Options for Retail, Hospitality and Leisure Tenants in Dubai: Re-Negotiating Lease Obligations in Unprecedented Times

From time to time, exceptional events beyond the control of contracting parties — whether armed conflicts, pandemics, natural disasters, or other crises — fundamentally alter the commercial environment in which leases were negotiated. Where retail, hospitality and leisure tenants ("Tenants") have committed to rental obligations at rates reflecting market conditions that no longer exist, the question arises: what legal mechanisms are available under UAE law to seek relief from obligations that have become disproportionately burdensome?

This article examines the primary statutory basis upon which Tenants in Dubai may seek to re-negotiate their lease terms: the hardship doctrine under Article 249 of Federal Law No. 5 of 1985 ("1985 Civil Code"), and its successor, Article 224 of Federal Decree-Law No. 25 of 2025 ("New Civil Code"), which came into effect on 1 June 2026.

What Is the Hardship Doctrine and Does It Apply to Retail, Hospitality and Leisure Tenants?

Article 249 provides that where exceptional events of a general nature occur which could not have been foreseen, and the occurrence of such events renders performance excessively onerous for the obligor such that it threatens him with grave loss, the court may reduce the onerous obligation to a reasonable level if justice so requires. Any agreement to the contrary is void — Article 249 is mandatory, reflecting the principle that contractual equilibrium is a matter of public order (nitham al-'am).

This is the correct route for Tenants — not force majeure. Force majeure under Article 273 requires that performance be rendered absolutely impossible. The payment of rent — a monetary obligation — almost never becomes impossible. Most commercial leases also explicitly exclude force majeure from excusing rent payment. Article 249, by contrast, addresses the situation where performance remains possible but has become so burdensome as to threaten grave financial loss — precisely the position of Tenants whose revenue has significantly declined as a consequence of exceptional external events.

The threshold conditions are: (i) an exceptional event of a general nature; (ii) unforeseeability at the time of contract formation; (iii) unavoidability; (iv) the event occurring after formation but before full performance; and (v) performance rendered significantly onerous, threatening grave loss. The fifth condition — grave loss — requires specific evidence from the Tenant.

What Is the Position of Tenants Who Signed Before the Exceptional Event?

The unforeseeability condition is critical. A Tenant who signed a lease after the relevant exceptional event had already commenced would have no credible basis to argue that it was unforeseeable. The hardship doctrine is therefore effectively available only to Tenants who signed before the event occurred.

Tenants who signed long-term leases well before the exceptional event may have an even stronger case. The greater the distance between the date of contract formation and the onset of the crisis, the more difficult it will be for a landlord to argue that the event was foreseeable. Tenants who committed to rental obligations at rates reflecting assumed reasonably stable market conditions — assumptions later overtaken by unforeseeable events — are well placed to satisfy this condition.

Where there were precursor events that might have signalled a degree of increased risk, the position is more nuanced. A landlord may argue that a Tenant entering into a lease after such a precursor ought to have been aware of the possibility of a broader disruption. The strength of the unforeseeability argument will ultimately depend on the specific facts and the timing of the lease.

Are Retail, Hospitality and Leisure Tenants Entitled to Seek a Rent Reduction?

A Tenant cannot unilaterally seek to impose a reduced rent — the lease remains binding. However, Article 249 (and Article 224 of the New Civil Code from 1 June 2026) provides a mandatory statutory basis upon which a Tenant can apply to the Rental Disputes Settlement Centre ("RDSC") for judicial adjustment of the rent. The RDSC has previously exercised its discretion to reduce rent in circumstances of exceptional disruption.

During COVID-19, for example, the RDSC created specific committees to handle pandemic-related disputes and suspended ex parte payment orders for twelve months. In Case No. 02/04865/2020, the RDSC terminated a lease (annual rent of AED 12.6 million) on the basis of "exceptional circumstances" under Article 249. The tenant — a hotel operator — could no longer benefit from the premises due to pandemic-related closures.

In the residential context, the RDSC also declared job loss due to COVID-19 an "emergency circumstance" permitting lessees to terminate without penalty. This is a less directly relevant precedent for commercial Tenants, but it nonetheless illustrates the RDSC's broad willingness to apply the exceptional circumstances doctrine. Taken together, these precedents confirm that the RDSC is prepared to intervene substantially where exceptional events have rendered a lease excessively onerous.

A Tenant who withholds rent without an RDSC order nonetheless exposes itself to claims for arrears, forfeiture of security deposit, and eviction.

Under the New Civil Code, the remedies are expanded to include rescission — meaning that in cases of extreme hardship, the court may terminate the contract entirely if adjustment alone cannot restore fairness. The mandatory nature of Article 224 means that no contractual provision can exclude the Tenant's right to seek hardship relief.

What Can Tenants Do?

If Article 249 applies, a Tenant’s primary objective should be a negotiated resolution with the landlord.

A claim to the RDSC should be regarded as a last resort — as any court proceeding is going to be disruptive, time-consuming, and uncertain in outcome. Engaging the landlord in good faith under Article 246 of the Civil Code, supported by clear evidence of the financial impact, is far more likely to produce a commercially satisfactory result.

Tenants pursuing this course should: review the lease and identify notice periods and dispute resolution provisions; document the causal link between the exceptional event and their financial loss with specific evidence such as footfall data, revenue comparisons, and supply chain disruption; issue formal written notice to the landlord promptly, as contractual deadlines are strictly enforced; continue paying rent pending resolution; and not vacate the premises without legal advice.

What Should Landlords Do in Response?

Landlords who receive a request from a Tenant to renegotiate should not dismiss it out of hand. The mandatory nature of Article 249 — and Article 224 of the New Civil Code — means that a landlord cannot simply rely on the terms of the lease and refuse to engage. If the matter proceeds to the RDSC, the court has the power to reduce the rent regardless of what the lease says. The landlord will also have incurred legal costs and delay in the process. Furthermore, where the RDSC is exercising a broad discretionary power, evidence that a landlord refused to engage with the Tenant or ignored a reasonable request to negotiate is unlikely to be viewed favourably by the tribunal.

A pragmatic landlord will recognise that retaining an existing Tenant at a reduced rent is often preferable to the alternative. A vacancy carries re-letting costs in the current market, and there is a risk that the RDSC imposes a more significant reduction — or, under Article 224, rescinds the lease entirely. Voluntary concessions — whether in the form of a temporary rent reduction, a restructuring of payment dates, or a rent-free period — may preserve the landlord-tenant relationship and avoid the uncertainty of formal proceedings.

As the length and extent of the disruption remains unclear, short-term measures that are reviewable and extendable may be the best way to focus the relief during the relevant period.

Landlords should, however, ensure that any concession is properly documented. A side letter or variation agreement should record the revised terms, the period to which they apply, and confirmation that the original lease otherwise remains in full force. This protects both parties and avoids future disputes as to what was agreed. Landlords should also take care not to set a precedent that could be relied upon by other Tenants in the same building or development. Clear language limiting the concession to the specific circumstances of the individual Tenant is essential.

Where a landlord does not believe the Tenant's claim has merit — for example, where the Tenant signed after the relevant event or cannot demonstrate a causal link between the event and its financial position — the landlord should respond in writing, setting out its reasoning clearly. A well-reasoned response may dissuade the Tenant from pursuing RDSC proceedings. If proceedings are nonetheless commenced, it will demonstrate to the tribunal that the landlord engaged with the request properly and in good faith.

Conclusion: A Realistic Pathway to Relief

The hardship doctrine does not offer an easy exit from a lease, nor does it guarantee relief. The threshold remains high, the burden of proof rests with the Tenant, and the court retains broad discretion. However, for Tenants who can demonstrate a clear causal link between the exceptional event and grave financial loss, and who have documented their position carefully, the hardship provisions offer a realistic pathway to rent adjustment or other form of relief.

For landlords, the message is equally clear. Where such circumstances arise, there is a duty to apply a pragmatic approach grounded in shared sacrifice. Neither party chose this disruption, and neither party should bear its consequences alone. A willingness to share the burden — even modestly — is more likely to preserve valuable tenancies, avoid costly proceedings, and position both parties for recovery when conditions improve.

Both Tenants and landlords facing these circumstances should seek specialist legal advice at the earliest opportunity.

This article is for general information only and does not constitute legal advice. Independent legal advice should be sought in relation to any specific matter.

You can read more about the New UAE Civil Code: Hardship and Lump-Sum Price Adjustments under the New UAE Civil Code: Articles 224 and 829.