Landlords in Dubai to require licences for short-term lets

Effort to standardise property market and to increase tourist accommodation in the lead-up to Expo 2020.

Currently short-term holiday lets fall into a grey area of Dubai property law. Pawan Singh / The National

The Dubai Government is to start requiring landlords who rent out furnished properties on a short- term basis to get licences as the emirate attempts to standardise its property market and to increase tourist accommodation ahead of Expo 2020.

In a decree announced yesterday Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, ordered that anyone renting out holiday lets on a daily, weekly or monthly basis would be required toapply for a licence from the Department of Tourism and Commerce Marketing (DTCM), the body which classifies Dubai hotels.

A statement on the news agency Wam added that the department would grant new holiday home licences to landlords only with properties in specific Dubai neighbourhoods, without saying where these will be located. It also did not disclose how much the licences would cost.

Currently short-term holiday lets fall into a grey area of Dubai property law. Federal law requires all areas of commercial activity to be licensed.

Hotel companies and property brokers who rent out short-term holiday lets are required to pay expensive bonds. But landlords themselves who wish to rent out private property have not been required to get a licence.

Under the new decree number 41 of 2013, DTCM will be responsible for coming up with a set of standards that will be required for all holiday homes in the emirate, deciding what procedures applicants must follow to get a licence, inspecting properties, approving or denying applications and creating a database of all licensed holiday homes in the emirate.

As a result of the changes DTCM will also add two new classes of “standard” and “deluxe” holiday homes to its existing hotel classification framework.

DTCM said that the move would increase the amount of short-term accommodation available to tourists as the city gears up to welcoming an anticipated 20 million visitors for Expo 2020 and broaden the range of accommodation available. It added that the move would also provide a potential revenue stream for landlords eager to get their hands on lucrative short-term rents.

“This decree provides a potential revenue stream for owners of a second or multiple properties: an alternative to renting out the property on an annual lease,” said the DTCM director general Helal Saeed Almarri. “By being part of the wider Hotel Classification Scheme, property owners will be able to benefit from the growth of visitor numbers over the coming years.

“By including holiday homes as part of our Hotel Classification framework, we will ensure that visitors can book a private apartment, town house or villa with full confidence that the accommodation is of a quality standard, has the appropriate insurances, and is managed by a qualified party,” he added.

According to property brokers in Dubai, short-term lets can fetch landlords anything between one- and-a-half or twice the rent of more traditional yearly rentals.

“These sorts of lets are much more expensive because of the hassle factor involved,” said Mario Volpi, the managing director of Prestige Real Estate. “All the charges are much higher, including the deposit, the fees the agents charge. But you’re paying for flexibility and these sorts of arrangements are probably still cheaper than a hotel room over the time period.”

Said Ludmila Yamalova, managing partner at the law firm Yamalova & Plewka: “With Dubai gearing up for Expo 2020, more and more landlords are going to be looking at short-term lets and this new decree is likely to make the law in this area more clear-cut.

“The difficulty is saying at what level the requirement to get a licence actually kicks in and what constitutes commercial activity.”

According to DTCM figures, the number of tourists staying in Dubai’s 82,000 hotel rooms grew by almost 10 per cent during the first nine months of this year to a total of 7.9 million.

Occupancy levels at hotels and hotel apartments stood at 78.6 per cent and 81 per cent respectively, as the average number of nights guests stayed rose to 3.9 from 3.7. That netted more than Dh15.33 billion for hotels, an increase of 17.1 per cent compared with the same period the previous year.

The average daily room rate touched Dh589 for hotels and Dh422 for hotel apartments.