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On 7 January 2020, the Director General of the Department of Tourism and Commerce Marketing (“DTCM”) issued Administrative Resolution No. 1 of 2020 which sets out the executive regulation (the “Executive Regulation”) of Decree No. 41 of 2013 Concerning the Regulation of the Holiday Homes Rental Market in the Emirate of Dubai (the “Holiday Homes Decree”).
In recent years, the holiday homes sector in Dubai has expanded significantly and with the arrival of Expo 2020 in October, this impressive growth is likely to continue. In this context, the Executive Regulation, which entered into force on 19 January 2020, is a welcome development that provides helpful clarity and guidance to stakeholders wishing to operate in this increasingly important segment of Dubai’s tourism market.
Obligations of Developers, Co-owners and Management Bodies
The Executive Regulation imposes an obligation on developers, co-owners and management bodies to enable duly authorised holiday home operators to carry out their business in accordance with the terms of any license or permits issued to them by DTCM.
Obligations of Holiday Home Operators
The Executive Regulation imposes additional obligations on holiday home operators which were not expressly mentioned in the Holiday Homes Decree such as:
Introduction of the Initial Approval Stage
It is now a requirement for holiday home operators to obtain initial approval from DTCM prior to the issuance by DTCM of the final license allowing the operator to carry out the activity of leasing out holiday homes in Dubai. The Executive Regulation sets out the type of documents required, conditions and the process for issuance of the initial approval as well as the final license. It is worth noting that the application process is to be carried out entirely through an electronic portal hosted by DTCM which will hopefully streamline the relevant processes.
The License Term
The license granted to holiday home operators is valid for one (1) year and renewable for a similar period, subject to the operator applying for renewal before the end of the original or extended term and provided further that the conditions and requirements for the original license remain satisfied. DTCM has retained the discretionary right to extend the term of the license for up to four (4) years provided that the applicant has paid the requisite fees in advance. Equally notable is the fact that holiday home operators are now expressly prohibited from permanently or temporarily ceasing to lease out holiday homes during the term of their license unless they obtain the prior approval of DTCM.
The Permit vs the License
The difference between the holiday home license mentioned above and the holiday home permit is that the license is granted to the holiday home operators for the purposes of allowing them to carry out the activity, whereas the permit is issued in respect of the property in which the holiday homes activity is to be carried out. The holiday home property can be an apartment located in a building dedicated for use by holiday home operators, an apartment in any residential building, a house or a villa within a real estate development or an independent villa.
The Importance of Due Diligence
The Executive Regulation sets out the conditions for issuance of the permit, the procedure and applicable validity period (i.e. one (1) year).
A key condition is that evidence must be submitted to DTCM demonstrating that the holiday home operator has the right to use the property as a holiday home. The operator must also evidence the absence of any explicit provisions in the underlying sale contract for the property that would prohibit its use as a holiday home. In light of this, it is important that the necessary due diligence is completed before any permit application is made, in order to ensure that the property will comply with the applicable conditions imposed by DTCM.