This judgment clarifies the limitations on a landlord’s ability to recover long-term rental arrears when they fail to take timely legal action following a tenant’s breach of contract under the DIFC Leasing Law.
What was the specific financial dispute and the total amount claimed by Lihant against Liqt in SCT 265/2022?
The dispute concerned a residential tenancy agreement for an apartment in the DIFC, initiated by a contract dated 18 July 2018. The Claimant, Lihant, sought to recover substantial rental arrears, late renewal fees, and utility charges from the Defendant, Liqt, after the Defendant’s rent cheques bounced at the inception of the tenancy. The Claimant sought a total sum of AED 561,729.98, covering the period from the initial contract term through to the eventual handover of the premises.
The breakdown of the claim included rental arrears, late renewal penalties, bounced cheque fines, and outstanding utility charges. The court’s final determination significantly reduced this amount, holding the Claimant accountable for the delay in pursuing legal remedies. As noted in the judgment:
On 1 July 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking payment of AED 561,729.98, which consists of the following:
Which judge presided over the hearing in the Small Claims Tribunal and when was the final judgment issued?
The matter was heard before H.E. Justice Nassir Al Nasser of the DIFC Courts’ Small Claims Tribunal. Following a series of consultations and a hearing held on 14 December 2022, Justice Al Nasser issued the final judgment on 23 December 2022.
What were the primary legal arguments advanced by Lihant and Liqt regarding the termination of the tenancy and the accumulation of arrears?
The Claimant, Lihant, argued that the Defendant remained liable for the full duration of his occupation, which the Claimant alleged extended until the formal handover on 25 October 2022. The Claimant sought the full value of the rent and associated fees, asserting that the Defendant had failed to satisfy the financial obligations under the contract despite remaining in possession of the apartment.
Conversely, the Defendant, Liqt, contended that his failure to pay was a result of financial distress caused by the COVID-19 pandemic, including the loss of his employment and the bankruptcy of his business. Crucially, the Defendant argued that he had communicated his intent to vacate the premises as early as 20 September 2020. He further submitted that the Claimant had effectively prevented him from handing over the apartment by refusing to accept the keys until all outstanding utility bills were settled, despite the apartment being without electricity due to non-payment.
What was the core legal question the court had to resolve regarding the duration of the Defendant’s liability for rent?
The court was required to determine the precise date upon which the Defendant’s liability for rent ceased, given the conflicting narratives regarding the handover of the apartment. The doctrinal issue centered on whether the Defendant remained liable for the entire period until the formal handover in October 2022, or whether his liability was curtailed by his communication of intent to vacate in September 2020 and the Claimant’s subsequent inaction.
How did Justice Nassir Al Nasser apply the principle of mitigation of losses in determining the final award?
Justice Al Nasser determined that while the Defendant was in breach of the contract, the Claimant’s failure to act promptly to terminate the tenancy or seek legal redress after the initial cheques bounced significantly impacted the recoverable amount. The court found that the Claimant allowed the arrears to accumulate over several years without taking the necessary steps provided by the DIFC Leasing Law to mitigate their losses.
The judge concluded that the Defendant’s liability should be limited to the period during which he actually occupied the premises and communicated his intent to leave. As stated in the judgment:
In absence of renewal between the parties and due to the breach made by the Defendant, I find that the Defendant is liable for the contract period and overstayed in the Apartment until 20 September 2020.
Which specific provisions of the DIFC Leasing Law and contract terms were central to the court’s decision?
The court relied upon the DIFC Leasing Law No. 1 of 2020 to assess the rights and obligations of the parties. Specifically, the court examined the Claimant’s failure to exercise remedies available under the law to terminate the contract once the Defendant’s cheques bounced at the start of the tenancy. The court also referenced Clause 15 of the Addendum to the Contract, which stipulated that the validity of the tenancy was subject to the clearance of the cheques, and Clause 16, which governed the renewal of the contract.
How did the court treat the Defendant’s bounced cheques and the associated fines in the final calculation?
The court acknowledged the Claimant’s entitlement to specific penalties for the bounced cheques, separate from the rental arrears. The Claimant had provided evidence that the Defendant made only partial payments towards the contract, totaling AED 53,550. Regarding the fines for the bounced cheques, the court held:
The Claimant claims AED 4,000 in fines for four bounced cheques, which I find the Claimant is entitled to.
What was the final disposition of the claim and the specific monetary relief awarded to the Claimant?
The court allowed the claim in part. The Defendant was ordered to pay a total of AED 318,783.32, a significant reduction from the original claim of over AED 561,000. Additionally, the court ordered the forfeiture of the security deposit in favor of the Claimant and mandated that the Defendant settle all outstanding utility charges, including DEWA and district cooling, up to the date of his departure in September 2020. The court also awarded the Claimant AED 15,939.16 in court fees.
The Defendant shall pay the Claimant the sum of AED 318,783.32 plus interest at the rate of 9% per annum from the date of this judgment until the date of full payment.
How does this ruling change the practice for landlords in the DIFC regarding the recovery of long-term arrears?
This judgment serves as a warning to landlords that the DIFC Courts will not permit the recovery of unlimited arrears if the landlord has failed to mitigate their losses. Practitioners must advise clients that they have a positive duty to take timely action under the DIFC Leasing Law to terminate a contract and recover possession once a breach—such as a bounced cheque—occurs. Delaying legal action in the hope of future payment will likely result in the court refusing to award damages for the period during which the landlord remained passive.
Where can I read the full judgment in Lihant v Liqt [2022] DIFC SCT 265?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/sct-2652022-lihant-v-liqt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents cited in the judgment text. |
Legislation referenced:
- DIFC Leasing Law No. 1 of 2020 (Article 54)
- DIFC Contract Law No. 6 of 2004 (as amended)