FREE HOLD PROPERTY IN DUBAI
In early 2001, the Dubai Property Market changed.The Government of Dubai allowed foreign investors and buyers to take 99-year leases on apartments and villas .
The population of Dubai at that time was under 1 million.
In May 2002, the current Ruler of Dubai, His Highness Sheikh Mohammad bin Rashid Al Maktoum ruled that the emirate would permit foreign nationals to invest in Dubai properties on a freehold ownership basis.
Freehold properties were initially grouped under 3 government-owned entities - ‘Emaar Properties PJSC', ‘Nakheel' and ‘Dubai Holding'.
This kick-started the market and it has been thriving ever since.
In 2001, the Dubai government agreed to allow expats to have a 99-year lease of particular Dubai property, and then in May 2002, the crown prince of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, issued a decree allowing foreigners to buy property on freehold ownership. Sheikh Maktoum's decree sparked a real estate boom in Dubai's residential property sector.
Purchase of property on freehold basis means that the property is put in the owner's name for life, the owner has the right to sell, lease or rent their property at their own discretion.
Property owners and immediate family may be granted renewable Dubai residence visas.
FAQ's in Buying Freehold Property
Why was the Law enacted?
The Law was enacted for the following reasons:
What is the status of UAE and GCC Nationals under the Law?
There is now no distinct difference made between UAE and GCC Nationals, as they are to be afforded equal status under the regulations.
With the laws, both UAE and GCC Nationals can own any property anywhere 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
Ownership for nationalities other than UAE or GCC Nationals
As specified in Article 4 of the new Law, all nationalities other than UAE or GCC nationals have the right to own freehold titles, a 99 year lease, or a usufruct right in the above mentioned designated areas of Dubai, as determined by the Ruler’s approval.
It will include the projects within the portfolios of Dubai Properties, Nakheel and Emaar among others. A variety of other projects may also be included, eg. at Dubailand.
Does the Law distinguish between foreign individuals and companies?
Both are able to purchase Dubai property in the selected areas. The right to own property in the Ruler’s designated areas and obtain a registered title has been extended to both foreign individuals and foreign companies, but with regards to any company that wishes to buy Dubai property, it must be able to prove lawful existence in its home country.
Status of long leases in areas other than those designated by the Ruler?
Long leases differ from freehold property in that long leases in areas other than those designated by the Ruler are not registerable at the Land Department by foreigners.
Despite this, these leases remain as personal rights and are fully legal in all regards. Unregistered long leases in areas outside of those areas designated by the Ruler remain enforceable as personal contractual rights between the parties. Any dispute that might arise from an unregistered long lease will still be adjudicated by the Rent Committee.
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.
Therefore the law is fairly clear in this regard and that is 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, his only option would be to enter into a long lease for the property, which, although will not be possible to register, will not go against the provisions of the new Law.
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.
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 authorized to register real property rights and 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.
Will the Land Department charge fees for the registration of these transfers?
It is possible that both the seller and the purchaser will be required to pay the Land Department’s fees at the time of title registration. These currently amount to 2% of the purchase price, which can possibly be broken up by having 1.5% payable by the purchaser and 0.5% payable by the seller. However as is most often the case, developers commonly require the purchaser to pay the full 2%. This fee is currently under review and may possibly change in future.
Will the Land Department charge the 2% fee on the original purchase price or the most recent purchase price?
At the present time, it is the practice of the Land Department that the fees are charged based on the original purchase price. However as stated above, the Land Department could potentially introduce some new rules in regards to this issue, it is envisaged that the basis on which fees are levied may change. This could therefore involve taking into account the purchase price in any on-sale agreements or the market value of the property.
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 not totally clear at the current time but 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.
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.
Simply what this means is that any register and any sort 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. Though, where a property is still under construction, developers will no doubt continue with their current practices and to maintain their own internal registers.
If a third party purchaser has paid a developer a registration fee, will an additional registration fee be payable to the Land Department?
Yes, currently the law states that A purchaser will pay two fees. Take developer EMAAR, for example. They charges registration fees in additional to the fees payable to the Land Department.
However it is worth noting that this law 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.
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 generally 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. However in practice it can probably be expected for the Land Department to 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.
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 inquiry. Which effectively means that a potential purchaser of a property, for example, will be able to make his own inquiries directly with the Land Department in relation to the ownership and any third party rights attaching to the property.
Who will settle disputes under the new Law?
Now any disputes would be with the Dubai courts. Presently the forum for settling disputes under the new Law, will be filed a claim directly with the Dubai Courts but 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.
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 instance, 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.
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. In practice this means 3 things:
It is only when all the above process is followed, will in the eyes of law, the beneficiaries be recognized as the owners of a property.
Law will the Court apply to determine 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 expatriates 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.
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. The issue becomes a little clouded by the fact developers are offering visa with a property purchase, but despite this fact that the two issues of ownership of property and residency/ sponsorship should not be confused.
The Buying Process
There is basically no difference in buying a home in Dubai compared with most other long-established property markets.
Cash or mortgage financing ?
Whether the Seller is an individual or a development company, the Buyer can choose whether to pay cash or obtain mortgage finance, to spread his payments over time.
Ex-Pats are allowed to finance their home in Dubai over any period, up to 15 years. Several specialist mortgage companies and local banks now offer loan packages.
Owning a new property in Dubai will generally require the owner to contribute an annual service charge, which will vary, according to the level of amenities provided by the developer. Within a specific community, the scale of these charges will normally relate directly to the overall floor area of your home.
You may also choose to customise your home to suit your specific needs and enhance its value further. For example, many people have installed a private swimming pool in the garden of their villa, or made modest modifications. Permissions to conduct such modifications are generally not difficult to obtain, providing safety factors are addressed and your changes do not detrimentally affect your neighbors, their properties, or the visual amenity of the neighborhood.
What if I don’t plan to live full-time in Dubai?
Should you intend to spend most of your time outside Dubai, you need not worry about the maintenance or security of your home, as there is an extensive support infrastructure already in place. There is also a substantial residential rental market, which caters for the majority of the Dubai population.
For those owning a villa with a garden, there are many facilities management companies, providing reliable services with good value for money, which can keep your surroundings in prime condition. Many families also install their own swimming pool, which can also be regularly maintained under a straightforward service agreement.
As you would expect, the needs of overseas owners have encouraged many full-service, property management companies to establish a presence in Dubai. Some of these companies are homegrown and some are affiliates or associates of international organizations. For the ultimate peace of mind, serious consideration of this “one-stop shop” option is recommended.
How can I learn more about buying Property in Dubai?
One should never undertake any Dubai property purchase decision lightly, as there is far too much at stake! Whether you are buying property in Dubai, Paris, New York, Mumbai or Shanghai, the ground rules are basically the same: before committing yourself, make sure that you have sufficient information, from a broad cross-section of sources, to help you make the right decision for your unique needs.
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