Dubai Property Law

The land of architectural wonders, Dubai, is known is known for its high-rise towers and villas offering the coveted idyllic lifestyle. In the recent years, due to the reformation of its property laws, Dubai has been the center of attraction for investors in the real estate market.

In 2002, freehold ownership was introduced causing a flurry of investments in residential and commercial properties in UAE. With the onset of successful reforms by Dubai, other emirates like the Northern Emirates and Abu Dhabi followed suit.

While you might be considering an investment in the Dubai real estate industry, it would be prudent to be aware of the property laws and terminology that is frequently used:

The Law No. 3 of 2006

Introduced in 2006, Law No. 3 states that non-UAE nationals can own properties in designated areas for a period of 99 years, either in the form of a freehold property or leasehold right over a real property.

Freehold & Leasehold

Freehold means that the buyer has full ownership of the land. Leasehold means that a third party has an interest in the new property. Dubai offers both kinds of developments for sale.

NOTE: Leasehold developments do not provide a residential visa to property owners.

Property Sales and Transfer of Ownership (from Seller to Buyer at the completion of the transaction)

3 scenarios warrant for the sale and transfer of property in Dubai:

• Scenario 1 – Properties which can only be bought by UAE / GCC nationals
• Scenario 2 – Properties in designated areas which can be purchased and sold by foreign nationals in the “Secondary Market” (after the original buyer of the off-plan sells it to a secondary buyer prior to the building completion), whereby the new buyercontinues the payments till fully paid to the developer. A “Pre-Title Registration” registration system applies in this case.
• Scenario 3 – Properties whereby the Title Deed Certificate is already issued to the owner of the property.

The procedure is simple and acts as a safety net against any possible administrative or human error.

In “Secondary Market” sales, no transfer fee charge by developers is permitted; the transfer fee is only payable to the Dubai Land Department.

The Dubai Government has stepped in to ensure that all Dubai property ownership is recorded in one central place, i.e. The Dubai Land Department.

Documents required:

• Valid Passport copies of the Buyer & the Seller
• The Sale Transaction Contract – FORM F, floor plan, site location plan
• The settlement cheque for the transaction made out to the Seller (funds due to the Seller as per a statement of disbursements of funds held by the Listing Agent less agreed fees and charges and signed by the Seller at least 24 hours prior to the transfer date) and/or
• The Buyer’s Bank cheque from the Buyer’s financier and a Mortgage registration fee if applicable
• The Dubai Land Department (Seller’s Transfer fee 1% of the Property Purchase Price on the contract –Form F)
• The Dubai Land Department (Buyer’s Transfer fee 1% of the Purchase Price on the contract – Form F)
• The Listing Agent’s Fee as per Form F – Part 4 (And Form A)
• The Buyer’s Agent Fee as per Form F – Part 4 (And Form B)

Escrow Account

Law 8 2007, also known as Escrow Law, was passed in June 2007. This law provides guarantees and reassurances to property investors in order to create a safe environment for feasible investment. With 400 RERA licensed real estate developers to provide the best investment opportunities, the Law 8 2007 applies to any individual or company receiving off-plan payments for property that is not yet completed.

The buyers deposit all payments for the purchase of any off-plan units into a specific bank account which is operated in accordance with the predetermined conditions and terms approved by the Dubai Land Department (DLD). The responsibility of the DLD is to monitor and locate any infringement of the provisions regulating the establishment and operation of the escrow account.

Penalties for Developers

Dubai Government takes defaulters very seriously. A fine of AED 100,000 or/and imprisonment can be inflicted if the developer fails to respect the registration with the DLD; does not carry on with its activities; and provides false documentation for the purpose of obtaining a license.