From what began as a fledgling real estate industry way back in the early part of this century, the emirate of Dubai had definitely grown in leaps and bounds through the years, with its rapid growth halted only by the crippling global financial crisis.
And although the scars left by the property crash remain visible today, late in 2012, the Dubai property market began its slow but sure movement into recovery, with the pace rapidly increasing in the second half of 2013 and continuing well into early 2014.
From this standpoint, we can see that Dubai remains a top contender when it comes to real estate investment. But how, exactly, does one get to own property in Dubai?
Freehold and leasehold
In Dubai, property ownership is pretty straightforward, any person, whether a UAE national or an expat, and whether based overseas or currently residing in Dubai, can buy property designated as freehold in the Dubai property market. These specific designated areas are set by His Highness the Ruler of the Emirate of Dubai. Interested buyers are“not required to hold any type of residency or similar permit in order to purchase property.” When you buy a freehold property, you buy the asset as such which thus implies absolute ownership of the property asset.
Examples of freehold property are those developments in Dubai land, Emirates Living, Jumeirah Golf Estates, Palm Jumeirah, Dubai Marina, Jumeirah Lakes Towers, The Greens, and many others. There are also parts of the city where there are only specific properties which are designated freehold.
Leasehold, on the other hand, basically means you are buying the leasehold rights which are renewable say after a period of, say, 30-99 years. In this scenario, the leasehold contract is your asset, and in cases of leasehold, the landlord still has the legal obligation to maintain areas designated as common property (in the case of a community) and developers cannot just charge a community fee and then disappear one day.
Areas with leasehold property abound in Dubai, key among which are the Dubai International Financial Centre, Business Bay, Deira, and many others.
In either case, whether a property is freehold or on leasehold, the developer may allow for (or the law itself as in the case of the Strata Law) the formation of an association of leasehold or freehold owners to administer or manage the development and address all maintenance, security and other key issues.
Whether you are a freehold or leasehold owner, there are streamlined procedures and legal documents required to ensure you have full legal ownership of the property or leasehold contract.
A Dubai property transaction, on average, takes about 30 days to complete from the date the Sale and Purchase Agreement is signed. Key documents required include the MOU, NOC from the developer (as in the case of freehold property), mortgage documents (if any), manager’s cheques, and the payment of a number of fees. In such cases, it would be advisable to have an experienced real estate advisor on hand or a conveyance professional.
Some problems of freehold ownership
Disputes, misunderstandings and disagreements are part and parcel of life, more so when it comes to property ownership, especially in relation to matters of inheritance.
In the UAE, inheritance for Muslim nationals is guided by Sharia laws, while the law of the deceased’s home country can be applied for non-Muslim expatriates. However, there are many uncertainties regarding real estate inheritance issues. Unlike other jurisdictions, the UAE does not practice ‘right of survivorship’ (property passing on to surviving joint owner upon death of the other, as would be the case in Commonwealth jurisdictions), and the local courts will need to make the final decisions.
Matters of inheritance coming before the Dubai courts are heard by one or more judges. Juries are not used. Furthermore, unlike in some Western jurisdictions, there is no system of precedent in Dubai or the UAE. Judgements of some higher courts are published, not because they are binding on lower courts, to provide useful evidence of future judicial interpretation and practice. There may be a lengthy period of verifying and confirming the contents of the will. Matters can also get more complicated in the case of jointly-owned property as is the case in husband and wife relationships.
Here in Dubai, a property owner’s legal recourse in avoiding the above mentioned complications would be through succession planning and/or by setting up an offshore company.
Succession planning
Businesses, not just people, that don’t take productive steps to plan for future needs at all levels will face certain disruptions. Succession planning becomes even more important here in the UAE in the case of property owners facing uncertainties when it comes to who will have legal ownership of their property assets in the case of their passing or untimely demise.
Succession is about ensuring the ongoing success of your business through a timed transfer of ownership and control, and this includes control over various types of assets. A succession plan should define exactly who will take over the business, when they will take over the business and how they will take over the business.
With the help of a qualified legal professional, you should create your succession plan well in advance as research shows that succession can take more than two years to plan. Ideally, your succession plan should be part of your overall business plan and reviewed regularly. It should be flexible enough to change according to your circumstances.
In the case of succession planning related to property inheritance,you can have a family succession plan, which involves setting up a trust, gifting or selling the business to family members, or alternatively, if there is any non-family relation you may wish to elect, you can have a non-family succession plan, which involves ‘selling’ your business to an employee or another owner. Whatever type of succession plan you will have, it should efficiently address financial, legal and operational strategies needed for an orderly exit.
Offshore property ownership
Another legal recourse that can help investors avoid the complications of inheritance is setting up an offshore company and transferring property ownership to that company, so he/she could grant shares in the nominal company to other parties.
In the case of husband and wife being the investors, both spouses become equal shareholders in the company, and the MOA of the offshore company would have a clause stating that upon the death of one of the shareholders, the other shareholder becomes the sole owner of the company, so he/she the automatically ‘owns’ the UAE property.
It must be emphasized that, through as offshore company, a person can own any asset, whether it be stocks, shares, bank accounts, and properties here and abroad. So in case of death, there would be a legal agreement stating that upon his passing, his shares (including the property) will be passed on to named shareholders. This straightforward transfer of effective ownership will mean non- intervention on the part of the local courts.
One of the main concerns of people wanting to take this ownership option is the cost of getting work done, that is, setting up the offshore company which may amount to anywhere between Dh12, 000 to Dh18,000 as in the case of going through the Jebel Ali Offshore Company – the only offshore company through which Dubai property ownership is possible. The fee structure depends on the requirements of the client, the characteristics of the client and what entity facilitates offshore company formation – whether it be a solicitor, business of financial consultant. There are a lot of legal points to be taken care of and a qualified establishment should be able to advise the client properly and efficiently set up the offshore entity. It must be noted that the setup cost may be considered a lot less than if the person/s were to go through other inheritance channels that are not only time-consuming, but also emotionally draining for those left behind.
There are multiple sources of legal information aside from publicly available legal documents (via libraries and the Internet) such as news information, property company blogs, legal updates from websites of property law firms, the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA), etc.
But when you are faced with an actual property problem identified to be a contentious issue, there is nothing like having a qualified legal professional on hand to advise you in identifying what would be your best legal recourse.
Please contact one of our experienced lawyers today for more details. Email us at info@twslegal.ae or call +971 4 448 4284.