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What is the Evernest scam?

Evernest Holiday Homes Rental LLC recently conducted a scam
in the UAE, resulting in AED30mn in fraudulent gains, impacting almost 500
property owners and tenants. The scam involved Evernest leasing properties from
property owners and promising them high returns through rental income from
sub-leasing the properties at higher-than-market rent. What occurred in reality
was quite the opposite.

Evernest provided the property owners with post-dated
cheques, and then sub-leased the properties at an extremely low annual rent.
The catch was that Evernest’s tenants had to pay the entire rent to Evernest
upfront (i.e. in one cheque). Enticed by low rents, many people in search of a
bargain agreed to take this offer. In December 2021, Evernest’s principals and
managers fled the UAE, leaving the property owners without access to their
properties and holding worthless cheques, and the tenants with uncertainty as
to whether they will be able to remain in the properties. Unfortunately, this
is not the first time such a scam has occurred in the UAE.

How can individuals avoid being caught up in such a scam?

When entering into a rental agreement, Tenants should always
check the documents of the landlord, and request proof that the party they are
renting from indeed owns the property or has the capacity/authorisation to
sub-lease it. If the property is not owned by the party renting it out (that
is, the property is being sub-leased), tenants should check whether the party
renting out the property is licensed by the regulator and ideally should seek
the ultimate landlord’s written consent to the sub-lease.

In the event a tenant is sub-leasing a property, they should
ideally seek approval from the ultimate property owner regarding certain
aspects of the sub-lease. This would include checking that the intermediate
landlord is in fact authorised and has the capacity to sub-lease the property,
as well as to obtain acknowledgment of the amount of rent quoted under the
sub-lease.

The measures described above can also help protect the
ultimate property owners in that they will be informed of the terms/details of
the sub-lease and the ultimate tenant.

What are the regulations around sub-leasing in the UAE?

Short-term renting is regulated by the Department of Tourism
& Commerce Marketing (DTCM). The DTCM issues guidance ,the most recent
version being the First Edition 2020, which supplements Decree No. 41 of 2013
Regulating the Activity of Leasing out Holiday Homes in the Emirate of Dubai.

The DTCM requires appropriate licensing and permits to be
issued, and includes registering specific units as holiday homes with details
of the ultimate tenants, including  a
copy of the title deed of the property. Where a company seeks to act as the
sub-lessor, the managers’ or administrators’ details must be provided to the
DTCM.

Long term sub-leasing is dealt with directly under Dubai Law
No. 26/2007 on the Organisation of the Relationship between the Lessors and
Tenants in the Emirate of Dubai, and is generally regulated as per the
agreements between the parties, subject to some basic provisions in the
foregoing law. In such cases, the initial lease and the sub-lease are treated
similarly in most cases, where the tenant of the initial lease becomes the
landlord in the sub-lease. Accordingly, the regulator in such cases is the Real
Estate Regulatory Agency (RERA).

How does the Evernest scam impact the landlords involved?

The ultimate landlords (the property owners) will need to
take legal action against Evernest, and its principals and managers, in order
to get a conviction of fraud. This appears to be a clear case of fraud,
evidenced by its well-planned scheme to deprive the ultimate landlords of
rental income so that Evernest can gain the largest amount of rent from its
tenants before suspicions are raised. The goal should be to get an arrest
warrant against the principals and managers of Evernest followed by the seizure
of the fraudulently obtained money.

In some cases, the property owners may also need to consider
taking action against the tenants, some of whom have paid very little in rent,
and seek to reach an agreement whereby the tenant pays additional rent with an
extension to the lease, thereby reaching a fair outcome for both parties.

How will Evernest be tracked and held to account? What is
the legal process from now?

Fraud is an internationally recognised crime, which means it
can lead to the involvement of Interpol, who could issue international arrest
warrants for the perpetrators. That would likely lead to the arrest of the
perpetrators in whichever country they have now fled to. ‘

Further forensic work would be carried out in an attempt to
trace the money obtained as a result of the fraudulent scheme, ideally
resulting in compensation for the victims. 

This article was originally published by CM Today.