When tenants act as landlords
Dubai - For want of affordable options, many middle income families in Dubai resort to sub-letting.
Shilpa gupta (name changed on request) is a working Indian expatriate who rents a two-bedroom apartment in Karama. She has sub-leased one bedroom in her apartment to a couple for the past two years. She does not, however, do it by choice.
"I have sub-let my unit because I cannot afford to pay the rising rents in Dubai every year. My salary has been stagnant for some time now. School fees and other costs have rocketed. I am unable to save anything each month," she said.
"There are several families who partition even their living rooms and convert it into bachelor pads to earn extra money. Sub-leasing results in a loss of privacy for sure. The tenants may not keep the house clean either. But I am forced to make this compromise," Gupta added.
Gupta speaks on behalf of thousands of other middle-income expatriates who have also sub-leased their apartments to make a living. Although authorities often crack down on overcrowding and sharing in villas and apartments, residents often relapse into this practice for want of other viable options.
"There is a large percentage of population earning between Dh3,000 to Dh5,000 per month. The entry rents in Dubai at the moment is nearly Dh3,000 per month, which makes renting difficult for several families. This forces them to share apartments," said Robin Teh, country manager of Chestertons UAE.
This brings us back to the trending topic of affordable housing in the UAE. According to consultancy firm JLL, there are around 820,000 middle-income households in the UAE. This segment currently faces a shortage of affordable housing. JLL defines "middle-income" housing as that where families spend no more than 30 per cent of their gross household income on housing.
"The practice of sub-leasing and sharing of apartments and villas is one symptom of the shortage of affordable housing in the UAE, as this results in the need for many families to share their homes with tenants on a sub-lease basis," said Craig Plumb, head of research at JLL Mena.
The tendency to sub-lease always occurs at the lower end of the market spectrum who face difficult economic conditions.
"Sub-leasing is primarily a function of economic circumstance. This includes circumstances where rents are rising, regardless of the lack of legal protection that such practice involves," said Hussain Alladin, head of research at GCP Properties.
Dubai can be cheap or expensive - depending on what you earn and where you are from.
The high life
"Dubai salaries are amongst the highest in the world for senior executives and if you hail from one of the leading cities in the world, you'll feel spoilt for choice in Dubai. You get large modern apartments and villas with water views, gyms, pools close to the beach and work for far less than in New York, Sydney, London, Paris or Hong Kong. Even Beirut with its electricity cuts, daily challenges and low salaries commands similar rents for inferior quality stock," said Lukman Hajje, chief commercial officer of Propertyfinder.ae.
Meanwhile, for cost-conscious tenants at the other end of the spectrum, rents are expected to stay put for the next six months and begin to drop slowly.
"As more affordable stock is delivered in the next six to 24 months in areas such as Dubailand, Dubai Sports City and Al Furjan, we will see rents decline and a lot more options in the sub-Dh70,000-per-annum segment," added Hajje.
Opinion is divided on whether sub-leasing is legal in Dubai. Experts claim that if it is done with the landlord's approval, it can pass muster.
The practice is more prevalent in leasehold Dubai in areas such as Deira, Karama and Bur Dubai. Although sub-leasing does exist in freehold Dubai, strict monitoring in gated communities has clamped down on the practice.
"Sub-letting is not illegal if done with landlord approval as is shared accommodation for people of the same sex. Sharing between unmarried/unrelated people of different sexes is illegal," clarifies Hajje.
Standard tenancy contracts have explicit clauses that prohibit sub-leasing. It is usually worded as: "Tenant undertakes not to transfer the subject of tenancy to anyone else under any circumstances."
Article 24 of Law 26 of 2007 under Real Estate Regulatory Authority regulations stipulates that: "Unless otherwise agreed in the contract, the tenant shall not assign the benefit or sub-lease the property without obtaining the landlord's approval."
However, some cases are treated as an exception by landlords. In some cases, even if the tenant obtains the landlord's approval to sub-lease the unit, community or building rules may not permit it.
"There are some real estate companies who rent whole floors of units from owners for lower rates and then sub-let them themselves at a profit. This can be a 'grey area' in terms of liability as the management company must hold the correct licence to be able to do this to protect the owners," warned Teh.
Also, it is very common to see tenants advertising for roommates or families on websites.
"There is a lack of awareness and enforcement on the issue of sub-letting. Many tenants are themselves not aware of the dangers of living in an illegal way and dealing with unscrupulous agents," added Teh.
With the advent of the Ejari online registration system for all rental contracts in Dubai, the situation has become trickier for tenants resorting to sub-letting.
"As the locus standi [right to bring an action to court] is always between the landlord and the tenant, all liabilities that accrue as a result of the sub tenant will be passed on to the tenant. This has resulted in a reduction of sub-leasing transactions as these liabilities have come to light [bounced cheques, etc.]," said Alladin.