related to the Claimant should also be paid by the Claimant.
15. The Claimant submits that it has already paid AED 200,000 with regards to the Rental Arrears. The Claimant further submits that, as Defendant holds a security deposit of AED 12,500, therefore, the only sum remaining to be paid is AED 1,000.
16. The Claimant submits that the Defendant has agreed to the Renewed Agreement by way of a WhatsApp message and although he has settled the remaining balance of the Rental Arrears, the Defendant decided to not renew the tenancy Agreement.
17. Therefore, the Claimant filed a claim claiming that the Renewed Agreement should be honoured as the Claimant believes it has no outstanding obligations to the Defendant.
18. The Defendant filed a Counterclaim, claiming the sum of AED 121,086.25 comprising rent arrears until 4 October 2023.
19. At the Hearing the Defendant also requested that the Claimant be ordered to vacate the Unit.
Findings
20. The relationship between the parties is governed by the Lease Agreement along with the DIFC Leasing Law No. 1 of 2020 (“DIFC Leasing Law”).
21. I shall first consider the terms of the Agreement dated 29 April 2021 continuous as the parties renewed the Agreement verbally with the same terms.
22. As per the terms of the Agreement, the parties agreed that the rent shall increase 5% upon renewal. Therefore, the rent was at AED 150,000 for the first year, AED 160,000 for the second year and AED 168,000 for the third year.
23. Following the renewal of the Agreement, the Defendant requested the Claimant to pay the Rental Arrears in the sum of AED 213,500. The Claimant argues that this sum has been settled as he has paid AED 200,000 and the Defendant has in her possession the security deposit of AED 12,500. Therefore, the balance is only in the sum of AED 1,000. The Claimant, in addition, transferred the sum of AED 80,000 from the broker to the Defendant. However, the Defendant decided to refund this amount, alleging that she did not know where this money was coming from, although the Claimant submits that she was aware of the broker.
24. The Defendant submits that the parties did not conclude a Renewed Agreement and that the Claimant continues to overstay without making any payments towards the rent from 1 June 2023 onwards. Therefore, the Defendant requests the payments to be settled and for the Claimant to vacate the Unit as there is no contract in place.
25. The Defendant submits that pursuant to clause 2 of the Agreement“renewal of the tenancy is at the discretion of the landlord. If the tenant does not renew the tenancy on the Expiry date, he will have to pay the rent as demanded”.
26. Clause 3 of the Agreement provides the following:
“The contract is valid up to the end of the specified period after which date it is considered as null and void.”
27. Having reviewed all of the evidence, I find that there were ongoing negotiations to renew the Agreement, however, the parties did not agree upon a renewal. In addition, the Defendant’s agreement to renew was subject to the Claimant paying the Rental Arrears. The Defendant claimed that the Claimant should pay the sum of AED 232,000 including a court fee, however, this court fee is in relation to a different matter. The Claimant only paid the sum of AED 218,500, leaving the remaining balance of AED 13,500. Of this remaining balance, the Claimant requested the Defendant to deduct AED 12,500 from the security deposit leaving only the sum of AED 1,000 to be paid. I find that if this amount were to be deducted from the security deposit, then the Claimant should have paid a new security deposit for the renewal.
28. The Defendant submits that the Claimant failed to pay his rent on time and the Rental Arrears were to be paid pursuant to the Agreement of 1 May 2021.
29. Therefore, the Defendant requested the Claimant to vacate the Unit due to failure to settle the rent on time.
30. Considering the rent from 1 May 2021 to 31 May 2022 in the sum of AED 150,000 and the rent from 1 June 2022 to 31 May 2023 in the sum of AED 160,000, I find that the Claimant had an outstanding balance of AED 65,000 from the rent of 1 May 2021 to 31 May 2022 and AED 160,000 from 1 June 2022 to 31 May 2023. This balance was not paid until August 2022 in the sum of AED 7,000, in October 2022 in the sum of AED 5,500, in November 2022 in the sum of AED 6,000 and in July 2023 in the sum of AED 200,000.
31. I find the Claimant is in breach of its obligations to pay the rent in six cheques. The Claimant has failed to settle the payments on time. In addition, from the remaining sum of AED 13,500 as payment for Rental Arrears, even if the Defendant complied with the Claimant’s request to deduct this sum from the security deposit, there would still be an outstanding amount of AED 1,000 to be paid.
32. Therefore, the Claimant’s claim shall be dismissed.
33. The Defendant submits that the Claimant continues to overstay in the Unit without any payments. Therefore, as per the Agreement, the Claimant will be responsible to pay the overstay rent which is to be calculated on the basis of AED 168,000 per year.
34. In relation to the Counterclaim, the Defendant calculated the following:
(a) From 1 May 2021 to 31 May 2022 the sum of AED 65,000 + VAT AED 7,500;
(b) From 1 June 2022 to 31 May 2023 the sum of AED 160,000 + VAT AED 8,000;
(c) From 1 June 2023 to 31 August 2023 AED 42,000 + VAT AED 2,100;
(d) From 1 September 2023 to 4 October 2023 AED 28,000 + VAT AED 1,400;
(e) DIFC Courts fee + Dubai Courts fee AED 7,734.50;
(f) Empower Fee AED 1,052.25; and
(g) The location space penalty 10% AED 16,800.
The total is AED 339,586.25 – AED 218,500 = AED 121,086.25.
35. The Defendant claims VAT, however, I note that VAT was never part of the Agreement between the parties nor was it discussed during any course of the parties’ negotiations. Therefore, I shall not award payment of VAT.
36. The Defendant also sought to claim the location space penalty of AED 16,800 without providing any justification on the legal basis for how the Defendant claims this 10% penalty. Therefore, this claim shall be dismissed.
37. The Dubai Courts fee is not part of the jurisdiction of the DIFC Courts. Therefore, the Defendant must seek to claim this from the Dubai Courts directly.
38. The remaining balance after deducting the above amounts is the sum of AED 302,110.67. Of this sum, I have found that the Claimant has paid the sum of AED 218,500. Therefore, the balance is AED 77,552.24 which has been calculated up to 4 October 2023 (excluding the DIFC Court fees).
39. In addition, I find that the Claimant shall pay overstay rent at the daily rate of AED 460.27 from 5 October 2023 until the date of vacating the Unit.
40. The Claimant shall pay the Defendant the Court filing fee in the sum of AED 6,058.42.