How is the fraudulent scheme run and why were so many affected by it?
The scheme and the offending fraudsters operated as follows. A duly licensed real estate management firm (such as MFR Properties (branch of Al Olama Properties (LLC)) would find a landlord in Dubai and offer to rent the landlord"s property to tenants that sought out for a place to live. Having found the tenant, the management firm would not prepare a direct tenancy agreement between the instructing landlord and the tenant, but would instead draw up two contracts. The first of these would be a tenancy agreement between MFR Properties (as real estate management firm) and the landlord that would provide for the payment of rent by four cheques.
The second would be a contract between MFR Properties and the tenant which provided that the tenant would pay the rent for one year in full by one cheque. That was bad enough, but that was not all. In order to get thousands of properties on the management firm"s books and in order to rent them out as quickly as possible, the rent amount in the second contract (payable by one cheque) was significantly less than the amount stated in the first contract, and not the other way around, where a property management firm would rent a property from a landlord for a smaller amount and sub-lease it for a larger sum, retaining the differential and making a profit. This was not the way the offending management companies operated, which reaffirms the criminal intention of the managers/owners behind MFR Properties involved in the fraudulent scheme.
By way of a demonstrative example, a two bedroom apartment on the Palm Jumeirah rented by MFR Properties from a landlord for AED130,000, was sub-leased to tenant for AED100,000. MFR Properties received the full rental sum of AED100,000 from the tenant (by way of a one cheque payment) and gave the landlord 4 cheques, but paid only the first cheque (AED32,500) to the landlord at the outset. The fraudulent real estate management firms made huge criminal gains out of the sheer volume of properties that were rented in this way and the short length of time that it took to get properties on their books, rent them out, get the cheques and get paid - large volume and small time equated large profits. After three months, when the second cheque was presented to the bank, it would bounce.
MFR Properties would, in the meantime, "pack up shop", shut their office and, for all intents and purposes, disappear. It would then take a substantial length of time before the defrauded landlord would realise that the office of the offending real estate management firm (in this example, MFR Properties) was, in fact, closed down and any connected bank accounts drained of cash and closed. Time kicked in as a factor in assisting the fraudsters - and it was on their side yet again. By the time that the landlord realised what had happened, his/her money was long gone, the rent is not coming and the property was occupied with the tenant. Each landlord is left alone to deal with the situation, seek protection of his rights, take legal measures and commence proceedings deploying all that remains at his disposal - the Dubai legal system.
The judicial process in Dubai is complex, costly and lengthy and, ideally, one which should (where possible) be avoided. The fraud, which is seemingly a pre-planned and carefully calculated scheme, is being carried out by agents that have an in-depth knowledge of Dubai, its legal system and regulations, as well as the length of time that it would take for affected victims of the crime to seek and obtain a remedy or enforce their rights, giving the offending real estate agents yet more time to defraud numerous other players in the Dubai rental market.
During 2012 many local newspapers from time to time named various real estate firms that were involved in the scam. Among these are MRF Properties (branch of Al Olama Properties (LLC)), MFR Real Estate, Marks Falcon Real Estate, FHS Properties and Shamyana Entertainment Services. The victims of the scam even created an internet blog sharing their stories http://www.mfr-property-marks-falcon-scam.com and posted a web petition (http://www.avaaz.org/en/petition/Stop_MFR_Properties_The_multimillion_dirham_scammers_and_its_deceptive_techniques/?tssWFdb ) to raise awareness of the fraud in the Dubai community.
A Pakistani manager of MRF Properties was sentenced by the Dubai Criminal Court to 3 months" imprisonment for a bounced cheque and is now serving his sentence in Dubai prison. That is the extent of the punishment. The landlords received no money and were left with no recourse against the MRF Properties and with sitting tenants. The head office of MFR Properties – Al Olama Properties (LLC) is still licensed and operational and both Al Olama Properties (LLC) as well as its other branches remain functional and can continue cheating and defrauding people.
The purpose of this short article is to make people aware of the scam, to act as a word of caution to people that are considering entering into real estate transactions and tenancy agreements in Dubai. The times of unquestionable trust into real estate brokers are long gone. In order to avoid being cheated in real estate transaction, please consult a lawyer. For my basic recommendations on preliminary steps that individual landlords and tenants can take prior to entering into the relevant transaction and once their rights are violated see my article on "Renting Property in Dubai (legal aspect and practical recommendations)".