People across the globe considers Dubai as one of the world’s most attractive places to invest in real estate. To reinforce its position as a world-class real estate investment destination, the Dubai land department (“DLD”) from time to time regulates the real estate environment of the Emirate of Dubai touching on the real estate laws covering the ownership explicitly for Gulf Cooperation Council (“GCC”) nationals, and the expatriates, and aiming at shielding the interests of the real estate investors. This article focuses on the pivotal aspects that an expatriate should bear in mind when buying a property, be it off-plan or ready to move-in unit.
Designated Areas
In May 2002, when His Highness Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of Dubai, announced ownership of real estate by foreigners on a freehold basis in designated areas of Dubai, there was no specialized laws and regulations in place then. Relating to the determination of areas where non-locals can acquire properties in Dubai, Regulation No. 3 of 2006 was promulgated. This regulation identifies the designated areas where expats can own freehold land and property, usufruct and long-term lease rights for over a period of 99 years. Regulating the real estate registration and ownership rights in the Emirate of Dubai, in the same year Law No. 7 of 2006 was announced. In 2019, the said law was amended as Dubai Law 7 of 2019, and Article 9 of the Dubai Law No. 7 of 2016 was superseded stating that “all dispositions that create, transfer, change, or extinguish real property rights, and all the final rulings validating these dispositions, must be recorded in the real property register, and that such dispositions shall not be deemed effective unless recorded in the real property register.” Further, “without prejudice to the rights of persons acting in good faith, and subject to the provisions stipulated in the UAE Civil Code concerning claims for infectiveness of debtors’ dispositions as against creditors, all real property dispositions that create real property rights, and are recorded in the real property register of the DLD are deemed effective as against all persons even if the party undertaking the real property disposition is indebted to a third party, unless the disposition is intended to be detrimental to the rights of that third party.”
Dubai Regulation No. 1 of 2010, however, amends Dubai Regulation No. 3 of 2006 on determining areas for ownership by Non-UAE Nationals of real property in the Emirate of Dubai. Regulation No. 1 of 2011, Regulation No. 2 of 2012, Regulation No.3 of 2012, Resolution No. 14 of 2015, Resolution No. 8 of 2016, Resolution No. 18 of 2019, Decision No. 7 of 2021, and Decision No. 6 of 2022, further added certain lands to the zones of ownership by non-nationals of real-estate in the Emirate of Dubai.
Land Registration Fee
We now reroute the readers to Dubai Law No. 7 of 1997 on Land Registration Fee, that prevailed almost a decade earlier that the aforementioned laws on designated areas in which non-UAE nationals may own real estate properties in Dubai and the real estate registration in Dubai, which was amended by Law No. 21 of 2006 to make it yet another law that saw light in the year 2006. Pursuant to Article 4 of Law No. 21 of 2006, in registration of the sale of immovable assets transactions, the seller and purchaser shall be charged a fee equal to 1% each, together making it 2% of the sale price. This law was however, repealed by Dubai Law No. 7 of 2013 on the Land Department. The registration fee payable to the DLD are payable on the registration of the off-plan sale contract and are paid by the purchaser and the seller equally unless otherwise agreed in the relevant sale agreement and which currently amounts to 4% of the sale price together with certain minimal administrative charges.
Escrow Accounts for Real Estate Development
In the very next year, the Law No. 8 of 2007 on Escrow Accounts for Real Estate Development in Dubai came into force. The legislative intention of this law is for protection of the investors’ money into off-plan sales in developments under construction. In accordance with this law, the developers that intend to sell units off-plan in a real estate development project must open a separate escrow account for the project with an escrow agent (bank/financial institution) accredited by the DLD. The developer must deposit in a project escrow account all amounts paid by the purchasers of off-plan units and loan payments funded by financiers for the purpose of construction of the real estate development project. The amounts deposited in the escrow account shall be allocated exclusively for the purposes of construction of the real estate development project and settlement of the project financing payments in accordance with this law. Project escrow accounts are audited and monitored on a regular basis by the real estate escrow account division of the real estate regulatory agency (“RERA”), the regulatory arm of the DLD, which was established by the Dubai Law No. 16 of 2007.
Strata Law
Along with the introduction of escrow accounts for real estate development in Dubai, the same year Law on Strata Law came into effect. i.e., Dubai Law No. 27 of 2007 concerning ownership of jointly owned real property in Dubai, which was abrogated by Dubai Law No. 6 of 2019. With the backing of this law the property owners jointly manage their communities and buildings, and the use of common areas and facilities which includes corridors, elevators, and parking bays. It also provides for the establishment of owners’ associations entrusted with the management, operation, maintenance and repair of common areas. Also, pursuant to this Law, developers are held liable to repair structural defects for ten years and minor defects for one year from the date of obtaining the certificate of building completion.
Regulating the interim property register in Dubai
In 2008, Law No. 13 of 2008 on regulating the interim property register in Dubai was promulgated, but it was amended by Law No. 9 of 2009, and further amended by Law No. 19 of 2020. The said Law covered the provisions on pre-registration, where on registration a certificate of registration is issued in the name of the purchaser. This gives the purchaser the security that his right to the said real property unit (provided he is not in breach of the sale contract) cannot be sold or alienated without his knowledge while also providing the purchaser with the protections afforded by the law in the case of cancellation of the contract. The developer shall terminate off-plan sale contract if purchaser default payment, and the developer’s compensation on sale termination is linked to the stage of construction reached. The property purchased off-plan is then transferred to the property register and recorded in the names of the purchasers once the project has been completed, or once a completion certificate has been issued to the developer, and the DLD has been provided with the required confirmation that the purchaser has paid for the real property unit and complied with the sales contract. The interim property register and the Oqood system also provides a system for the registration of mortgages over off-plan real property units. The implementing regulations of the Law No. 13 of 2008 is issued vide the Executive Council Resolution No. 6 of 2010, which has to be read in conjunction with Law No. 13 of 2008. It covers several pivotal provisions which includes, grounds for purchaser to terminate sale contract due to the developer’s breach. RERA Dubai could take action to cancel a development project and the process after cancellation. If completion is over 80%: developer can confiscate the paid amounts, plus remainder of the payment or request the DLD to auction the property to collect the remaining amount, and the buyer to pay any expenses arising from the auction. If between 60 & 80%: developer retain not more than 40 per cent of the sale contract’s value and return the remaining amount to the purchaser within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier. If less than 60 %: developer retain up to 25 %of the sale contract’s value and return the remaining amount to the buyer within one year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier. If the developer did not initiate the work for reasons beyond his control and without negligence, the developer may void the sale contract solely, deduct not more than 30 per cent of the paid money and return the remaining amount to the purchaser within 60 days of the date of re-selling the property, whichever is earlier. If the project is cancelled by a resolution from the RERA, the developer must refund all payments made by the buyer, pursuant to the law concerning escrow accounts for real estate development in Dubai. The procedures prescribed are however not applicable to land sale contracts. Such a sale remains subject to provisions stated in the sale contract. Developer to register with the RERA as well as open an escrow account. Deposit the money received from buyers into the escrow account of the project rather than in his own account. Enables the buyer to effectively track the developer’s progress whilst being protected from fraud. If you’ve now realized that a property developer you bought from was not registered with RERA, file a real-estate case of fraud and breach of contract in the concerned court along with claims of compensation.
Pre-mortgage interests
Law No. 14 of 2008 is the next in line. This Law regulates registration of lenders’ pre-mortgage interests on the interim real estate register, and mortgages on the main real estate register. The Law also outlines the procedure for mortgage enforcement in the event of the borrowers’ default on the loan repayment (with mechanisms for enforcement and sale of property by public auction).
Conclusion
On reading the above, it goes without saying, the real estate legislations in the Emirate of Dubai aims at providing a world-class real estate environment that attracts investment, holding the strategic objectives of the government in the real estate sector, by keeping up with the latest global systems in the field of real estate registration laws, and enhancing the efficiency of real estate regulation and control in the Emirate of Dubai. The legislators also intend for modernization and development of real estate registration regulations to keep up with the latest global systems in the said area, by encouraging real estate investment through the creation of a suitable climate for real estate investors, enhancing the contribution of the real estate sector in the overall development of the Emirate, and planning and development of an integrated strategy for the development of real estate in the emirate and the access to the world.
Recommendation
For guidance and further information, feel free to contact Al Dhaheri International Advocates & Legal Consultants, one of the leading Dubai law firms and your trusted Dubai lawyers, reaching out at the contact details provided on our website. We strongly recommend contacting MR. MOHSEN MOUSTAFA, Managing Partner at Al Dhaheri International Advocates & Legal Consultants, one of the best real estate law specialists in Dubai, who will promptly and efficiently address any inquiries you may have on the above.
Disclaimer
The contents herein are for the reader(s) a general awareness. It is not intended to render any specific legal advice on the above topic, but solely for information purposes and to provide readers with an insightful overview of the region’s developments in law. Access to this article, which is available online in digital format on our website, does not form an attorney-client relationship. With the changes in the legal regime, we constantly update our website contents.
Written by — Senior Legal Counsel Dr. Sherina M. Saji
