Freehold FAQ's

Why was the Law enacted?

The Law was enacted for a number of reasons, namely:

1. To regulate and supplement the existing practice in relation to property registration for UAE Nationals;
2. To clarify and confirm the actual status of GCC Nationals in regards to their rights to own Dubai property;
3. To nominate development projects that can be owned as freehold by foreigners;
4. To provide a regime whereby individuals can be provided with a confirmation of their rights to purchase and own a property in Dubai, as well as the security of having title to the property registered to them.

What is the status of UAE and GCC Nationals under the Law?

No distinction is made between UAE and GCC Nationals, as they are afforded equal status under the provisions of the Law.

UAE and GCC Nationals can own any property right 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 (which we commonly see in Ground Development Leases), and a usufruct right (the right to use and exploit property belonging to another person).

What is the position of ownership for nationalities other than UAE or GCC Nationals?

Article 4 of the new Law provides that all nationalities other than UAE or GCC nationals can own freehold title, a 99 year lease, or a usufruct right in designated areas of Dubai, as determined by the Ruler’s approval. We are currently awaiting the first of such Ruler’s approvals but the current indications are that this will be issued shortly and that it will include the expected projects within the portfolios of Dubai Properties, Nakheel and Emaar. Some other projects may also be included, for example, those located at Dubailand.

Does the Law distinguish between foreign individuals and companies?

The right to own property in the Ruler’s designated areas and obtain a registered title extends to both foreign individuals and foreign companies. However, any company that wishes to purchase property in the designated areas must be able to prove its lawful existence in its home country.

What is the status of long leases in areas other than those designated by the Ruler?

Long leases in areas other than those designated by the Ruler are not registerable at the Land Department by foreigners under the new Law. These leases remain as personal rights and are not illegal in any way. Unregistered long leases in areas outside of those areas designated by the Ruler remain enforceable as personal contractual rights between the parties. It must be noted that any dispute arising 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.
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, he should 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 authorised 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?

Both the seller and the purchaser will be asked to pay the Land Department’s fees at the time of title registration. These currently amount to 2% of the purchase price, which is broken up by having 1.5% payable by the purchaser and 0.5% payable by the seller. However, it should be noted that developers commonly require the purchaser to pay the full 2%. The Land Department’s fees are currently under review by the Executive Council and may be subject to change.

Will the Land Department charge the 2% fee on the original purchase price or the most recent purchase price?

Current practice of the Land Department is that fees are charged on the original purchase price. However, as the Land Department introduces new practices, it is envisaged that the basis on which fees are levied may change, and they may take 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 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. This means that any register or other type 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. However, where a property is still under construction, developers will no doubt continue 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. A purchaser will pay two fees. EMAAR, for example, charges registration fees in additional to the fees payable to the Land Department. It must be noted that this 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 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. In practice, the Land Department will 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 enquiry. This means that a potential purchaser of a property, for example, will be able to make his own enquiries

Who will settle disputes under the new Law?

In relation to the forum for settling disputes under the new Law, any aggrieved party can file a claim directly with the Dubai Courts, or implement any arbitration process that may be agreed between the parties. 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 example, 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. This means that the process will be as follows:-

1. The relatives of the deceased person must apply to the Court for a declaration that identifies the beneficiaries;
2. The beneficiaries than apply to the Sharia Court to commence succession proceedings; and
3. The inheritance declaration is registered on the deceased’s title at the Land Department.

Only when the above process is followed, will the beneficiaries be recognized as the owners of a property.

But what Law will the Court apply to determine who 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. Despite the fact that many developers are offering residence visas to property purchasers, the two issues of ownership of property and residency/ sponsorship should not be confused.