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Many illegal cases of subletting have come to light in recent years, pointing to a trend of tenants trying to making money on the side, joining in-the know or even unaware subtenants down a paperless trail. In 2012, a multimillion dirham rental scam involving Haitham Al Kouatly had led to hundreds of families losing nearly a year of rent or more. Landlords remained oblivious and the parties involved were unaware of the legal recourse they had when the situation came to light. The case highlighted the importance of checking all the paperwork before planning to rent out an apartment in the city.
What the law states
Subletting is not illegal in Dubai, but comes with caveats that property owners and tenants should pay heed to before entering upon such a contract. It begins with getting written consent from the landlord. Tom O'Grady, Head of Real Estate, Middle East at DLA Piper, points to Law 33 of 2008, an amendment on Law 26 of 2007, in which Article 24 requires a written consent from the landlord, unless the tenancy contract specifies the subletting option. Before entering into an agreement, individuals should ask to view the head lease and ensure that the original tenant has the right to sublease. If not, the permission to do so needs to be explicitly sought.
Assuming there is written consent from the landlord, subtenants should be aware that the term of a sublease contract expires upon expiry of the lease contract between lessee (original tenant) and the lessor (landlord), unless the latter ''expressly agrees to extend the term of the sublease contract'', as per Article 8.
Also, the landlord has the right to request for eviction prior to the expiration of the leasing period, explains Hassan Elhais, a legal expert practicing in the region. ''Article 25/1/b outlines the subtenant's rights to fight eviction with the lessor, i.e. the original tenant,'' he says. The Article states that ''if the lessee sublets the property or any part thereof without obtaining the written approval of the lessor, the evacuation shall apply to the sublessee while preserving the rights of the latter to recourse against the lessee for indemnification''.
A subtenant in this scenario has recourse to Article 30 of Dubai's Law 26 of 2007, which states that if a property is subject to a headlease and a sub-lease and the sub-lease was approved by the landlord, then if the Dubai Municipality Rent Committee terminates the head-lease, the subtenant is entitled to remain in the property for the remaining term of the sublease.
Given the legal framework around subletting, what does it mean for tenants listing on vacation rental sites such as Airbnb and HomeAway? ''Under short term letting, the form of the contract is unclear — is it a lease or a subtenancy? Also, it is unlikely to be covered by insurance and would need licenses to be undertaken,'' says O'Grady. ''From my experience of subletting a con do in the US, I know that it requires tourist licenses, registration, payment of sales tax, even car safety inspections. The vacation rental concept is relatively new, with only holiday resorts and timeshare models existing earlier in the tourism industry and globally. Real estate laws are being relooked at to see where short-term letting stands.''
In London, for instance, planning regulations have been modified in tandem with changing market needs and the new law allows for up to three months of short term letting a year without needing any planning permission.
Short-term letting of a part of the space, such as one of three bedrooms in homes are not permitted by law. Subletting laws at present only allow for entire units to be sublet, with written consent from the landlord in place. Dubai will soon enforce Decree No. 41 of 2013 Regulating Rental Activities of Holiday Homes in the Emirate of Dubai, requiring property management companies to obtain a permit for each unit on short-term lease. This would again apply only to entire home units and not portions of it.
Licences for subletting
Assuming the landlord allows subletting, the terms require obtaining a license from the Dubai Economic Department (DED). For property management companies, landlords are advised not to allow companies without the necessary licenses to sub-lease their properties. These licenses vary with the real estate activity involved. For instance, one such activity is ''leasing and management of other people's property'', and as per government guidelines, this includes ''firms engaged in managing commercial, residential, industrial buildings through contracting with the owner in order to re-lease on subcontracting bases''.
Mohammed Kawasmi, Partner — Property Practice at Al Tamimi and Company, explains that one of the requirements to obtain a license for such as licence is to open a bank guarantee for Dh5 million. ''Based on DED license requirements, individuals are not allowed to do subleasing activities if they have no licence,'' says Kawasmi.
It is clear where the law stands in terms of permitting subletting in the city. Those who find themselves at the receiving end of illegal subletting can take legal action by following certain procedures. For disputes arising from subletting, affected parties are advised to approach the Rental Dispute Settlement Centre. The procedure involves filing charges first at the Arbitration Department, which will try to settle disputes within 15 days.
If not successful, a lawsuit has to be lodged with the Department of First Instance, which will try to settle the dispute within 30 days. The ruling is final, unless appealed to the Department of Appeal, and only for claims worth more than Dh100,000. A verdict is issued within 30 days.
Get a glimpse on Ejari registration for all Dubai lease contracts
Source: Manika Dhama, Special to Property Weekly