Can a Dubai tenant be penalized for ‘bounced’ direct debit payment?

The online registration system Ejari has allowed landlords to debit rent from the tenant’s account directly, thus doing away with the need for post-dated cheques.

Dubai has integrated the real estate online registration system Ejari with a direct debit system of the Central Bank, thus allowing landlords to debit rent from the tenant’s account directly, doing away with the need for post-dated cheques.

But one of the challenges to date with the transition for some landlords to migrate from post-dated cheques to direct debit has been the issues around enforcement in the case of ‘bounced’ direct debit.

Previously, there was a perception that the payment of future rental instalments without a cheque in hand is not protected. But real estate brokers and property management firms said this is not true, as the tenant has to sign the direct debit mandate again – forming a binding, legal undertaking that they will honour the rental payments just the same as a post-dated cheque.

Although the UAE decriminalised cheque bounces in December 2021, the payee of the cheque may file an execution case against the payor, according to legal experts.

In the event of a ‘bounced’ direct debit payment due to lack of funds, the bank will notify the person in question, in the same manner as a bounced cheque, and the documentation, too, can be registered similarly to that of a bounced cheque.

Anisha Sagar, head of property management at Allsopp & Allsopp, said the legal action process will be the same as cheques, which would be routed first with a 30-day notice and then through the Rental Dispute Centre.

“Since the direct debit is approved through the Central Bank and is through the banking systems, we would hope there are more stringent measures to protect both parties,”

added Sagar.

Harry Tregoning, founder of Tregoning Property, said the tenant will be contacted by the bank in the first instance of default, and he/she will be given a chance to move funds into the account, as it would more often than not be an oversight.

“In the event of non-payment, ‘legal action’ will be taken against the tenant.”

News Source: Khaleej Times