Open letter to UAE banks and landlords

How landlords and banks can help the UAE’s workers and the economy during the Covid-19 crisis

The Covid-19 crisis has brought the world to a near-standstill. Affecting more than 144 countries across the globe, the pandemic is showing no signs of coming to an end any time soon.

Here at EER Corporate Services, we’re monitoring the situation closely. As things have developed, it’s become ever more clear that everyone in the UAE – government, businesses, banks, landlords, everyone – needs to pull together.

While safety measures and new restrictions serve to reduce the spread of this devastating pandemic, they’ve also, inevitably, created not only a global economic crisis, but a potential bad debt crisis much closer to home.

We need to do what we can to avoid thousands and thousands of employees and families running up bad debt, credit card debt and dealing with bounced cheques. The last thing the UAE will want as it starts to recover once this is over is a lot of negative coverage about the thousands of employees who cannot leave the country due to cases being filed by banks and landlords.

The fact is that paying rent, credit card bills, car loans, putting food on the table – it all becomes impossible when having to take pay cuts or unpaid leave.

So, what can be done to mitigate the economic damage to UAE businesses and citizens? In short, if the entire financial system can come together and assist small businesses, employees and tenants in this trying time, we may be able to protect our families, friends, neighbours, co-workers – and an economy that we’ve worked so hard to build.

Landlords can help private and commercial tenants.

How will I pay the rent?

Many individuals and business owners are asking the same question. As it stands in the UAE, landlords have the statutory right to evict a tenant for non-payment of rent within 30 days of notification. A commercial landlord can also evict a tenant who leaves their commercial property empty for more than 30 consecutive days.

These are unprecedented times and concessions need to be made.

In the UK, the Residential Landlords Association is asking landlords to take a sympathetic approach, allowing their private tenants to defer payment and pay at a later date.

In Italy, measures are being put in place to create a financial rescue plan which includes concessions for commercial tenants. Shop owners forced to close may be offered tax credits to cover 60% of their March rental payment.

Our view is the UAE needs to move decisively for both private and commercial tenants.

The situation for tenants is fluid and is changing by the day. But one initiative has already been announced in the UAE. The Al-Futtaim Group has set up a fund to give its eligible retail tenants across its malls three months’ rent relief.

Meanwhile, the Dubai Land Department (DLD) is currently working on initiatives to help tenants struggling to pay rent as a result of the pandemic. Many DLD-endorsed landlords are already taking measures by deferring tenants’ payments or granting them a temporary reduction in rent.

In Abu Dhabi, all current rental property evictions have been halted in a step to protect vulnerable tenants during the current situation.

In accordance with the government and DLD’s own concerns and measures, we at EER Corporate Services are asking landlords to do the morally upright thing and help ease the financial burden for their tenants in these trying and exceptional circumstances.

• Defer cheques– allow tenants to delay cheques or rent due now for the coming months.
• Defer the balance– rather than insisting on an upfront payment of the full amount, allow tenants to pay 50%, then defer the balance to a later date.
• Spread the cost of payments– instead of the four-cheque policy normally used in the UAE, allow tenants to make smaller, more frequent payments – for example, six or even 12 cheques.

There’s a pivotal role banks must play during the crisis.

In an effort to reduce the financial burden for individuals and small businesses, Dubai’s ruler Sheikh Mohammed Bin Rashid Al Maktoum has asked local banks to make financial concessions over the coming months. By offering refinancing, repayment deferrals and in some cases, lower repayments, banks can help limit the impact of the pandemic on the national economy.

The government has asked Dubai-based banks for a three-month moratorium from 1st April until 30th June – to waive loan repayments for workers forced to take unpaid leave due to the pandemic.

Banks are also being encouraged to enhance credit and trade lines to support ongoing operational costs for businesses affected by the current crisis.

Currently, five major banks are implementing these initiatives: Emirates NBD, Emirates Islamic, Dubai Islamic Bank, Mashreq Bank and the Commercial Bank of Dubai. We ask the government to make this mandatory to all financial institutions and lenders in the UAE – that is, to follow the example of the government and these five banks in doing not only what is morally right, but what is needed.

The team at EER Corporate Services would like to see some key measures extended to all UAE banks and financial lending institutions. That is, a temporary suspension of repayments on mortgages, car loans, credit cards and interest.

This would help borrowers manage their financial obligations during this difficult time without the added burden of accumulating debt.

We must support the hard-hit hospitality industry.

The UAE hospitality industry, which was forecast to employ 659,000 people by 2026, is one of the hardest hit by the Covid-19 crisis. At the time of writing, it’s still unclear how the pandemic will affect the ongoing preparations for Dubai Expo 2020.

Many companies in the hospitality sector are asking staff to use up their holiday allowances or take unpaid leave for a certain length of time. This may seem unfair to many, but under the circumstances, it is a better solution than forced redundancies.

If employees are not being paid, it will have the knock-on effect of non-payment of rent, mortgages, and debt. In some circumstances, in debt and unable to leave the country, they could be faced with deportation, jail or both.

By following the government’s lead and implementing concessionary measures by 1st April, financial lenders and landlords can help to relieve the pressure that businesses and workers are currently facing.

We can all do our part. If you’re an employer, implement remote working; if you’re a landlord or bank, then allow deferred payment, and so on.

The UAE is an incredible place to live and work. And we want to keep it that way. Working together now means we can safeguard the country and its people for the future.