Holiday home firms raise validity of ban

With the September 19 deadline imminent, holiday home operators in Dubai are now openly questioning the validity of Emaar’s ban on all short leases at Downtown Dubai from that date. Questions on the legality, it is learnt, have been submitted to Dubai Tourism and Commerce Marketing, as the sole entity responsible for licensing all holiday home services in the emirate.

According to sources, Emaar issued the ban based based on a provision that owners of properties at Downtown have to be abide by the “Community Rules”, which are set by the master-developer. This provision is part of the Sales & Purchase Agreement Emaar issues to buyers.

Also, the Community Rules can be changed as “per the sole discretion of Emaar”.

Sticking point

But holiday home operators contend this is based on a premise that will not hold up legally. They point to the Dubai Decree that “explicitly prohibits developers to impose any Community Rules that would prohibit rent-out of residential units as holiday homes”.

Now, this is the part of the Decree that has raised the hopes of holiday home operators. A final word from DTCM is still awaited, because on this hinges the future direction of this real estate category. Because, these businesses and investors who have put up their properties for short-term leases believe other master-developers could well follow suit if Emaar gets the go-ahead.

So, it’s not just the 1,000 odd holiday homes within Downtown that is at stake, these sources add. “There has already been an impact on enquiries and there have been several cancellations after the Emaar announcement,” said Vinayak Mahtani, CEO of bnbme. “Several guests have also chosen to take a connecting flight rather than stop off for a night in Dubai.

“It is unfortunate a brand like Emaar has not attempted to approach any of us in trying to find a solution. Surely, they must realise that we are influencers in investors’ decisions on where to buy property. Already, they have left 1,000 odd investors owning properties placed in the short-term market in the lurch.”

Precedent

Industry sources add this issue of developer rights has already been settled before, when "DTCM issued a decision that a holiday home ban has to be explicitly mentioned in the SPA for a community management firm to be able to ban holiday homes in the community," said Tomas Dolezal, CEO of Elite Royal Apartments. In this, he cites the decision issued by DTCM for Al Bateen Community Management, which is final and binding as per the decree governing the industry.

"We, as holiday homes operators, commenced our operations exactly as required by the law... and we thought that we are protected. There are many individuals who would lose their entire personal and family wealth based on a single deliberate decision of a developer. We speak of personal losses in millions of dirhams."

Other developers

According to sources, some of the other developers with their own towers at Downtown are tepid over the Emaar move to ban holiday homes across the community. Privately, these developers have assured holiday home operators of their support, and they too are waiting for a clarification from DTCM on how to proceed after September 19. What they will not like seeing is have enforced vacancies if the holiday home leases completely vacate their buildings.

As for those wanting to book, they would prefer discretion and select another location in Dubai until this situation blows over.

Some estimates suggest up to Dh3 billion in the holiday home business could be wiped out from the ramifications of such a move. And that 3,000 odd jobs will also be lost. “Developers sold thousands of homes based on the second home/holiday home concept,” said one source. “As thousands of units are being handed over, developers cannot suddenly change their minds.

“With uncertainty, international funds will also stop channeling billions into the local holiday home sector.”

Why holiday home operators want to pursue the legal aspect

According to these businesses, the Emaar ban is not valid:

* Because the ban is “written in the Community Rules and not the Sales and Purchase Agreement as required by Dubai Tourism and Commerce Marketing;

* Emaar’s update in the Community Rules - prohibiting holiday home lettings - is a “direct breach” of Executive Resolution 1/2016. This specifically prohibits developers to impose a rule that would prohibit residential units as holiday homes;

* Community Rules v4.2.1 did not refer to holiday homes and did not include “specific wording required by DTCM” to ban holiday homes in the community; and

* Emaar was issuing own move-in permits to holiday home operators under Community Rules. Therefore, it cannot be “argued by Emaar that already Community Rules included a clause that prohibits owners to rent out units as holiday homes”.

first appeared in the Gulf News on 15.09.2019