FAQ -
Dubai Freehold Frequently Asked Questions
Questions and
Answers on the New Dubai Property Law – Law No. (7) of 2006
1. Why was the Law enacted?
The Law was enacted for a number of reasons, namely:
-
to
regulate and supplement the existing practice in relation to
property registration for UAE Nationals;
-
to
clarify and confirm the actual status of GCC (Gulf
Cooperation Council. Consists of The United Arab Emirates,
The State of Bahrain, The Kingdom of Saudi Arabia, The
Sultanate of Oman, The State of Qatar and The State of
Kuwait) Nationals in
regards to their rights to own Dubai property;
-
to
nominate development projects that can be owned as freehold
by foreigners;
-
to
provide a regime whereby individuals can be provided with a
confirmation of their rights to purchase and own a property
in Dubai, as well as the security of having title to the
property registered to them.
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2. What is
the status of UAE and GCC Nationals under the Law?
No distinction is made between UAE and GCC Nationals, as they
are afforded equal status under the provisions of the Law.
UAE and GCC Nationals can own any property right throughout
Dubai and have the title registered in their name at the Land
Department. The property right that they may own includes
freehold ownership, a long lease of up to 99 years, the right to
build on the land owned by another person, known as the right of
Musataha (which we commonly see in Ground Development Leases),
and a usufruct right (the right to use and exploit property
belonging to another person).
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3. What is the position of ownership for nationalities other
than UAE or GCC Nationals?
Article 4 of the new Law provides that all nationalities other
than UAE or GCC nationals can own freehold title, a 99 year
lease, or a usufruct right in
designated areas of Dubai,
as determined by the Ruler’s approval. We are currently awaiting
the first of such Ruler’s approvals but the current indications
are that this will be issued shortly and that it will include
the expected projects within the portfolios of Dubai Properties,
Nakheel and Emaar. Some other projects may also be included, for
example, those located at Dubailand.
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4. Does the Law distinguish between foreign individuals and
companies?
The right to own property in the Ruler’s designated areas and
obtain a registered title extends to both foreign individuals
and foreign companies. However, any company that wishes to
purchase property in the designated areas must be able to prove
its lawful existence in its home country.
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5. What is the status of long leases in areas other than
those designated by the Ruler?
Long leases in areas other than those designated by the Ruler
are not registerable at the Land Department by foreigners under
the new Law. These leases remain as personal rights, and are not
illegal in any way. Unregistered long leases in areas outside of
those areas designated by the Ruler remain enforceable as
personal contractual rights between the parties. It must be
noted that any dispute arising from an unregistered long lease
will still be adjudicated by the Rents Committee.
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6. Is there any way for a foreigner to own property in
non-designated areas?
Article 26 of the new Law deals with the circumstances where
agreements are made that purport to give a property ownership
right to someone who is not entitled to own it, and who is
therefore not entitled to register it under the new Law.
Article 26(1) states that any agreement or sale made in
violation of the provisions of the Law (or with the intent to
circumvent its provisions) shall be null and void. Article 26(2)
goes further to say that any interested third party, the Land
Department or the public prosecution has the right to request
the court to declare such a transaction void.
There is no way under the new Law for a foreign person to own
property in any non-designated areas. If a foreign person wishes
to “own” property in the non-designated areas, he should enter
into a long lease for the property, which, although will not be
registerable, will not go against the provisions of the new Law.
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7. Why is registration of title so important?
Registration of a person’s interest on the title of a property
provides conclusive evidence of his ownership. Article 22 of the
new Law provides that the Land Department shall issue a title
deed of real property rights in accordance with the current
records in the Real Property Registers. Article 24 goes further
to say that the title deed referred to under Article 22 shall
have absolute power of evidence to establish real property
rights.
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8. What is the process for title registration?
Article 6 of the new Law states that the Land Department shall
solely, to the exclusion of others, be authorised to register
the real property rights and the long term leases as provided
under Article 4. Once a property is completed and handed over to
the purchaser, the purchaser can then procure the developer to
register the title to the property in the name of the purchaser
in the Real Property Register at the Land Department. The Sale
and Purchase Agreement as well as the accompanying scheme
documentation will possibly need to be translated into Arabic
(which should be undertaken by the developer). The purchaser
will then be asked to sign the Land Department standard transfer
form, for the internal use of the Land Department. This form
will provide the details of the parties, the property, the
purchase price etc.
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9. Will the Land Department charge fees for the registration
of these transfers?
Both the seller and the purchaser will be asked to pay the Land
Department’s fees at the time of title registration. These
currently amount to 2% of the purchase price, which is broken up
by having 1.5% payable by the purchaser and 0.5% payable by the
seller. However, it should be noted that developers commonly
require the purchaser to pay the full 2%. The Land Department’s
fees are currently under review by the Executive Council and may
be subject to change.
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10. Will the Land Department charge the 2% fee on the
original purchase price or the most recent purchase price?
Current practice of the Land Department is that fees are charged
on the original purchase price. However, as the Land Department
introduces new practices, it is envisaged that the basis on
which fees are levied may change, and they may take into account
the purchase price in any on-sale agreements or the market value
of the property.
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11. How would the Land Department know the “market value” of
the property for the purpose of ascertaining what amount the 2%
fee is to be levied on?
Article 6, point 7 of the new Law requires the Land Department
to “lay down the rules in connection with the evaluation of real
properties”. It is envisaged that the Land Department will
employ its own expert valuers. The Land Department’s valuers
will be tasked to:
-
verify a
property value; and
-
provide a
valuation for a prospective purchaser, if the prospective
purchaser so requests.
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12. What
about developers’ internal registries?
Article 6 of the new Law states that the Land Department shall
solely, to the exclusion of others, be authorised to register
the real property rights and long term leases as provided under
Article 4. This means that any register or other type of
database maintained by a developer is not recognized under this
Law. Once we have the Ruler’s approval of the designated areas,
the formal process of the Land Department registrations can
begin. The developer’s internal registrations will be replaced
by the formal registration in the Land Department in situations
where physical hand over of properties has taken place. However,
where a property is still under construction, developers will no
doubt continue to maintain their own internal registers.
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13. If a third party purchaser has paid a developer a
registration fee, will an additional registration fee be payable
to the Land Department?
Yes. A purchaser will pay two fees. EMAAR, for example, charges
registration fees in additional to the fees payable to the Land
Department. It must be noted that this is only applicable during
this transitional phase, and once the Land Department
registration process is in full swing, no registration fees
should be payable to developers.
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14. How will apartments be registered?
Article 23 of the Law is the only Article dealing with the
registration of individual apartments and offices in a
multi-storey building. The Land Department is currently working
on a new Strata Law which should be issued within the next few
weeks. It is envisaged that this new Strata Law will fully deal
with issues such as ownership and management of the common areas
in the building, Co-Owners Associations, rules of occupancy and
so on.
However, Article 23 sets the tone by stating that a multi floor
or apartment real property shall be considered as a single real
property unit and a folio shall be designated thereto in the
Real Property Register. Supplementary folios in the names of the
owners of such apartments and floors and common areas shall be
added to the original folio. In practice, the Land Department
will open a main register for the building itself, and within
the main register there will be a sub-register for each
apartment or office. The owner of an apartment or office will be
registered as owning the freehold interest in his unit, together
with an undivided share in the common areas of the building,
calculated in accordance with his participation quota. It is
envisaged that the Constitution of the Co-Owners Association and
the Master Community Declaration (where applicable) will be
registered on the main building register with a notation of such
encumbrances will be shown on the title of each individual unit.
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15. Will the register at the Land Department be open to
public inspection?
Article 5 of the new Law states that a third party may inspect
the property register and obtain a certified copy of it,
provided that the enquirer has a legitimate reason for that
enquiry. This means that a potential purchaser of a property,
for example, will be able to make his own enquiries directly
with the Land Department in relation to the ownership and any
third party rights attaching to the property.
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16. Who will settle disputes under the new Law?
In relation to the forum for settling disputes under the new
Law, any aggrieved party can file a claim directly with the
Dubai Courts, or implement any arbitration process that may be
agreed between the parties. There is also a possibility of the
Land Department establishing its own arbitration and
conciliation service, but the Land Department has not yet
confirmed this.
It must be noted that, in relation to unregistered long leases,
these fall outside the ambit of the new Law and the Rents
Committee retains jurisdiction of any disputes arising between
landlord and tenants.
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17. What remedies are available under the new Law?
Article 10 of the new Law deals with disputes. In short,
specific performance is not available as a remedy under the Law,
but the available remedy is damages. For example, if a seller
defaults in his obligations under a Sale and Purchase Agreement
and does not transfer the property to the purchaser, the
purchaser can only claim damages from the seller for the losses
suffered and cannot force the seller to transfer the property to
him.
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18. How does the new Law affect the inheritance rules of
property?
Article 11 of the new Law states that any inheritance
declaration that includes real property rights shall be
registered in the real property register. It further states that
no dispositions by any heir in connection with any such rights
shall be valid or effective against third parties, unless such
dispositions are registered. This means that the process will be
as follows:-
a. The relatives of the deceased person must apply to the Court
for a declaration that identifies the beneficiaries;
b. The beneficiaries than apply to the Sharia Court to commence
succession proceedings; and
c. The inheritance declaration is registered on the deceased’s
title at the Land Department.
Only when the above process is followed, will the beneficiaries
be recognized as the owners of a property.
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19. But what Law will the Court apply to determine who the
beneficiaries are of a foreign national?
Article 17(5) of the Federal Civil Code states that the Law of
the UAE will be applied to wills made by expats disposing of
their real property which is located in the UAE.
However, a new Federal Law was passed at the end of 2005, the
Personal Affairs Law (No. 28 of 2005). It appears that, as a
result of the new Personal Affairs Law, a foreigner can opt for
the laws of his own country to apply on the question of
inheritance of his property. Although this is not entirely
clear, it is believed that the Land Department supports this
view.
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20. How does a person’s residence status relate to property
ownership and why was this not dealt with in the new Property
Law?
Residency is a Federal Government issue and not a local property
law issue. In principle, a person could own a property in the
UAE and choose not to reside in the property. Despite the fact
that many developers are offering residence visas to property
purchasers, the two issues of ownership of property and
residency/ sponsorship should not be confused.
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