Dubai: Is It Legal For Car Rental Companies To Demand Security Deposit?

Question: I plan to rent a car in Dubai, but the company demands a security deposit. I tried asking the reason, but the salesman did not offer a convincing answer. Is it legal for the company to seek a deposit? If yes, what are the rules for getting the security deposit back? For what purposes can the amount be used?

Answer: In Dubai, renting or leasing vehicles must not be carried out without obtaining a license from the competent authority. Before renting out a vehicle to a lessee, a lessor must verify the validity of the driver's licence. This is by Article 29 of the Federal decree-law No. (14) of 2024 on traffic regulation

"1. Vehicles shall be rented and leased by the provisions of this decree-law and the legislation in force in the State.

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2. Vehicle rental activity may not be practised unless a licence is obtained from the competent authorities. The executive regulations of this decree-law shall determine the conditions for practising vehicle rental activity.

3. Companies licenced to engage in vehicle rental activities shall ensure the validity of driving licences approved in the state, duplicated or recognised by the renter, by the controls and procedures specified in the executive regulations of this decree-law.

4. The executive regulations of this decree-law shall determine the controls for renting vehicles, the obligations of the drivers of these vehicles, and the procedures for registering them."

Furthermore, you will have to sign a car rental/lease contract between you and the car rental company wherein all the details about the car rental will be mentioned.

Also, all car rental companies in Dubai should return consumers' credit card holds and other deposits within 30 days of the vehicle's return. This circular is issued by the Dubai corporation for consumer protection and fair trade, which operates under the Department of Economy and Tourism.

According to circular no. (1) of 2024, if the security deposit was paid in cash or via debit/credit card, rental companies must refund the amount in cash or through a bank transfer and they are required to cover any transaction fees incurred. However, companies are allowed to deduct actual costs related to traffic violations, vehicle damages, and applicable administrative fees from the deposit.

The circular prohibits rental companies from charging consumers additional fees for using credit cards or payment applications.

In the UAE, it is general practice to charge a security deposit when renting a car, serving as a financial safeguard for rental companies against potential liabilities during the rental period. This deposit covers unforeseen costs such as traffic violations, Salik (toll) charges, minor vehicle damages, fuel discrepancies, and administrative fees that may arise during or shortly after the rental.

If you face any issues getting your security deposit back, you may contact the Department of Economy and Tourism by filing a complaint.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: Readers may e-mail their questions to: ... or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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