New Regulations For Bounced Cheque In Dubai
The post-dated cheque (aka the draft) is the rent payment method that is widely used in Dubai as well as all over the UAE. Even if you agree to split your annual rent payment onto two or more parts, writing out a draft for each part in advance on the day of signing the lease is the common way to follow.
It is very convenient both for the landlords and the tenants. To clarify, it enables the parties to settle the rent payment once and for the whole year. Thus, landlords get some guarantees their tenants will not evade rent payment. In their turn, the tenants don’t need to waste their time on sending a draft each time the due day comes.
You may ask ‘What guarantees are you talking about if the tenant simply may not provide sufficient funds for the clearance?’ Well, indeed, cases with bad drafts are not unheard of in Dubai. However, according to local legislation, a bounced cheque is considered as the trickery and is subject to criminal prosecution. Hence, this is a good reason to provide sufficient balance to the due date.
Read further to know the details.
How long is a Cheque valid in the UAE?
Well, this is not about when you actually draw a cheque. This is about what date of issue you indicate in it.
To clarify, the date of issue is one of the fields a cheque contains. It is located in its upper-right corner, right under the name of the bank, and identified simply as “Date”. The bank legislation doesn’t prescribe any difference between the date of issue and the date of clearance when the recipient (aka the Payee) is allowed to get the payment.
For example, you can draw a cheque on November 15, 2020, and indicate the date of issue on November 15, 2021. For a bank, it means you have issued the cheque on November 15, 2021. So, if you indicate, November 15, 2021, in the “Date” field, your bank will clear it (pay the prescribed amount from your account to the prescribed payee) not earlier than November 15, 2021.
Now let’s go back to the question about how long a cheque is valid in the UAE. According to the law (the Article (618) of the UAE Commercial Transactions Law), it is valid within six months from the date of issue.
For example, if you issue a cheque on November 15, 2021, its bearer should present it for clearance no later than on May 15, 2022.
What is the penalty for Cheque bounce in Dubai?
In general, according to the Article (401) of the UAE Penal Code, if a cheque is bounced, the person who draws it is subject to detention or a fine. The minimal penalty here is:
- One-month jail sentence as detention;
- AED 2,000 as a fine.
Till the end of 2017, any of these two penalty types can be applied to any draft dishonored by the bank. However, now imprisonment is the penalty that is, typically, applied only in cases with dishonored drafts of over AED 200,000. Hence, if the amount is AED 200,000 or less, only a fine is imposed on the drawer.
The severity of the fine depends on the exact amount of the draft and can be up to AED 100, 000 (see the table below).
Bounced cheque amount, AED
Fine amount, AED
0.00 – 50,000.00
50,001.00 – 100,000.00
100,001.00 – 200,000.00
15,000.00 – 100,000.00
Note, even if detention is not applied, a travel ban may still be imposed in addition to a fine, regardless of its amount.
What happens if your Cheque bounces in Dubai?
First of all, you need to know the Penal Order law No 1 of 2017 handed over the bounced cheque cases settlement to the Public Prosecution (aka the ‘One Day Misdemeanour Court’). Therefore, the police station is entitled to execute the complaint without transferring it to the court.
If your rental cheque bounced, your landlord (or its authorized representative) or the bank may file a police complaint against you, qualifying your actions as cheating.
The police notify you about the complaint and summon you to the police station. There, you are allowed to settle the complaint without transferring it further and imposing any punishment. In other words, if you arrange paying the amount you have specified in the dishonored draft within a few days, you will not subject to fine or detention. Note, the police usually demand your passport as a pledge for your arranging the clearance.
If you fail to arrange the clearance, the Public Prosecution sentences you in accordance with the severity of your case.
If you or another party have any objections to the sentence, the right to appeal is still at presence. But keep in mind the appeal is lodged to the criminal court and will have the standard proceeding.
Be aware, paying the penalty does not exempt you from your rental payment liabilities. At last, note your landlord may also file a case to the Rental Disputes Center for your eviction.
At BSO, we successfully undertake some preventive steps to avoid bounced cheques. Starting with screening the potential tenants and ending with reminding them to timely top up their bank balance. Thus, landlords who entrust us with their properties have minimal issues with dishonored drafts. Reach us and know more about our services.