Property Law

law no. (7) of 2006 concerning real property registration in the emirate of dubai (the ‘dubai property law’) was signed by his highness sheikh mohammed bin rashid al maktoum, ruler of dubai, on 13th march 2006 and came into force on 1st april 2006.

according to the dubai property law, the lands department will be the only authority recognised as being able to register real property rights for property in dubai. real property rights capable of registration include rights of freehold ownership, rights of usufruct, long leases of up to 99 years, rights of musataha and also collateral rights such as easements, restrictions and mortgages over real property.

a couple of the above concepts explained:

• the ‘right of usufruct’ is a concept that is found in our federal civil code. it is the right to use and exploit property belonging to another person. it is a ‘right in rem’, in other words, it is a real property right. a lease is very similar. it also grants the right to use and take advantage of property belonging to another person, but according to our federal civil code, a tenant does not acquire a property right through a lease, he just acquires a personal right, a right that is enforceable through a contract between himself and the landlord.

• the distinction between the ‘right of usufruct’ and a leasehold right is important in the context of foreigners’ property rights in dubai and will be discussed in further detail hereunder. for uae and gcc nationals, there is really very little practical distinction between the ‘right of usufruct’ and a lease. both give a tenant the same rights, namely the right to use and exploit a property and both can be registered.

• the ‘right of musataha’ is similar to the ‘right of usufruct’. it is the right to use and exploit land belonging to another person along with the right to build on that land. it is the right that we commonly see granted to a tenant through a ‘ground development lease’

ownership by uae and gcc nationals

according to article 4 of the dubai property law, uae and gcc nationals and companies wholly owned by such nationals have the right to own any property interest in the emirate of dubai, and to have such rights registered at the lands department. uae and gcc nationals can therefore own property rights in all areas of dubai, and so can their companies. this includes limited liability companies and private joint stock companies in which all the shareholders are uae or gcc nationals.

if a company is incorporated in the uae or in any of the other gcc countries and has foreign shareholders, it will not be considered a uae or gcc national for the purpose of owning property. the only exception to this is public joint stock companies, companies such as emaar and union properties, that are listed on the dubai financial market. these companies allow their shares to be bought by foreigners but are still considered to be uae nationals and can own property anywhere in dubai.

ownership by nationals other than uae or gcc nationals

according to article 4 of the dubai property law, all nationalities other than uae or gcc nationals are granted the right to own a freehold interest, a right of usufruct or a long lease of up to 99 years in ‘esignated areas’of dubai as approved by the ruler.

regulation no. 3 of 2006 was signed by the ruler and published in the government’s official gazette on july 3rd 2006. this regulation provides at article 3 that “non-locals may own properties as freehold not limited by time, or may have the usufruct right or hire right for a period not exceeding (99) years in the plot or plots shown opposite each of the under-mentioned areas according to the maps issued by the department and attached with this regulation”. the maps were not published with the regulation. article 3 lists 23 designated areas and specifies the applicable plots by their plot numbers.

foreign companies, as well as individuals, can own a freehold title, long lease or a usufruct right of up to 99 years in the designated areas. it is understood that the lands department will impose no restrictions on this and it will therefore make no difference whether the company is registered in the cayman islands, england, hong kong or any other foreign jurisdiction, provided that evidence of lawful existence in the country of incorporation is given.

status of long leases granted to foreigners outside designated areas

long leases, sold in areas which are not designated areas, fall outside the ambit of the dubai property law, but nonetheless are not illegal in any way. they do not contravene this law or any federal law. however, such unregistered leases are treated in a different way for some purposes:

o unregistered leases remain personal rights, not rights in rem or property rights;

o unregistered leases are still capable of being inherited;

o disputes arising between a landlord and a tenant of an unregistered long lease will still be adjudicated by the rents committee.

void arrangements

article 26 (1) of the dubai property law provides that, “any agreement or disposal made in violation to the provisions of this law or with the intent to circumvent its provisions shall be null and void”. article 26 (2) gives any interested third party, the lands department and the public prosecution the right to request the court to declare such a transaction void. this is directed at so called ‘sham arrangements’. this provision is not saying, for example, that long leases granted to foreigners in areas that are not designated areas are illegal. what this provision is aimed at, are those agreements that purport to give a property ownership right to someone who is not entitled to own it and is not entitled to register it. what would be void, for example, is a sale & purchase agreement for the sale of a freehold right in favour of a foreigner in respect of a property in deira, as foreigners do not have the right to own freehold property in deira. that is an obvious example.

a more subtle example might be the ‘nominee ownership’ type arrangements that we sometimes see, where a foreigner who wishes to own property will reach an arrangement with a uae national, wherein the uae national will hold title to the property at the lands department, but for all intents and purpose the foreigner considers himself to be the property owner. the best advice to any foreigner wishing to ‘own’ property in a location which is not approved for foreign ownership, is to take a long lease of the property. whilst the lease cannot be registered, the foreigner would at least have contractual rights pursuant to the lease, which can be enforced and a lease arrangement is not illegal or invalid.

how does a person prove his ownership?

regarding proof of ownership of property, in terms of articles 5, 22 and 24 of the dubai property law, if a purchaser considers that he is the owner of a property, the contract or other agreement by which he acquires that ownership is insufficient to prove it. the purchaser needs to take the contract to the lands department and apply for ownership to be registered in his name. if the application is in order, the lands department will register his ownership in the property register and issue him with a ‘title certificate’. this is the document which proves his ownership.

if title certificates are conclusive evidence of property ownership, what if they have been issued incorrectly or contain incorrect information? article 7 of the dubai property law allows objections to the data recorded in the property register ‘on the grounds of fraud or forgery’. further, article 13 authorises the lands department to correct errors in the property register on its own initiative or at the request of an interested party.

in conclusion, it is the property register itself that at any point in time is the conclusive source of information regarding property rights, and the title certificates contain a mirror record of that information as of the date that they are issued. if some time has passed since a title certificate was issued, and a party wishes to rely on the information that it contains, he should go to the lands department and check it against the property register. the information may have changed since the title certificate was issued, perhaps because the lands department has rectified the register pursuant to article 7 or article 13. or maybe subsequent entries have been made in the property register without the co-operation of the title holder, and therefore without amendment to his title certificate, for example, some form of third party interest or a court judgment.

registration of third party interests

article 24(2) of the dubai property law provides for third party interests, any conditions, undertakings, encumbrances or any other liabilities related to real property rights to be registered in the designated folio (page) of the real property unit.

many of the new private communities that we see in dubai are managed and maintained through a master community declaration and multi-owned buildings are managed through a constitution of the co-owners association. these two documents contain a number of covenants and easements, such as the promise to pay service charges and so on. the lands department has confirmed to us that the third party interests contained in these documents will be registered on the individual property titles.

dealing with property disputes

in the case of a property dispute, article 10 of the dubai property law provides that the liability for breaching an undertaking to transfer any real property right shall be limited to payment of indemnity, whether or not such undertaking provides for an indemnity. therefore if a seller defaults on his obligations under a sale & purchase agreement and fails to transfer the property to the purchaser, the purchaser can claim damages from the seller for his losses suffered, but cannot force the seller to transfer the property to him. in other words, specific performance is not available as a remedy.

the question arises as to which forum should be utilised for settling disputes arising under this law? article 27 of the law specifically repeals a decree dated 6th november 1977. that 1977 decree prevented any property related disputes from being filed at court unless the case was referred to it by the lands department. now that decree has been repealed and any aggrieved party can now file a claim direct with the dubai courts or implement any agreed arbitration process.