Holiday Home
Sub-leasing comes with inherent risks, and landlords are better off staying away from that model. Image Credit: Gulf News Archive

Basically, the holiday home business model in Dubai works in two ways. One, the property company pays the landlord to sublease units as holiday homes. In the second, they go and sign a management agreement with the landlord, whereby the landlord get daily, weekly, monthly reports on the state of occupancy and revenues generated.

The latter system is fully integrated with Dubai Tourism and, as such, fully transparent. The landlord gets paid as the property gets rented, which works out to a profit sharing model with the holiday home company. This model is by far the best option for many reasons:

If the holiday home company is able to rent at certain rates and ensure a certain occupancy level, they should be able to rent whether it is through a management agreement or sublease. The only difference is that in a sublease, the landlord has to face the risk of the people behind the holiday home company doing the skip.

Also minimised are risks associated with the market going down or if the holiday home operator cannot secure tenancies. Then, the landlord can have a new round of negotiations to reset the terms.

Do away with the sub-leases

If someone is able to rent for X amount from you and sublease for X+20 per cent, then the landlord can definitely find companies in the market that can rent directly at X+. If your building generates Dh1 million a year and a leasing company comes and tells you they will rent it for one cheque of Dh900,000 and sub-lease for Dh1 million plus, you should go find an operator who can actually rent it for you directly at Dh1 million or above.

The other risk in a sublease is when the transaction does not have an Ejari registration with the Dubai Land Department. And even more so if the tenant who has subleased has an Ejari. It ends up being a much longer process to settle the matter through the Rental Dispute Committee.

Tenants must check through the Dubai REST app the authenticity of the ownership details and should issue cheques only as per the name of the landlord stated there. Always issue a rental cheque to the landlord. Make no compromises there.