Homefront: ‘Should I return a non-refundable deposit for a deal gone wrong?’

Dubai landlord has cancelled the contract and found a new occupant, but the previous tenant wants his deposit back

The law is silent when it comes to returning the security deposit when deals go wrong. It is up to the parties to decide the fate of this down payment as per any agreement. Getty Images

I recently signed a rent contract in Dubai and the tenant asked me to hold the property for him until a particular date. He agreed to pay a Dh5,000 deposit, which would go towards his rent. We agreed that this deposit was non-refundable. When it was time to pay the deposit, he gave us a cheque worth Dh4,500 and said that he would pay the rest later.

A day before the tenant was supposed to move in, he asked me not to deposit the cheque as he was short on cash. This was the second time he was short on cash in two weeks. So, I cancelled the contract as he clearly could not afford the property. I told him that I would not deposit the cheque but would look for another tenant instead. I also told the agent that I would retain the deposit as agreed. During this time, the tenant deposited Dh500 into my account without my consent.

The tenant’s real estate agent has now messaged saying he has the money and would like to move in to our property. I have already signed a rental contract with another tenant, who is in the process of moving in. The old tenant claims the contract offers leeway for one month from the move-in date or he will demand his deposit back.

I do not want to rent my property to him because he will always be late on rent payments. I also do not want to give him back the deposit because I missed getting a month's rent and delayed payment the next month because of him. According to the law, do we need to return his deposit? FK, Dubai

In answer to your question, the law is silent when it comes to the return of the booking or security deposit when deals go wrong. Therefore, it is up to the parties to decide the fate of this down payment as per any agreement. It is also worth mentioning that potentially your moral judgement will come into play at this point. Having said this, if it is clearly mentioned that the deposit is non-refundable when it was given, it does not get returned should things go wrong.

You say that both parties agreed that the deposit was non-refundable, but I guess this was not put in writing for you to now ask about returning it or not as per the law. A verbal agreement is still an agreement but much harder to prove than anything put down in writing.

It is obvious that the tenant is having financial issues by his erratic manner and his demands now for the deposit to be returned are clear proof of this.

I have never heard of a month’s grace period for a rental contract, so unless it was clearly mentioned as one of the clauses, I believe the agent is just trying his luck by mentioning this.

I suggest you stick to your agreement regarding the deposit and continue with the new rental as before.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for more than 35 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to [e-mail]