Property Law

Dubai Introduces Greater Transparency and Purchaser Protection Into It’s Property Laws

February 14, 2017

Dubai Property Law and freehold: Overview:

Prior to 1999 Non-GCC expatriates resident in Dubai were only permitted to rent or own property under UAE federal law approved 99-year leasehold interests.

In 2002 – the Dubai government announced that it would permit expatriates to own freehold property in selected projects – and instantly created the Dubai international property sector.

Earlier projects had been commenced by the Dubai Government owned or part owned Emaar and Nakheel Properties.

Emaar started with Dubai Marina in 1999 – and later with the Emirates Living Community projects – Emirates Hills, The Meadows, The Springs, The Lakes, and The Views – which were initially offered on a leasehold basis – and subsequently on a freehold basis.

In May 2002 – Dubai’s then Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum – signed a decree permitting foreigner investors including local residents – to buy and own freehold property in selected projects – and the Dubai property sector rapidly grew in size and importance immediately after this.

Nakheel concurrently launched the Palm Jumeirah – as a freehold project – and all previously developed leasehold property was automatically converted to freehold.

The new 2002 freehold policy – and the decision by the major government owned master developers – to subdivide master plots into individual sub plots for sale to other developers opened the market to new entrants such as:

Damac Properties,
Dubai Properties,
Mizen,
ETA Star Properties,
Union Property.

Although the freehold liberalization policy was announced in 1999 – it was not officially incorporated into the law until the 14th of March 2006 – when the Dubai government issued a law authorizing foreign ownership of property in designated project areas of Dubai

With the freehold property law in effect – any property purchased by a foreigner is listed under his or her name for life – and this enables the property to be registered with the Dubai Government Lands Department.

The owner then has full rights over the use and possession of the property including the right to sell, lease or rent it.

Registration of property including off plan units: Law no 14:

Law no 14 came into effect in Dubai in October 2008 – and requires all off-plan units to be registered with Dubai Lands Department – which will make the Dubai real estate market a safer place for home purchasers and investors – and responds to past complaints from investors – especially off-plan investors.

The new law also establishes a mandatory procedure applicable to any developer seeking to terminate a sale and purchase contract.

The new property law requires that the sale of all off-plan properties be fully registered with the Land Department before they can be resold.

This will have a natural slowing effect on the rate at which any property can be subject to speculation – and be flipped and resold.

The registration information must include:

the name of the purchaser and the vendor;
the value of the property;
the location of the property;
any relevant mortgage or payment plan details;
the payment history and fees paid and chargeable.

Any sale that is not registered will be considered void – and therefore unenforceable in any court of law.

An interim registration law came into effect on August 31 2008 – providing that any ownership change of off-plan properties in Dubai will be invalid if not registered in RERA’s Interim Register.

Upon registration – all registered sales are then officially recorded in the Land Department Register.

Sale transactions executed before the law came into effect are not exempted – and must be registered within 60 days of the laws enactment.

The law will also prevent unscrupulous developers and agents charging transfer fees – although they will still be able to charge administration fees which will be capped – and only payable upon the Land Department’s registration of the sale.

So bad news for speculators – as the registration procedure will slow down the market – but good news for home owners and long term property investors who will have a well protected title under a Torrens registration system similar to that in place in Australia.

The new mortgage law:

The new mortgage law – which came into effect on October 30 2008 – states that mortgages will be invalid if not registered at the Dubai Land Department or the new Interim Real Estate Register – and it sets out all procedures concerning a mortgage and its legal effects on the parties to it.

It also includes execution procedures for the mortgaged property – and prescribed proper conduct between the bank and the borrower.

The mortgage law is designed to provide greater regulation within the Dubai property market to protect buyers.

Under law 14 a mortgage may only be offered by a registered financial institution – like a bank or finance company – and the mortgage is required to be fully insured.

Each mortgage has to be registered with the Land Department – the details required for registration being:

the amount of the mortgage;
the value of the property being mortgaged;
the name of the person to whom the money has been lent;
and the repayment period and terms.
Real Estate Regulatory Authority [RERA]:

Reforms of Dubai’s real estate sector’s regulations started in July 2007, when a Real Estate Regulatory Authority [RERA] was established in Dubai to set policies and to create awareness of rights and responsibilities in the property sector.

The Strata Law:

The Strata Law was issued and came into effect on March 31, 2008. It defines the responsibility of property owners and developers in the management of common areas in multi-owner developments, like gated communities and apartment buildings.

Dubai Property Court:

A new specialist Dubai Property Court was established in September 2008 – solely to adjudicate over property disputes.

It is likely to reduce the workload of RERA – which since it’s formation – has been swamped by property cases – including many for developer project delays and noncompliance with the property developer’s original description.

In summary the new Dubai property laws introduce a regulatory system in respect of the Dubai property market that in many respects now offers superior consumer protection to Dubai property purchasers to that offered by many western jurisdictions.

 

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