The sun, the villas, the high-rises: the UAE can appear – and often is – a haven for those seeking top-rate accommodation. But beware the pitfalls. Property law in the Emirates is as complex as it is in most countries – so be well-versed in the must-dos and mistakes many expats have made in the past.
The new changes in the RERA Calculator may show that property prices are dropping but that doesn’t affect you rights when it comes to property law in the UAE.
DUBAI IS A THRIVING CITY of over two million people where 67 per cent of citizens still rent. Among them, hundreds of scare stories and warnings abound about false contracts, evictions and worse. Fortunately, however, there are a few rules by which those issues can be annulled.
The first thing to consider is often who to live with. It is usually more practical to live with friends or work colleagues, but be aware that living with an unmarried partner in the UAE, is considered a crime of “voluntary debasement”. Under Article 356 of the UAE Penal Code, anyone engaging in consensual intercourse will be punished by a minimum one-year custodial sentence.
Terms of two years are not unheard of. In 2011 a love triangle between a New Zealand man, and lovers from Britain and Brazil, landed all three behind bars.
Dubai Electricity and Water Authority (DEWA) bills must be paid solely by the person whose name appears on the bill. Only one person per household can do this unless a married couple’s joint account is registered.
In terms of drawing up a tenancy contract there are several key things to consider. Firstly, make sure you are dealing with a Real Estate Regulatory Agency (RERA)-registered broker. Secondly, register yourself with Ejari (‘My Rent’ in Arabic), which is the chief rent regulator in Dubai. Ejari will protect a tenancy agreement.
Any clause stating that a contract is non-renewable is, if not accompanied by a valid eviction notice, is illegal in the UAE. In fact, despite tales to the contrary, the rules limiting why and how a landlord can evict, are actually fairly tough.
Eviction is only permitted under the following circumstances: if the property is being sold, if the landlord or his or her family want to live there or if the building will be extended, rebuilt or demolished.
If the landlord evicts for the first two reasons, they must give 12 months notice. Thereafter a landlord may not rent the premises for an additional two years, for a residential property, and three years for all other properties.
If this rule is not followed, tenants can apply for compensation from the Land Department Rental Dispute Centre.
Non-payment of rent for 30 days can also result in eviction, unless otherwise agreed. Eviction may also be served if a tenant uses a property for illegal purposes, drastically alters the property, or uses it for a purpose other than the one for which it was agreed.
The financial crisis of 2008 hit Emirati property hard, but huge sums are being pumped into the market again: British investors alone invested Dhs5.8 billion in the country last year, while Indians almost doubled that amount.
Most complications in Dubai and Abu Dhabi – by far the two most sought-after emirates – arise from the initial paperwork required to buy a property, and misunderstandings as to what actually constitutes a purchase.
The word ‘freehold’, for example, does not mean, as in some countries, ownership of land in perpetuity. “It can mean different things in different emirates so potential buyers really need to be very aware of what ownership rights they are purchasing,” lawyer Brent Baldwin, of Hadef & Partners, recently told Emirates 24/7.
Emirati nationals are permitted to buy freehold property anywhere in Abu Dhabi, for example, while GCC nationals have the ability to own property in nine specific investment zones. For everyone else, buying amounts to what is effectively a longterm lease, and only in multi-storey developments, that do not include the land beneath the building in question, in those same investment zones.
Many of the leases run up to 99 years, and because of this faraway term, there is very little scope in the law for what may happen at their end. Add to this the fact that the emirate has no property register, and most lawyers warn that rights could be flexible, and insubstantial.
“A lease in Dubai is a contractual right rather than a property right,” writes Alan Bainbridge, of Norton Rose Fulbright. “Although a tenant is granted the right to use property, this is a personal right enforceable through the lease contract rather than a right connected with the land itself.”
A Sales and Purchase Agreement (SPA) is an essential document for commercial transactions in the UAE, and is a vital component of any property deal.
Make sure that all issues are declared and resolved before the SPA is signed. If ‘conditions precedent’ arise after the signing, the SPA may be ruled invalid. In case differences or delays arise, make sure to have a ‘Long Stop Date’ written into the agreement – that is, a specified date after which point one or more parties may walk away from a deal.
Also make sure the business or individual from whom you are buying is legitimate. “Often buyers will sign an SPA with Company A, when in reality Company B (or a Shareholder in Company A), is the actual owner of all or part of the assets being purchased,” says Sarah Hasnani of Al Tamimi & Co.
“On the sell side, sellers often engage in a contract under which Company C is buyer and makes significant final commitments to the seller, but seller does not realise until it is too late that Company C is merely a shell company with no assets to meet the commitments,” she adds.
Finally, adds Hasnini, do not copy and paste a contract format from the web. Make sure you have a qualified lawyer overseeing proceedings from beginning to end.
Property After Death
Again, be sure that you have a local will drawn up, as the UAE’s property laws upon death are a particularly tricky path down which to walk. Expats who have bought Emirati property either solely or with their spouse may be confused “as to which inheritance laws apply to their assets upon their demise, and usually assume that the laws of their native country automatically prevail over local Sharia laws,” says Nita Maru, of TWS Legal Consultants.
“If an expatriate owns property (locally) and passes away, the laws of their home country may not apply to their assets held within the UAE, especially those that are fixed and immovable.”
If you die without a will or succession plan, adds Meru, 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 applied automatically,” she says.