INTERNATIONAL PROPERTY NEWS

18th August 2005

Dubai’s new Real Estate Ownership Act

Dubai is no different when it comes to unusual features within the property market, most have come from the fact that the Dubai freehold market is just over three years old.

Things have changed a lot compared to before, foreigners can now own property in Dubai and the market is no longer a closed door.

President H.H. Sheikh Khalifa bin Zaved Al Nahyan issued Law no. 19 of 2005 in relation to real estate ownership, in his capacity as Ruler of Abu Dhabi.

This new law states that ever property granted by the government to a UAE citizen, before or after the issuance of this law, shall be his/her (the beneficiary’s) property and would therefore be obligatory on him/her to register for property title. He/she shall also, within the boundaries of the law, have the right to use, invest and take advantage of it. The law also said the Abu Dhabi Executive Council shall come out with the laid down rules on the transfer of ownership of the properties given out before the issuance of this law.
The right to own properties, according to the law, shall be limited to UAE nationals and other corporate bodies fully owned by them. Citizens of member states of Gulf Cooperation Council, GCC, shall also own properties which shall be within the area designed for investment, but they shall have the right to act on any real or liability of the properties. The bye-laws shall decide the rules, regulations and period of contract on the properties that fall outside the investment areas.

The law also states that non-UAE nationals shall have the right to own surface property not the land itself in investment areas. They shall have the right to arrange all their properties on it (surface) and to derive benefit from the properties on the surface in the investment area based on a long-term land title agreement which shall last for 99 years or long-term surface ownership agreement of 50 years renewable for the same period subject to the agreement of the two parties.

Anybody who has the right to benefit from property or the surface for a period that exceeds 10 years shall have the right, even without due permission from the owner, to act on it, including the right to mortgage it. However, the owner of the property shall not mortgage it unless he gets approval from the one who has the right of benefit of the property or the surface. In both cases, the law added, the two may agree on the contrary. The Abu Dhabi Executive Council shall issue a decision on the bye-laws on the investment areas, method of provision of services to these areas which shall not contravene or contradict this new law.

The new law abrogates Emiri Decree no. 33 of 1966, which deals with the renting of land for building purposes. It also abrogates every ruling that contravenes or contradicts it.

YESTERDAYS NEWS

Dubai Real Estate – Ten things to know

Dubai is no different when it comes to unusual features within the property market, most have come from the fact that the Dubai freehold market is just over three years old.

Things have changed a lot compared to before, foreigners can now own property in Dubai and the market is no longer a closed door.

Remember to ask for the ‘original price’ when thinking about buying a property. The original price being the price paid by the first owner of the property after the developer. This will then enable you to establish the ‘premium’ or percentage paid above the ‘original price’ to see if you are being quoted the market rate.

It is wise to enquire upfront about the transfer fee to avoid any unpleasantries later on down the line. Transfer fees are the fees that you need to pay when transferring ownership from one owner to another, usually ranges from 1 – 7%.

Payment of commission to agents by the person buying the property is the traditional pattern for rentals and has now been extended to home sales, normal rates are about 2%.

Pay attention to the payments schedule as some are more generous than others. Always expect to put down between 5 – 15% deposit on a residential property when it is under construction.

On the secondary market sales there is usually a non-refundable deposit of about Dhs20,000 to Dhs1million, on the condition that the owner agrees not to sell the property to somebody else for around one month.

A new federal property law is awaited this autumn. However, at the moment freehold property rights for foreigners have been guaranteed since May 2002 by Dubai Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum. It seems that any new legislation is unlikely to change this but it could clarify some sticky points and possibly introduce leasehold tenure on some developments.

Inheritance rights under UAE law says that the local courts shall apply the laws of the country of the deceased. Therefore the formation of offshort companies to avoid Sharia law on interitance is not required by foreigners. There is no apparent history of the seizure of foreign property in the UAE.

Keep an eye out for, when buying properties, the owners not keeping up with their payment schedules. You are unable to transfer ownership until all payments have been made and service charges paid.

There is usually one year free maintenance, usually with villas and apartments when purchasing a property. This allows for correction of any minor problems and has a 10 year structural defect guarantee.

Residency visas are always available from the developer if the new home owner requires one. This is so that there is never any fear of owning a home and not being able to live in it, although these visa do not allow you to work in Dubai.