Dealing With Bounced Cheques
A bounced rental cheque is an ordinary situation in the real estate business. Tenants may end up in an NSF (non-sufficient funds) state for many reasons. The point is what landlords can get according to the laws covering these cases. We want to make sure you know all the aspects of how to minimize your losses.
Cheques are an integral part of Dubai financial system. Writing a cheque you are unable to pay for is against the law. By the way validity of a bounced check in the UAE is two years. In other words, if you receive a bad draft, you can file a case in its regard within two years from the payment date.
Penalties for bounced cheques effective till 2022
In past, you would get imprisoned for this action but from 2017, Dubai courts started to issue fines instead. This covers the cheques for amounts not exceeding AED 200,000.00. Below you can see the penalties tenants pay for bounced cheques:
- A cheque up to AED 50,000.00 – a fine of AED 2,000.00;
- A cheque between AED 50,000.00 and AED 100,000.00 – a fine of AED 5,000.00;
- A cheque between AED 100,000.00 and AED 200,000.00 – a fine of AED 10,000.00.
Penalties for bounced cheques effective from 2022
On 27 September 2020, the UAE Government published significant amendments concerning sentences for bounced cheques. To clarify, on 2 January 2022, the following fines and other punishments will be applicable:
- A fine of from AED 1,000 to the full cheque value, and no less than 10% of the draft value for endorsing a cheque with insufficient funds.
- A fine of from AED 5,000 to twice the value of the draft, and no less than 10% of the draft value for deliberately withdrawing funds so as not to pay for the cheque, ordering the bank not to pay for it, or undertaking other actions so as make the clearance impossible (including, bad cheque signing and closing the account). The fine can be substituted or even supplemented with imprisonment (from six months to two years).
- Report to the Central Bank for the account of a bounced cheque drawer and the surrender of all his chequebooks issued by the UAE banks for up to five years without the right to get another one during this period.
- Publication of the name and other identification details of the convicted drawer in daily newspapers or e-publishing media (one publication in Arabic and one in English) at the expense of the drawer.
- A double-size fine in case of the bounced check issue with the same drawer, with no specified sentence period.
- Also, now partial payment for the dishonoured draft up to available funds shall be possible. Moreover, refusal of the partial payment will be sentenced with fines of 5,000 to twice the value of the draft, and no less than 10%.
What does this reform mean for landlords?
Most debtors were afraid of going to jail. Now, a bounced cheque of the mentioned amount is successfully downgraded to a misdemeanour. Tenants are now interested in repayment. It's much easier for banks to find a solution for debt restructuring and take into account debtors’ paying capability at the same time nowadays. However, imprisonment for up to two years for such severe bad ill actions as closing the account or fund withdrawal will have a significant effect and lowers such non-payment risks for the landlord.
Fortunately for landlords in Dubai, BSO support in real estate assets management prevents such issues. We take care of timely rent collections along with swift payment clearance for every client. Whether you own a residential or commercial property, we assure you that all the payment aspects are under BSO's control.
How does BSO help landlords to avoid dealing with bounced cheques?
One of our advantages is an outstanding way of tenants screening before advising on any deal to our landlords. BSO works on verifying the following information about any potential tenant:
- Tenant profile;
- Employment status;
- Monthly income statement;
- Rental history;
- Legal compliance.
BSO approves trouble-free tenants, so it reduces the risk of getting bounced cheques, which any landlord appreciates. Contact us today and keep yourself away from bounced cheques.