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Dubai Property Law 2006

Dubai has emerged as a wondrous world, offering a multitude of attractions, an inevitable sense of security and above all the overall ambience that triggers energy and excitement. It is no wonder why more and more people are opting to settle down in Dubai or to pay a visit to this culturally strong and hospitable part of the world.

Although considered as one of the most expensive cities of the world, Dubai still is a magnet that attracts rather compels people to take a bite of its suaveness.

The Initiation!

In 2001 Dubai Property Market changed. The government agreed to allow foreign investors and buyers to take 99-year leases on apartment and villa property in Dubai. At the time when this law was passed in 2001 the population was close to 1 million people. In May of 2002, the crown prince of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, stated that Dubai would allow foreign investors to buy Dubai properties on freehold ownership. The statement just jumpstarted the market and it has been booming ever since.

Now during last three years Dubai has emerged as the ultimate destination for international and local property investors. The boom was triggered by the ‘freehold property scheme’, unveiled in 2003 by Dubai government, allowing foreigners to own property for life, with the right to sell, lease or rent it at their own will. Along with this, the increase in population, flourishing tourism and readily available mortgage facilities from banks and financial institutions have given vent to an extraordinary real estate boom in Dubai. Real estate projects of almost $30 billion are currently under development in Dubai.

Since the new laws were passed, capital growth in Dubai has been on the up and capital growth that exceeds 20% is expected as Dubai continues to nurture its attraction to be the NO1 tourist and leisure country. This coupled with achievable 8% rental income return; it is clear why Dubai is considered one of the top investment property hot spots in marketplace.

The Law

In the case of Dubai and the UAE, property law is very young and still taking its long-term shape, although the key elements are straightforward to understand. The Law No. 7 that legalizes freehold ownership of land and property for UAE and GCC citizens, while allowing the same rights to non-GCC expatriates to pre-designated areas that will be approved by the Ruler of Dubai.

Non-GCC expatriates will be given the right to acquire freehold and 99-year lease property, in areas designated by the Ruler. The law comes almost four years after the government first announced freehold ownership to expatriates, grouped under three Dubai-government owned entities Emaar Properties, Nakheel and Dubai Properties. The new property law entitles the investors and buyers to the following clauses:

Summary

The foreigners will have the right to lease or purchase the land, after getting approval from the three master-developers, Emaar, Al Nakheel, and Dubai Properties.

A land will be registered in the name of a foreigner only after the developers submit a no-objection letter, stating that all the payments for the transaction have been made in full.

There are three kinds of ownership proposed in the legislation: freehold, usufruct, and common hold. The owner will have complete ownership rights over a free hold property and the building in this case will be in the owner's name.

The second category is usufruct or long-term lease. The law characterizes 'usufruct' as the right to use another's property short of destruction or waste of its substance. The right of usufruct, as per the law, should not be for less than five years. This will most probably be a long-term lease whose maximum validity period will range from anywhere between 50 to 99 years.

Common-hold allows leaseholders to dispense with their landlord and obtain a share of the freehold.

The registration fee for the transaction will be two per cent of the total value of the property, of which 1.5 per cent has to be paid by the purchaser and the rest by the seller. After the payment of the whole amount, the owner is free to either bequeath the property or sell it.

The most important and probably extremely consequential component of the law is the clause that those who already purchased property will have to legalize their purchase by registering it with the authorities. Another important feature of the law is the recognition of the land development lease.

The confidence of the investors and buyers as the new Dubai property law ascertains on them the 100% foreign ownership for the expatriates. More banks will begin the facility of home finance as there is a guarantee in the ownership of the properties.

The law also specifies the functions and responsibilities of the Department of Land and Property, which has so far been doing all the work by virtue of practice, sans legal clarity. As per the law, the department will determine the survey areas; approve the land map and the fees for the services provided by the department.

Excerpt from Law No.7 of 2006

Article No.3
Provisions of this law are applied to properties located in Dubai.

Article No.4
The right to own properties within the Emirate shall be limited to UAE and GCC citizens, to the companies wholly owned by them, as well as to the public stock companies. Pursuant to the Ruler’s consent, non-UAE nationals may be granted the following rights in designated areas:

a) Freehold ownership of the property for an unlimited period;
b) Usufruct over the Property or 99-year lease thereof.

Article No.5
The original documents and judicial rulings upon which properties are registered are to be kept at the Lands and Properties Department.

It bans the removal of documents from the department. Judicial bodies or any expert or committees assigned are authorized to review the documents and get attested copies.

Article No.6
The Lands Department is solely assigned to register property rights and long-term leasing contracts as stipulated in Article No.4 of this law.

Under the law, the department will carry out the following duties:

1- Specifying survey areas or re-conducting surveys and attesting location maps.
2- Specifying rules related survey and releasing maps related to property units.
3- Preparing model property contracts.
4- Setting rules related to regulating, keeping and destroying documents.
5- Setting rules related to the use of Computer in data entry and saving.
6- Setting rules related to the regulation and keeping the records of property brokers.
7- Setting rules related to the assessment of properties.
8- Setting rules related to the sale of properties in auctions, and supervising the auctions.
9- Fixing fees for services offered by the department.
10- Setting up branches of the department upon the director’s discretion.

Article No.7
A property register at the Dubai Lands and Properties Department shall be set up for documenting property rights and their amendments. Its records hold the ultimate evidence against all without exceptions. Its records cannot be challenged except in the case of forgery.

Article No.8
Documents of the property register which are electronically saved, have the same evidential value of the original documents.

Article No.9
All property transactions and deals that result in giving, moving, changing or removing property rights, must be registered with the property register. And so must all the final rulings that prove such dealings, which are not considered valid until they are registered.

Article No.10
To undertake transferring any property rights is limited to the contractor’s commitment to the guarantee if he defaulted on his contractual duties whether compensation was stipulated in the undertaking or not. FEATURES

Article No.11
The inheritance notification must be registered with the property register, in case heirs have property rights within their inheritance. And, no dealings will be admitted unless registered.

Article No.12
The department has the authority to look into applications submitted by owners of unregistered lands seeking to settle their legal status.

Article No.13
The department can correct purely financial errors in the property register upon a request by applicants or on its own, with informing concerned parties.

Article No.14
The department coordinates updating property data with parties concerned.

Article No.15
The registration of property areas and units at the property register must be based on typographic, property unit and property area maps. It also reads that each property area must have an independent map, manifesting all property units in the area and their numbers.

Each property unit must also have a separate map, showing its location, boundaries, length, area and buildings, and the numbers of neighboring units.

The law also stipulates that any amendment to the property unit, whether by dividing or merging units must be registered with the property register.

The department issues ownership certificates regarding property rights, which are considered ultimate evidence to prove property rights.

The above-mentioned certificates must include any terms, conditions, undertakings or any other commitments.

The provisions of federal civil transactions law No.5 of 1985 and its amendments are still valid in the cases not stipulated by this law.

Any agreement or deal concluded in violation of this law is invalid. Any person, department or public prosecution has the right to contest such a deal.

This law abrogates the provisions of the decree concerning legal and penal suites related to land transactions in Dubai, dated November 6, 1997

The Chairman of the department issues the necessary regulations and rules to put this law into effect.

The law shall be published in the official gazette, and is to be taken into force from the date of its issuance.

Article No.22
The Department shall issue title deeds of Real Property Rights in accordance with the current records in the Real Property Register.

Article No.23
Subject to the provisions of any other law, 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.

Article No.24

Title deeds referred to under Article 22 of this Law shall have absolute power of evidence to establish Real Property Rights.
Any conditions, undertakings, encumbrances or any other liabilities related to Real Property Rights shall be stated in the designated folio of the Real Property Unit.

Article No.26

Any agreement or disposal made in violation to the provisions of this law or with the intent to circumvent its provision shall be null and void.
Gives any interested third party, the Land Department and the Public Prosecution he right to request the court to declare such a transaction void. This is aimed at so called ‘sham arrangements’.

Article No.27

Law specifically repeals a Decree dated 6th November 1977. That 1977 Decree prevented any property-related disputes from being filed at court unless the case was referred to it by the Land Department. Now that Decree has been repealed, any aggrieved party can now file a claim direct with the Dubai courts or implement any agreed arbitration process.