Letting a Dubai home as a holiday home: permits, fees and fines

In this article

Written by

Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

About Kooky and Shaka →

An investor who buys an apartment in Dubai and lets it to a tenant for a year signs a tenancy contract. An investor who lets the same apartment to visitors by the night steps into a different body of rules altogether. In the Emirate of Dubai, receiving paying guests in a furnished home is a regulated activity of its own, supervised by the tourism authority, with a licence for the person or company that operates, a permit for each home, a classification, a nightly charge collected from the guest and a printed schedule of fines.

Those rules are spread over four texts published on the Dubai Legislation Portal and a short procedure document from the Dubai Department of Economy and Tourism. This guide reads them in order: what a holiday home is, who may operate one, which homes qualify, how the permit is applied for and what it costs, how homes are classified, what is owed to guests and to the authority, how the Tourism Dirham works, where the building and the developer stand, and what the fines are. Where the texts are silent or do not agree with each other, the guide says so.

Schedules 1 and 2 of Executive Council Resolution No. 49 of 2014, as published in English on the Dubai Legislation Portal.

The four texts behind every holiday home

The foundation is Decree No. 41 of 2013 Regulating the Activity of Leasing out Holiday Homes in the Emirate of Dubai, issued by the Ruler of Dubai on 24 November 2013. Its Article 19 brings it into force three months after publication in the Official Gazette, and Article 16 gave anyone already letting to guests three months from that date to comply. The decree names the Department of Tourism and Commerce Marketing, the DTCM, as the authority in charge. The procedure document for holiday homes read for this guide is published under the name of the Dubai Department of Economy and Tourism.

The decree is a framework. Article 9 leaves the classification of homes to a resolution of the Director General, and Article 10 leaves the fees to a resolution of the Chairman of the Executive Council. The decree itself prints no fee.

Three texts fill those gaps. Executive Council Resolution No. 49 of 2014, issued on 7 December 2014, carries two schedules: one of fees, one of violations and fines. Administrative Resolution No. 1 of 2020, issued by the Director General of the department on 7 January 2020, sets the procedure for the licence and for the permit of each home, and lists the day-to-day duties of the operator. Executive Council Resolution No. 2 of 2014, issued on 24 January 2014 and in force since 31 March 2014, created the Tourism Dirham and counts holiday homes among the establishments that must collect it.

What the law calls a holiday home

Article 1 of the decree defines holiday homes as furnished real property units designated to conduct the Activity, a defined term that means regularly leasing out holiday homes, or renting them in order to sublet them to guests. A guest is a natural person who stays in a holiday home in return for payment. The 2020 resolution tightens the wording slightly: it describes the Activity as leasing out holiday homes on a regular and continuing basis.

Two consequences follow from those definitions. The first is that the home is furnished and let to people who stay, not to a company and not as empty space. The second is that the definition itself covers renting a home in order to sublet it to guests, so the framework is not written for owners alone. Whether a tenant may in fact do this in a given home depends on the documents the department asks for, described below, and on the tenant's own lease.

The scope is wide. Under Article 2 the decree applies to all individuals and entities conducting the activity in the Emirate, including the Special Development Zones and the free zones, and it names the Dubai International Financial Centre as an example. A home inside a free zone is therefore inside the same regime.

Article 8 of the decree also fixes the shape of the letting. A licensee leases on a daily, weekly, monthly or annual basis, and leases the home as a whole and not in part, as separate rooms or bed spaces. Letting one bedroom of an apartment to a visitor while another guest occupies the second bedroom is not what the decree licenses, and the fines schedule has a line for it.

Who may operate: the owner or a licensed company

Article 3 of the decree is short: only persons licensed by the department may conduct the activity. The 2020 resolution defines a licensee as an individual or an Establishment licensed to do so, and the decree defines an Establishment as a corporation or company licensed for the activity. The texts therefore know two kinds of operator, a natural person and a company.

The department's procedure document shows how that looks at registration. A company operator fills in the company's details and uploads a copy of a trade licence that carries a vacation homes rental activity. A holiday home owner fills in individual details and uploads a copy of an Emirates ID. In both cases the document describes a permit obtained online, with a QR code that can be printed.

For a company, the 2020 resolution describes a two-stage route. Article 2 requires an initial approval, applied for through the department's electronic portal with copies of the passports and Emirates IDs of the owners, the partners and the managing director, a valid commercial licence and certificates of good conduct. The applicant then has three months, renewable once, to obtain the licence itself, failing which the approval is revoked. Article 3 adds that a legal entity must prove it has an office, that the department may make field visits, and that the prescribed fees are paid before the licence is issued. A rejected applicant is told the reasons and may apply again.

The licence lasts one year and is renewable, under Article 7 of the decree and Article 4 of the resolution. The renewal is applied for before the expiry date. Both texts allow the department to approve a term of up to four years, and the resolution adds the condition that the fees for the whole term are paid.

For the investor, the choice between the two routes is a choice about who carries the licence and its duties. An owner who registers personally is the licensee: the insurance, the guest records, the complaints log and the fines described below sit with the owner. An owner who hands the home to a licensed company gives that company a written authorisation, and the company is the licensee for that home. The pages read for this guide do not state any limit on the number of homes an individual owner may register; that point is not settled by the decree or by the 2020 resolution, and it is left open here.

Which homes can be given a permit

The licence belongs to the operator. The permit belongs to the home. The 2020 resolution defines the permit as the department's document approving that a furnished property unit be designated as a holiday home, and Article 8 lists what the unit must satisfy.

It must stand in an area where the department, together with the other authorities concerned, allows the activity. It must be one of four things: an apartment in a designated building, an apartment in a residential building, a villa within a compound, or an independent villa. It must meet the specifications that the department's Guide sets for its classification. The application carries a copy of the passport or Emirates ID of the owner or of the tenant. The applicant must have the right to dispose of the unit. And the agreement under which the unit was sold must not expressly bar its use as a holiday home.

That last condition deserves a careful reading by anyone buying with short lets in mind. The resolution does not ask the developer for permission. It asks that the sale agreement does not expressly prohibit the use. A purchase contract that contains such a clause closes the door at the permit stage, whatever the building looks like.

The department's procedure document adds a classification by land use. An apartment is recorded as residential. A house or villa in a closed complex is recorded as residential or commercial. An independent villa is recorded as commercial, or as a farm, a category the document reserves for the Hatta area.

Applying for the permit, step by step

Article 9 of the 2020 resolution routes the application through the electronic portal, with documents proving that the conditions of Article 8 are met. The department may inspect the home and ask for further documents. An approved applicant pays the fees before the permit is issued; a rejected applicant is told why and may reapply. The procedure document names the papers attached to each unit: a copy of the owner's passport or UAE ID, a copy of the title deed, a written authorisation from the owner on the department's approved form, and a Dubai Electricity and Water Authority bill in the name of the owner or of the licensee, which, in the document as read, must be no less than three months old.

The one-year life of the permit comes from Article 10 of the resolution. Missing the renewal is not a formality: failure to renew on time is one of the eight cases in which Article 11 allows the department to suspend or revoke a permit. An owner who wants to stop can cancel the permit in the system; the procedure document says no approval is needed for that, and gives a charge of AED 70.

What the licence and the permit cost

Schedule 1 of Executive Council Resolution No. 49 of 2014 lists eighteen fees. The ones an owner meets first are below. The same resolution notes that these fees do not prevent other government entities from charging their own, and sends the money to the Public Treasury of the Government of Dubai.

The department's procedure document presents the bill in a simpler form, and the two do not match line for line. For the operator, it gives one amount: AED 1,500, plus a knowledge fee of AED 10 and an innovation fee of AED 10, which makes AED 1,570. It calls this the individual or operator permit and does not mention the AED 500 licence fee or the AED 100 initial approval. The AED 1,500 is the same figure as the e-Programme subscription in the schedule, but the document does not say that this is what it is. For each home, it gives AED 300 per bedroom, AED 50 for the classification certificate and the same two AED 10 fees, which makes AED 370 for a one-bedroom home, and it repeats the ceiling of AED 1,200 per holiday home each year. Its AED 70 for a cancellation or an amendment is also not a figure found in the schedule, where revoking a permit is listed at AED 50. The pages read for this guide do not explain the differences, and no amendment to the 2014 schedule was found.

A worked example, using the procedure document's method and assuming that the ceiling applies to the per-bedroom part only. For a two-bedroom apartment, the permit is 2 × AED 300 = AED 600; adding the AED 50 certificate and the two AED 10 fees gives AED 670 for the year. For a five-bedroom villa, 5 × AED 300 would be AED 1,500, which the ceiling brings down to AED 1,200; with the same additions the total is AED 1,270. An owner registering personally with that one apartment would add the AED 1,570 operator amount, for AED 2,240 in all. The document does not say how often the operator amount falls due; the licence it relates to has a one-year term under the decree. These are illustrative sums built from published rates, not a quotation.

Standard or deluxe: how homes are classified

Article 9 of the decree creates two classes, deluxe and standard, to be defined by a resolution of the Director General. Article 15 of the 2020 resolution confirms the two classes, places the criteria in the Guide and has the department issue a certificate for each home. The department inspects homes against the criteria and may move a home up or down a class according to how it complies.

The class is not a marketing label the operator chooses. A licensee must give guests accurate information on the home and its classification, and must display the licensee's information and the classification in Arabic and English inside each home, both under Article 8 of the decree. A trade name may not include the classification category, nor the word "Dubai", under Article 13 of the 2020 resolution. The fines schedule distinguishes a failure against the primary classification criteria, at AED 500, from a failure against the secondary ones, at AED 200. The criteria themselves sit in the Guide, which was not among the pages read; this guide does not describe them.

The class matters for one more reason: it sets the rate of the nightly charge collected from guests.

What the operator owes every guest

The decree sets no duties for guests. Everything is written as a duty of the licensee, and Article 14 of the 2020 resolution adds a long list to those in Article 8 of the decree.

Some concern the contract. The operator signs a Holiday Home Lease Contract with each guest and hands over a copy, and charges only the costs agreed in it. Electricity and water are provided without extra charge to the guest, under the decree. Each guest receives a copy of the rules of the home.

Some concern safety and service. The home is kept clean, habitable and regularly maintained. Emergency and guest-service numbers answer around the clock. Reasonable safety measures are taken, with fire, pools and wellness facilities named. The maximum occupancy written on the permit is respected. An insurance policy from a licensed insurer, covering damage to guests, stays valid for the whole term of the licence.

Some concern records. The operator regularly gives the department the guest information it prescribes; the procedure document says guests are registered through a Guest Check-in System on the holiday homes portal. Guest records are kept on paper and electronically for at least three years, and guest information is disclosed only to the government entities concerned or to the competent judicial authorities. A complaints policy is displayed, and each complaint is logged with the date and time it was received, the complainant's details, its subject and the measures taken.

Advertising has its own rules. Every print and digital advertisement carries the approved trade name and the permit number of the home, and must not mislead.

The Tourism Dirham on each night

Executive Council Resolution No. 2 of 2014 defines the Tourism Dirham Fee as the fee charged to a guest for a stay at a hotel establishment, and its definition of hotel establishment lists holiday homes by name. Under Article 3 the guest pays it for each night of room occupancy, at a rate that depends on the classification. Schedule 1 of that resolution sets AED 15 per occupied room per night for what it calls a luxury holiday home and AED 10 for a standard holiday home. By comparison, the rates the same schedule sets for hotels run from AED 7 to AED 20.

Two wording points are left open. The schedule speaks of a "room", not a bedroom, and of a "luxury" holiday home where the decree says "deluxe". The department's legislation library lists Administrative Resolution No. 2 of 2020, dated 7 January 2020, which prescribes the rules for calculating, collecting and paying the fee; its text could not be read for this guide, so how the rooms of a home are counted, and whether any limit of nights applies, are not stated here. The 2014 resolution itself sets no maximum number of nights.

The operator is the collector. Article 4 requires the establishment to remit what it collected before the sixteenth day of the following month, with a monthly statement of occupancy and fees; to show the fee on the guest's invoice; never to collect more than the set amount; to keep accounting books for at least five years; and to have annual accounts audited by a licensed auditor and filed within six months of the year end.

A worked example, on the assumption that each bedroom is counted as a room. A standard two-bedroom home occupied for 18 nights in a month would collect 2 × AED 10 × 18 = AED 360, due before the sixteenth of the next month. Schedule 2 of the resolution fines late payment at 10 per cent of the unpaid amount with a minimum of AED 1,000. Ten per cent of AED 360 is AED 36, so the minimum applies: a missed deadline on AED 360 would cost AED 1,000.

The building, the neighbours and the developer

Does the building have a say? The texts read here touch the question in three places, and none of them is a requirement for a letter of no objection from an owners' association; no such requirement appears in the decree, in the 2020 resolution or in the procedure document.

What the texts do say is this. The sale agreement must not expressly forbid the use, as seen above. The home must be in an area and a type of building where the activity is allowed. And Article 17 of the 2020 resolution turns to the other side: developers, joint owners, property management and leasing firms and service providers must enable licensees to operate under their licences and permits.

The operator's duty runs the other way too. Article 14 requires courteous dealing with guests, with neighbours and with the managers of the building or compound. A permit may be suspended or revoked, under Article 11, when the home is used for a purpose other than the one permitted or for an illegitimate or immoral use, when it no longer meets the requirements of the permit or the classification, and in other cases of public interest. Under Article 12, an application to re-open a closed home is made no sooner than 15 days after the closure. Rules that a community or a jointly owned building applies under other Dubai legislation are outside the texts read for this guide.

Fines, suspension and closure

Article 11 of the decree sets the range: a fine of not less than AED 200 and not more than AED 20,000. Schedule 2 of Resolution No. 49 of 2014 fills it with a list of violations, each with its amount.

A repeat of the same violation within one year doubles the fine, up to a ceiling of AED 100,000. Operating without a licence a second time within the year would therefore cost AED 10,000, and operating under a suspension a second time AED 40,000. Beside the fine, the department may issue a warning, suspend the activity for up to six months or cancel the licence. A licensee whose licence was cancelled may apply for reinstatement one year later.

Inspections are carried out by department employees who hold law enforcement powers under Article 12 of the decree: they may enter and inspect holiday homes and establishments, review records and write violation reports.

A decision can be contested. Article 13 of the decree gives the affected party 30 days from notification to file a written grievance with the Director General, who decides within 30 days of receiving it; the decree calls that decision final. One further article is worth an investor's attention: under Article 15, the department is not liable to third parties for damage caused by a licensee's activity. The licence is a permission to operate, not a guarantee given to guests or neighbours.

A Dubai holiday home rests on two documents with separate lives: a licence that follows the operator and a permit that follows the home.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

About Kooky and Shaka →