Abu Dhabi Court of Cassation (General Assembly), Request No. 3 of 2023 (Rent), decision of 30 October 2023
A lease governed by Abu Dhabi Law No. 20 of 2006 presupposes that the tenant uses the premises himself. An investment contract, under which an investor exploits property by way of business, re-letting its units for profit, erecting buildings at his own cost or altering existing ones to let them out, is different in nature: it is a commercial activity under Article 6 of the Commercial Transactions Law, the protective rent-law rules (including the registration requirement) do not apply to it, and disputes over it fall to the Abu Dhabi Commercial Court. A cassation chamber may also refer conflicting principles to the General Assembly without a pending case.
The head of the cassation rent chamber asked the General Assembly to remove an apparent conflict between two principles on how to distinguish a lease from a property investment contract, which decides whether a dispute goes to the rental disputes committees or to the courts. Although the definitions were not disputed, applying them to particular cases (including appeal 39 of 2023 in the rent chamber) had produced inconsistent results.
As a preliminary point, the General Assembly held that although Article 10 bis (3) of Law No. 23 of 2006 on the Abu Dhabi Judicial Department suggests that a referral is made while a chamber is hearing a case, nothing in it prevents a chamber from requesting a referral without a pending case, and delaying the resolution of conflicting principles would cause confusion for courts and litigants.
On the substance, it recalled the settled definition used by the commercial and civil chambers: an investment contract is one in which the investor undertakes to exploit the property by building on it at his own cost, or altering or adding to buildings, and to exploit them, with the works reverting to the owner at the end; or takes a whole or part of a building for a lump sum in order to let its units to others for his own profit. Law No. 20 of 2006 on the leasing of premises contains exceptional rules protecting tenants, which must be construed strictly and cannot extend to the relationship between owners and such investors. Investment contracts therefore fall outside the rent law, need not be registered to be relied on, and fall outside the rental disputes committees. Because letting premises for re-letting by way of business is a commercial act under Article 6(15) of Federal Decree-Law No. 50 of 2022, the Abu Dhabi Commercial Court, which under Article 4 of Resolution No. 28 of 2019 hears claims on commercial acts even where the act is commercial for one party only, has jurisdiction. The General Assembly adopted that principle.
Master-lease and building-investment arrangements are common in Abu Dhabi. The decision tells owners and investors that such contracts are commercial, are not subject to the tenant-protection rules or the lease registration requirement, and are litigated before the Commercial Court rather than the rental disputes committee. Getting the forum wrong can cost a claimant months, so the characterisation of the contract matters from the outset.
| Article 6(15) of Federal Decree-Law No. 50 of 2022 (Commercial Transactions Law) |
| Abu Dhabi Law No. 20 of 2006 on the leasing of premises and the regulation of landlord-tenant relations |
| Article 4 of Resolution No. 28 of 2019 of the Chairman of the Abu Dhabi Judicial Department establishing the Abu Dhabi Commercial Court |
| Article 10 bis (3) of Abu Dhabi Law No. 23 of 2006 on the Abu Dhabi Judicial Department, as added by Law No. 13 of 2018 |
“عقود الإيجار المحكوم بالقانون رقم 20 لسنة 2006 بشأن إيجار الأماكن وتنظيم العلاقة الإيجارية بين المؤجرين والمستأجرين في إمارة أبو ظبي”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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