Real estate is one of the UAE's key commercial drivers. Over the past ten years, the UAE's property market has matured significantly with the support of reforming real estate law.
Today, Dubai and Abu Dhabi are the two leading Emirates for buying real estate, and the governing real estate legal requirements for each is different.
By far, most complications encountered in buying a property stem from the initial paperwork required and misunderstandings as to what constitutes a purchase in the UAE.
Real estate law can be complex and, while it is not mandatory in the UAE to engage a lawyer to assist with property transaction, gaining access to good advice is strongly recommended.
Are There Any Restrictions On Buying Property In The UAE?
There are currently four types of land ownership in the UAE:
1. GCC land with freehold available only to UAE nationals.
2. GCC land for lease open to all nationalities for a period of one to 99 years.
3. Freehold land open to all nationalities.
4. Freezone land for lease, open to all nationalities for a period of one to 99 years (renewable).
In Dubai for example, Law No 7 of 2006 regulates real estate registration and ownership rights in Dubai. And, according to this law, Emirati nationals and GCC nationals are permitted to buy freehold property in the Emirate of Dubai.
For everyone else, effectively buying property amounts to taking out a long-term lease, and only in multi-storey developments, that does not include the land beneath the building in question, in those same investment zones.
What Does Freehold Mean In The UAE?
The term ‘freehold' in the UAE context does not mean, as it does in some countries, ownership of land in perpetuity. It can mean different things in different emirates so potential buyers should do their due diligence on the ownership rights they are acquiring.
What Should I Consider When Buying a Property?
Prospective real estate buyers should understand that a lease in Dubai is a contractual right rather than a conventional property right. The right to use the property as a tenant is a personal right enforceable via the lease contract, rather than a right connected with a purchase of the land itself.
The Seven key aspects of buying a property in the UAE are:
1. Ensure you have adequate finance in place to complete the transaction.
2. Obtain an NOC from the developer of the property you plan on buying.
3. Clarifying the identity of the actual seller.
4. Verify that the developer and the project are registered along with their status at the respective Land Department.
5. Third party encumbrances on the property.
6. Appropriate agreement to be agreed and signed between the parties.
7. Evaluate the kind of property as to whether it is leasehold or freehold, and its status whether it is off-plan or completed. Accordingly, to verify the procedures and fees for registration of the property in the name of the Buyer.
Do I Need Pre-Approved Finance?
Always obtain a pre-approval letter from your bank or finance company to clarify the maximum amount the bank will lend you. You will need to provide your lender with salary certificates and bank statements to obtain their pre-approval letter. Pre-approval letters have an expiration date, so be aware of this during your negotiations and in finalizing the settlement.
What Is A No Objection Certificate?
A no-objection certificate (NOC) confirms that the seller has paid all applicable fees, and the developer does not object to the proposed sale. The developer provides the NOC to the seller, usually for a fee.
Most developers require both buyer and seller attend the NOC application procedure. The buyer may have to arrange to make a deposit to cover future service charges. NOC deposit and fee policies may vary from one developer to another.
Expect processing times and validity periods to vary from one developer to another. An NOC can take five to seven working days to process. Once issued, transferring ownership of the property can occur.
Also, ensure that the individual or business you are buying the property from is legitimate. Often buyers will sign an agreement with a company only to discover another company or a shareholder in the company is the actual owner of the sale property.
What Is A Sales and Purchase Agreement?
In the UAE, a Sales and Purchase Agreement (SPA) is an essential document for property transactions. Always ensure all issues are identified and resolved before signing the SPA. Be aware, if ‘conditions precedent' arise after the signing.
To cater for differences or delays, incorporate a ‘Long Stop Date' (a specified date at which point one or more parties may walk away from the contract) in your agreement.
Purchasing Property With A Mortgage
When purchasing a property with a mortgage, it is a sensible precaution to include a "mortgage contingency clause" in your real estate purchase contract, even if you have been pre-approved for a loan. This clause should state that the purchase is subject to obtaining a loan, and if you are unable to obtain that loan, the contract will become void, and the deposit refunded to you.
Even with more efficient legislation in place, it is important to correctly time some of the steps involved in purchasing real estate, or the parties risk having to spend additional time and money.
For peace of mind, we recommend you engage MIO's in-house conveyancing team, to avoid unforeseen complications and delays arising.
Put A Will In Place
After buying a property, we suggest you either update your will to reflect your new purchase or put a legally recognized local UAE will in place.
Non-Muslim expats who have bought Emirati property either solely or with their spouse will discover local Sharia laws take precedence over the inheritance laws of their native country. That is, as a non-Muslim expat in the UAE, you may already have a will made in your home country for your assets there, however, your home-country laws of inheritance may not apply to your movable and/or immovable assets in the UAE, unless you have a registered will recognised as per UAE laws.
So, if you die without a will, local courts will examine your estate and distribute it according to Sharia. For example, a wife who has children will qualify for only one-eighth of her deceased husband's estate, and without a will or estate planning in place, this distribution will be automatically applied.
Therefore, obtaining a will in UAE ensures the distribution of your estate according to your preferences.
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In recent years, the real estate legal requirements in the UAE have greatly streamlined the process of purchasing property. However, with the different rules and definitions applied by individual emirates, it can still prove complex to complete, particularly if both the buyer and seller have mortgages involved in the transaction.
While the overall process is the same, the steps taken in a transaction depend on whether the buyer is purchasing with cash or a mortgage, and if the property has a mortgage against it.