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DUBAI PROPERTY LAW

  • Law No 9 of 2009 amending Law No 13 of 2008

    Law No. (9) of 2009 amending some provisions of Law No. (13) of 2008 Regulating the Interim Real Estate Register in the Emirate of Dubai

    We, Mohammed bin Rashid Al Maktoum, Ruler of Dubai

    After taking into consideration Law No. (8) of 2007 Concerning Guarantee Accounts of Real Estate Developments in the Emirate of Dubai;

    • Law No. (16) of 2007 establishing the Real Estate Regulatory Agency;
    • Law No. (13) of 2008 Regulating the Interim Real Estate Register in the Emirate of Dubai (hereinafter referred to as the “Original Law”).

    Issue the following Law:

    Article (1)

    Articles 2 and 11 of the Original Law shall be replaced with the following text:

    Article (2)

    The following words and expressions shall have the meanings set out opposite them unless the context otherwise requires:

    Emirate:                                         Emirate of Dubai.
     
    Department:                                 Department of Lands & Properties.

    Establishment:                            The Real Estate Regulatory Agency

    Real Estate Register:                The Real Estate Register maintained by the Department.
       
    Interim Real Estate Register: A set of documents kept in written or electronic form in the electronic register at the Department in which all contracts for the sale of real estate and other dispositions off plan are recorded before being transferred to the Real Estate Register.

    Real Estate:                                 Land and permanent structures erected on it.
     
    Real Estate Unit:                        The subdivided part of the real estate including any subdivisions off plan.

    Off Plan Sale:                              Sale of subdivided real estate units off plan or not yet completed.

    Master Developer:                     A person licensed to develop real estate and sell its units in the Emirate.
       
    Sub-Developer:                        A person who develops part of a real estate project of a Master Developer under an agreement between them.

    Broker:                                        A person engaged in real estate brokerage activities pursuant to Regulation No. 85 of 2006 regulating the Register of Real Estate Brokers in the Emirate of Dubai.

    Competent Authorities:         The authorities concerned with licensing and registering real estate projects in the Emirate.         

    Article (11)

    1. In the event that a purchaser defaults on any term of the contract he made with the Developer for the sale of a Real Estate Unit, the Developer should notify the Department accordingly and the Department will then give the purchaser 30 days notice to fulfill his contractual obligations, by hand, registered post or email.

    2. If at the end of the period referred to in sub-clause 1 of this Article the purchaser has not fulfilled his contractual obligations, the following provisions should apply:

    a. If the Developer has finished not less than 80% of the real estate project then the Developer may retain all amounts paid and request the purchaser to pay the outstanding amounts of the contract value. If this not possible the Developer may request the sale of the real estate at a public auction to obtain the outstanding amount.

    b. If the Developer has finished not less than 60% of the real estate project then he may terminate the contract and forfeit not more than 40% of the real estate unit value as mentioned in the contract.

    c. If construction of real estate projects has commenced but has not reached 60% the Developer may terminate the contract and forfeit not more than 25% of the real estate unit value as mentioned in the contract.

    d. In projects where construction has not commenced for reasons outside the Developer’s control and without any neglect from his side the Developer may terminate the contract and forfeit not more than 30% of the amounts paid by the purchaser.

    3. For the purpose of paragraphs c and d of sub-clause (2) “construction” means that the Developer has taken possession of the real estate project site and has commenced construction works as per the designs authorised by the Competent Authorities.

    4. For the purpose of paragraphs b, c and d of sub-clause (2) the Developer must return the due amounts to the purchaser within one year from the date of termination or within 60 days from the date of resale of the real estate unit whichever first occurs.

    5. Notwithstanding what is mentioned in sub-clauses 1 and 2 of this Article the Establishment pursuant to a report may decide to cancel the real estate project and in this case the Developer should return all amounts collected from purchasers as per the procedures and provisions stated in Law No. 8 of 2007 concerning guarantee accounts of real estate developments in the Emirate of Dubai.

    6. The provisions mentioned in this Article do not apply to plot sale contracts where off-plan sales in the plot have not commenced as in such case it remains subject to the terms mentioned in the contract entered between the two parties.

    7. The provisions of this Article apply to all contracts entered into before this Law came into effect.

    Article (3)

    This Law shall be published in the Official Gazette and shall take effect from its date of publication. 

    MOHAMMED BIN RASHID AL MAKTOUM
    RULER OF DUBAI 

    Issued in Dubai on 12 April 2009.        

  • Law No. 14 of 2008

    Concerning Mortgages in the Emirate of Dubai

    WE, Mohammed bin Rashid Al Maktoum, Ruler of Dubai After taking cognisance of Federal Law No. 5 of 1985 regarding civil transactions, as amended; Federal Law No. 8 of 2004 regarding financial free zones; Law No. 7 of 2006 regarding real estate registration in the Emirate of Dubai; Regulation No. 3 of 2006 designating the areas in which non-UAE nationals may own freehold property in the Emirate of Dubai; Law No. 8 of 2007 concerning real estate development trust accounts in the Emirate of Dubai; Law No. 27 of 2007 on ownership of jointly owned properties in the Emirate of Dubai; and Law No. 13 of 2008 regulating the interim real estate register in the Emirate of Dubai Issue the following Law:

      Section One - Definition & General Provisions

    Article (1)

    This Law shall be called "Law No. (14) of 2008 Concerning Mortgages in the Emirate of Dubai"

    Definitions - Article (2)

    The following words and expressions shall have the meanings set out opposite them unless the context otherwise requires:

    Emirate: Emirate of Dubai.

    Department: Department of Lands & Properties.

    Head: Head of the Department.

    Property: Land and permanent structures erected on it which may not be moved without suffering damage or alteration.

    Property Unit: The subdivided part of the Property including any subdivisions shown off-plan.

    Real Estate Register: A set of documents kept in written or electronic form at the Department which provide an up-to-date record of real rights in Property.

    Interim Real Estate Register: A set of documents kept in written or electronic form at the Department in which all contracts for the sale of Property and other legal dispositions off-plan are recorded first before being transferred to the Real Estate Register.

    Mortgage: A contract whereby a creditor acquires security over Property or a Property Unit for the repayment of his debt, ahead of ordinary creditors and lower ranking creditors, from the value of the Property wherever located and by whomsoever held.

    Mortgagor: The owner of the Property or the holder of the right in-rem or personal right under the contract of sale signed with the owner of the Property which is marked as sold off-plan and is registered in the real estate register or the interim real estate register.

    Mortgagee: A creditor who lends money to a mortgagor against the security of Property that exists ipso facto or ipso jure.

    Article (3)

    The provisions of this Law apply to the Mortgage of Property and Property Units as security for debt. It makes no difference whether the debt is secured by a charge over the whole of the Property or over an undivided interest therein or by right in-rem or personal right over a Property marked as sold off-plan.

    Article (4)

    The Mortgagee/creditor should be a bank, company or financial institution that is duly licenced and registered with the UAE Central Bank to provide finance for Property in the UAE.

    Article (5)

    1. The Mortgagor must be the owner of the Mortgaged Property or Property Unit and in a position to dispose of the same.

    2. The Mortgagor can be the debtor or guarantor in rem who executes a Mortgage on behalf of the debtor.

    3. Subject to Articles 22, 23 & 24 of this Law, a Mortgage over Property or a Property Unit must be shown to exist ipso facto or ipso jure off-plan when the Mortgage is made.

    4. A Mortgage may only be created over Property or a Property Unit that is capable of being disposed of.

    Article (6)

    A Mortgage includes all appurtenances to the Property or Property Unit including buildings, plants, assigned/apportioned properties and any improvements made after the Mortgage contract.

    Article (7)

    1. A Mortgage is not valid unless it is registered with the Department and any agreement to the contrary is void.

    2. The Mortgagor shall bear the costs of the contract unless otherwise agreed by the parties.

    Article (8)

    1. Mortgage applications shall be filed with the Department and shall be signed by the Mortgagor and Mortgagee or the guarantor in rem, if any, including the following particulars:

    a) All information related to the Property

    b) Value of the Property

    c) Value of the debt

    d) Mortgage term

    e) Personal details of the Mortgagor, Mortgagee and guarantor in rem including domicile and place of residence.

    2. The mortgage contract shall be signed using the standard form of the Department and the Real Estate Register or Interim Real Estate Register, as the case may be, shall be updated accordingly. The ranking of the Mortgage is determined by its date of registration.

    3. The Department shall give the contracting parties a mortgage deed bearing the signature of the competent officer and the seal of the Department.

    4. The mortgage deed can be in electronic form and is admissible as evidence on the same basis as a written mortgage deed.

    Article (9)

    The Mortgage must secure a debt that is owing or promised at the conclusion of the Mortgage.

      Section Two - Legal Effects of Mortgage

      Article (10)

      The Mortgagor shall not sell, gift or otherwise dispose of the Mortgaged Property Unit or Property or create any right in-rem or personal right over the Mortgaged Property Unit or Property without the approval of the Mortgagee and subject to the assignee agreeing to take over the obligations of the Mortgagor under the mortgage contract. The Mortgagee may in the mortgage contract stipulate joint liability of the mortgagor and assignee for those obligations.

      Article (11)

      If a clause in the mortgage contract gives the Mortgagee title to the Mortgaged Property when the Mortgagor fails to pay the mortgage debt within the specified period or provides for the sale of the mortgaged Property without taking the statutory steps, the Mortgage shall be considered valid but in either case the clause is void. The clause is also void if included in a subsequent agreement.

      Article (12)

      The Mortgagor has the right to administer his mortgaged Property and collect its yield and revenue until it is foreclosed and sold at a public auction upon default of paying the debt.

      Article (13)

      Where loss or damage occurs to the mortgaged Property, the Mortgage shall attach to substitute assets and the Mortgagee may cover his claim from those assets in the order of its priority.

      Article (14)

      The debt may only be covered out of the mortgaged Property and the guarantor in kind may not seek recourse against the debtor's assets before enforcement against the mortgaged Property.

      Article (15)

      1. The Mortgagee may assign his rights subject to the consent of the debtor. The assignment deed shall be registered with the Department.

      2. The Mortgagee/creditor can, up to the value of his debt, assign the rank of his Mortgage to another creditor having a security interest in the same Property.

      Article (16)

      A Mortgage secures only the amount specified in the mortgage contract unless otherwise provided by law or agreement.

      Article (17)

      The rank of a Mortgage is determined by the serial number under which it is registered with the Department. In case several applications are submitted at the same time to register a Mortgage against the same debtor and over the same Property, the Mortgages shall be registered under the same number and those creditors shall rank equally in the distribution of auction proceeds.

      Article (18)

      A Mortgagee/creditor may follow the mortgaged Property into the hands of any person in possession thereof in order to obtain payment of his claim when due according to rank. A person shall be deemed in possession of the Property if he acquires title to the Property after it has been mortgaged or acquires any other right in- rem or personal right over the Property.

      Article (19)

      The Mortgagor will guarantee the mortgaged Property and keep it in good condition until the debt is repaid. The Mortgagee may protest any deficiency in the guarantee and take whatever legal action is necessary to protect his rights and recover the costs from the Mortgagor.

      Article (20)

      A Mortgage terminates upon repayment of the secured debt.

      Section Three - Special Mortgages

      Article (21)

      A Musataha holder may mortgage buildings or plants over the term of the Musataha without having the right to mortgage the land that is to be developed unless otherwise agreed.

      Article (22)

      The holder of usufruct or long term lease for a term between 10 and 99 years may Mortgage his interest in the Property or Property Unit for the term of the usufruct or long term lease

      Article (23)

      A Mortgage over rights of musataha, usufruct or long term lease shall terminate and be deleted from the register upon repayment of the debt secured by the Mortgage or upon expiry of the term of the musataha, usufruct or long term lease.

      Article (24)

      The purchaser of Property Units or Property that are marked as sold off-plan or are under construction may mortgage them as security for the debt provided that those units or Property are registered in the Interim Real Estate Register maintained by the Department.

      Section Four - Execution Proceedings on the Mortgaged Property

      Article (25)

      Upon default in payment of the debt when due or upon fulfillment of a condition granting early repayment status, the Mortgagee/creditor or his universal or singular successor must provide the debtor or person in possession of the mortgaged Property or Property Unit 30 days notice through the Notary Public before commencing execution proceedings.

      Article (26)

      If the Mortgagor/debtor or his universal or singular successor or the guarantor in rem fails to pay the Mortgage within the period specified in the preceding Article, the execution judge shall, upon request of the Mortgagee/creditor order an attachment against the mortgaged Property so that it can be sold by public auction in accordance with the applicable procedures of the Department.

      Article (27)

      Subject to the preceding Article, the execution judge may, upon request of the debtor or his guarantor in rem, postpone the sale by public auction for up to 60 days and for one time only if he finds that:

      a) the Mortgagor/ debtor will be able to repay his debt if given this period.

      b) sale of the mortgaged Property or Property Unit will cause the debtor substantial damage.

      Article (28)

      Subject to Articles 25, 26 & 27 of this Law, failure to pay the debt within the stipulated period will cause the mortgaged Property to be sold by public auction in accordance with the applicable procedures of the Department within 30 days after the end of the relevant period referred to in either article.

      Article (29)

      The debtor or his guarantor in rem may repay the secured debt and its ancillaries before the due date.

      Article (30)

      The claims of Mortgagees/creditors shall be paid out of the price of the Property Unit or Property or out of the substitute assets in order of priority even if the Mortgages had all been registered the same day. If the sale proceeds are not sufficient to cover the claim of a creditor, such creditor can claim the difference from the debtor.

      Section Five - Closing Provisions

      Article (31)

      The Civil Transactions Code (Federal Law No. 5 of 1985), as amended, and the Civil Procedure Code (Federal Code No. 11 of 1992) shall apply to any matter for which no provision is made in this Law.

      Article (32)

      Property granted by the government to UAE citizens and such-like persons for commercial and residential purposes is excluded under this Law and is subject to the applicable orders and directives of the Ruler and the decisions in implementation thereof.

      Article (33)

      Mortgage deeds that are duly registered pursuant to this Law are binding upon third parties.

      Article (34)

      The Head of the Department shall issue the decisions necessary for implementing this Law.

      Article (35)

      This Law shall be published in the Official Gazette and shall take effect 60 days after publication.

      MOHAMMED BIN RASHID AL MAKTOUM - RULER OF DUBAI

      Issued in Dubai on 14th August 2008 : 13 Shaban 1429 Hegira

  • Property Ownership

    1. Title Registration Law

    Law No. (7) of 2006 concerning Real Property Registration in the Emirate of Dubai (the "Title Registration 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 Title Registration Law, the Dubai Land 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 the UAE 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 the 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 other 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 other GCC Nationals

    According to Article 4 of the Title Registration Law, UAE and other 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 Dubai Land Department. UAE and other 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 Title Registration 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 "designated 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" . 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 Dubai Land 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 Title Registration 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 as personal rights, not rights in rem or property rights.

    Void Arrangements

    Article 26 (1) of the Title Registration 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 Dubai Land 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 Dubai Land Department, but for all intents and purposes 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 Title Registration 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 Dubai Land Department and apply for ownership to be registered in his name. If the application is in order, the Dubai Land 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 Title Registration Law allows objections to the data recorded in the Property Register "on the grounds of fraud or forgery". Further, Article 13 authorises the Dubai Land 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 Dubai Land Department and check it against the Property Register. The information may have changed since the Title Certificate was issued, perhaps because the Dubai Land 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 Title Registration 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. Accordingly, these documents will be recorded on the individual property titles to which they relate.

    Remedies in Property Disputes

    In the case of a property dispute, Article 10 of the Title Registration 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.

    2.Strata Law

    Law No. (27) of 2007 on Ownership of Jointly Owned Properties in the Emirate of Dubai (the "Strata Law") was published in the Official Gazette on 31st December 2007. Article 33 of the Strata Law provides that this law will come into effect three (3) months from the date of its publication, namely 1st April 2008.

    It is worth noting that the Title Registration Law (discussed above) envisaged such Strata Law. Article 23 of the Title Registration Law provides that an apartment shall be deemed to be a "Real Property Unit" as defined in the Title Registration Law and therefore, titles created in accordance with the Strata Law will come under the ambit of the Title Registration Law in terms of procedures regarding registration in the Real Property Register of the Dubai Land Department and so forth

      Below is a summary of the Strata Law:
    • The definition of "Jointly Owned Property" provides that this law will cover two concepts of subdivision, namely subdivision within buildings where common areas will be created and subdivision within conventional methods of horizontal subdivision of land where common areas will be created.
    • We understand from preliminary discussions with the Dubai Land Department that developers will have a choice as to whether to (i) retain ownership of all common areas within a master community; (ii) retain ownership of some of the common areas within a master community; or (iii) not retain any of the common areas within a master community.

      Where a developer chooses to retain ownership of some of the common areas within a master community, the balance of the common areas will become Jointly Owned Property (as defined in the Strata Law). The Jointly Owned Property will be owned by the property owners within the master community in undivided shares and the Owners' Association to which these owners are members will be tasked with the administration and management of the Jointly Owned Property.

      Where a developer chooses not to retain any of the common areas within a master community, then all the common areas will become Jointly Owned Property.

    • The Strata Law implies that there will be numerous tiers of Jointly Owned Property within a single strata development. It is our understanding that in practice, a maximum of three tiers will be permitted.
    • Where there is a mixed use building consisting of, say, a commercial lot and a hotel lot, the Strata Law envisages that a document known as a 'Building Management Statement' must be prepared to document the maintenance and cost sharing arrangements between the lot owners in relation to the building's common facilities. If such Building Management Statement is required, then the Building Management Statement must be registered at the Dubai Land Department.
    • A unit within a Jointly Owned Property development ("strata development") and the unit's undivided interest in the common areas will be capable of being sold or mortgaged in favour of a bank.
    • A unit owner's interest in the common areas cannot be separately disposed of from the unit itself.
    • If a developer plans to develop its strata development in stages, the developer must disclose such arrangement in the master community declaration.
    • The original documents for the site plan, the master community declaration and the Owners' Association constitution must be lodged with the Dubai Land Department and such documents will be registered with the title deed of the Jointly Owned Property.
    • A developer is liable for building structural defects up to a ten (10) year period from the completion of the building and liable for defective appliances up to a one (1) year period from the completion of the building.
    • As regards Owners' Associations, the Strata Law provides that:
        1. an Owners' Association will be formed upon the registration at the Dubai Land Department of the first owner (other than the developer) of a Unit in the strata development.
        2. the Owners' Association is a not-for-profit legal entity and has a separate legal existence from its members. Accordingly, the Owners' Association has the right to sue and be sued in its own capacity
        3. each unit owner must pay the Owners' Association a share of the cost incurred by the Owners' Association to manage, operate, maintain and repair the common areas (which is commonly referred to as service charges). Each owner's share of the service charges will be determined based on the unit's area as compared to the total area of the strata development.
        4. unpaid service charges can be recovered by the Owners' Association as a debt in Court.
        5. the Owners' Association must insure the building and also maintain public risk insurance to cover against personal injury to owners and occupiers within the strata development and such insurance premiums will form part of the service charges of the Owners' Association.

  • Regulation of the Landlord & Tenant Relationship

    1. Landlord & Tenant Law

    Law No. (26) of 2007 Regulating Relationships between Landlords and Tenants in the Emirate of Dubai (the "Landlord & Tenant Law") came into force on 1st March 2008. This law regulates the relationship between landlords and tenants in respect of all property, with a few exceptions as mentioned below.

    Main Operative Provisions of the Landlord & Tenant Law
      The main provisions of the Landlord & Tenant Law are as follows:
    • The law governs tenancies of all types of property in Dubai, whether residential or commercial in nature, apart from hotels and free accommodation provided by employers to their employees.
    • Tenancy contracts must state a specific tenancy period as well as details of the property and the rent.
    • All tenancy contracts are to be registered with the Real Estate Regulatory Agency ("RERA"). If they are not registered, they cannot be referred to RERA or any other competent authority for dispute resolution.
    • If a tenant continues to occupy a property after the date of expiry of the tenancy contract without objection by the landlord, then the tenancy contract will be deemed to automatically renew on the same terms and conditions for a further period equal either to the original period of the tenancy contract or for one further year, whichever is less.
    • A tenancy contract cannot be unilaterally terminated by either party without the consent of the other party (subject to certain exceptions).
    • All sub-tenancies shall expire on the date of expiry of the head tenancy contract, unless otherwise agreed.
    • Rent is not to be increased and the terms of the tenancy contract are not to be amended for a period of two years from the date of inception of the original tenancy relationship.
    • Where rent increases are permitted, these will be subject to the rent cap policies set by the authorities.
    • If the tenancy contract does not state when rent payments are to be made, rent must be paid in four equal installments in advance.
    • At renewal or extension of a tenancy contract, the landlord and the tenant may agree upon a new level of rent. If no agreement is reached and it is necessary for the tenancy contract to be continued, then the Rents Committee shall decide upon the rent by comparing rents for similar properties in the same area of Dubai.
    • If either the landlord or tenant does not wish to renew a tenancy contract or either party wishes to amend the terms of an existing tenancy contract, that party must notify the other party not less than ninety (90) days prior to the expiry date, unless agreed otherwise.
    Can the Landlord evict the Tenant prior to the end of the Tenancy?
        Yes, but the landlord may only evict the tenant prior to the end of a tenancy period in the following circumstances:
      1. Tenant fails to pay any rent for a period of thirty (30) days after notification from the landlord;
      2. Tenant sub-leases without landlord's permission;
      3. Tenant uses premises for illegal or immoral purposes;
      4. Tenant purposely damages premises or causes damage through gross negligence;
      5. Tenant uses premises for a purpose not allowed by the tenancy contract;
      6. The premises are in danger of collapse;
      7. Tenant otherwise breaches the tenancy contract and does not rectify the breach within thirty (30) days' notice from the landlord.
    In what circumstances may the Landlord demand the Tenant to leave at the end of the Tenancy?
        The landlord may demand eviction of a tenant upon expiry of a tenancy contract in the following cases:
      1. The premises are to be demolished under governmental orders;
      2. The premises require comprehensive maintenance which requires the eviction of the tenant;
      3. The landlord wishes to demolish the premises for reconstruction or redevelopment;
      4. The landlord wishes to recover the premises for personal use or for use of "his next of kin of first degree".

    In any of the above situations, the landlord may notify the tenant of his desire to end the tenancy contract. Notification must be served at least ninety (90) days in advance. If the landlord recovers the premises for "next of kin" use, then the landlord is barred from leasing the premises to any other party for a period of one (1) year.

    What happens to the Tenant if the Landlord sells his interest in the Property?

    Transfer of title to the premises does not affect a tenant's right to continue to occupy the premises, as long as the tenancy contract has a fixed term.

    Can the Landlord disconnect services in order to force the Tenant out?

    Absolutely not; the landlord is prohibited from disconnecting services to the premises or preventing the tenant from benefiting from the premises.

    2. 2008 Rent Cap Decree

    • Decree No. (27) of 2007 regarding Rentals in the Emirate of Dubai (the "2008 Rent Cap Decree") restricts increases in rent to a cap of five percent (5%) in respect of tenancy contracts to be renewed in 2008, provided that the rent has not been increased in 2007. Further, the rent cannot be increased in 2008 when the tenancy contract was originally executed in 2007.
    • There is an exception for tenancy contracts of more than three (3) years in duration and which are due to expire in 2008. In these cases, the Rents Committee may increase the rental to an amount "equal to similar property rents".

  • Regulation of Developers

    1. Developers' Guarantee Account Law

    Law No. (8) of 2007 Concerning Guarantee Accounts of Real Estate Developers in the Emirate of Dubai (the "Developers' Guarantee Account Law") came into effect upon its publication in the Official Gazette on 28th June 2007. The main purpose of the Developers' Guarantee Account Law is to provide legislative protection to purchasers in off-plan transactions. The law seeks to introduce a regime of registration, licensing and regulation for developers and applies to all master developers and sub-developers undertaking property development activities in Dubai.

    Must all developers have a trade license?

    Article 6 of the Developers' Guarantee Account Law requires all developers, without exception, to have a trade license for their activities. If a developer does not have a trade license issued by the Dubai Department of Economic Development ("DDED") or one of the free zones, then it may apply to the newly established RERA for a development license to satisfy the requirements of this provision.

    To whom does this Law apply?

    Essentially, the Developers' Guarantee Account Law requires any developer wishing to undertake property development activities in the Emirate of Dubai and/or to sell units off plan to third party purchasers, to open a guarantee account with a bank or financial institution accredited by the Dubai Land Department. Each accredited bank or financial institution must first enter into a written agreement with the Dubai Land Department setting out the terms and conditions pursuant to which it will become the trustee in respect of the guarantee account. It is intended that all monies received from third party purchasers in off plan sales will be paid into such guarantee account for the project. As a general rule, any monies in the guarantee account shall only be paid out by the trustee to settle invoices of contractors and consultants engaged in the construction and development of the project. It is important to know that not all expenses incurred by the developer in connection with the project shall automatically qualify for payment from the monies held in the guarantee account.

    What are the conditions for disbursement of monies from the guarantee account?

    The terms upon which any monies can be disbursed from the guarantee account is governed by an escrow agreement entered into between the developer and the account trustee (an accredited bank or financial institution). The mechanism for the payment of any monies will be by way of certification by the development's project manager to the account trustee whenever a construction milestone has been successfully completed.

    What is the purpose of the 5% retention in the guarantee account?

    Article 14 of the law requires the account trustee to retain 5% of the total amount issued in the guarantee account as a retention for a period of one year after the developer has transferred titles of units into purchasers' names. The purpose of this 5% retention is to act as a further guarantee that the developer will promptly and effectively remedy any defects in the property within the first year following handover.

    What is the applicable registration process?
      Each developer is required to go through a registration process in order to fulfill the requirements of the law. In summary, the process is as follows:
    • Developer/Project Registration - a developer first needs to register itself at the Dubai Land Department on the Developers' Register together with the details of each project.
    • Opening of guarantee account - once the developer has registered itself and its projects, it can proceed to establish a guarantee account for each project.
    • Submission of documents for finalisation of registration - once the guarantee account has been opened and the agreements have been signed, they will be submitted to the Dubai Land Department for finalisation of registration.
    What are the penalties for breach of this Law?
        Article 16 provides that without prejudice to any penalties provided for in any other law, a penalty of incarceration and payment of a fine not less than AED 100,000, or either one of them, shall be imposed on anyone who:
      1. Carries on a property development business in Dubai without a license;
      2. Submits a false document or makes misstatements to concerned authorities in order to obtain a license for carrying on a property development business;
      3. Knowingly offers to sell units in bogus property developments;
      4. Embezzles, uses or squanders payments delivered to him for the purpose of construction of property developments, and misappropriates such payments;
      5. Any auditor who deliberately prepares a false record about the results of an audit he conducts on a developer's financial position, or intentionally conceals significant facts from his report;
      6. Any consultant who knowingly approves false documents about a property development;
      7. Any developer who deals with a broker who is not registered in the Brokers' Register at the Land Department pursuant to By-Law No. (85) of 2006 regarding the Real Estate Broker's Register in the Emirate of Dubai (see below).
    Under which circumstances may a developer be cancelled from the Register at the Dubai Land Department?
      Article 17 provides that a developer shall be cancelled from the Developers' Register in any of the following events:
    • If he declares bankruptcy;
    • If he does not commence construction within six (6) months of the date he was granted approval to sell off plan without an acceptable excuse;
    • If his license is cancelled by the licensing authorities;
    • If he violates any of numbers (2), (3), (4) or (5) of Article 16 of the Law;
    • If he is in violation of any of the laws and/or by laws regulating the real estate development activity.

  • Regulation of Real Estate Brokers

    1. Property Leasing & Management Law

    Law No. (2) of 2003 Regarding the Profession of Renting and Leasing Out Real Estate in the Emirate of Dubai (the "Property Leasing & Management Law") was issued on 24th February 2003 and regulates the activities of management of a third party's property or leasing it for the purpose of renting it out. Real estate brokers undertaking such activities are required to lodge a bank guarantee in the amount of AED 5 million with the DDED in order to obtain a trade license. The law refers only to the activity of managing or leasing third parties' property and does not extend to the sale of property. However, the requirement for an AED 5 million bank guarantee has been applied even in cases of the sale of property.

    What is the purpose of the bank guarantee?

    The purpose of the bank guarantee is to cover any ruling and fees imposed by the Rents Committee of the Dubai Municipality. The Rents Committee has jurisdiction over any disputes or matters between a landlord and tenant in respect of a lease. The law is not clear on whether the bank guarantee is restricted to disputes between real estate brokers and third parties or disputes between real estate brokers and/or landlords and/or tenants.

    The bank guarantee will be for a period of one year and shall be renewed automatically throughout the period of the trade license. In the event of cancellation of the trade license, the guarantee shall be returned only after six months have passed from the date of cancellation.

      The bank guarantee requirement under this Law is waived for:
    • Public joint stock companies engaged in the field of property in the Emirate of Dubai; and
    • Private joint stock companies engaged in the field of property in the Emirate of Dubai with a capital value of at least AED 5 million.

    An individual would be eligible for a license to set up an office to lease and manage his/her property or the property of his/her kin up to twice removed without having to present a bank guarantee provided he/she owns property worth at least AED 8 million. Property allocated to him and his family in the form of private housing shall not figure in this computation.

    What are the penalties for breach of this Law?

    Breach of this Law is subject to a penalty of imprisonment and/or a fine not exceeding AED 500,000.

    2. Brokers Registration By-Law

    By-Law No. (85) of 2006 Regarding the Regulation of Real Estate Brokers Register in the Emirate of Dubai ("Brokers Registration By-Law") was issued on 30th May 2006 and came into force immediately.

      The essential features of the Brokers Registration By-Law are as follows:
    • It is applicable to real estate brokers who deal in the sale and purchase of property that is registered at the Dubai Land Department.
    • In addition to the requirement to obtain and maintain a trade license from DDED, a regulated broker is required to apply for registration in the Brokers' Register maintained by the Dubai Land Department.
    • Registration applies to both the company itself and to the individuals operating within the company who wish to have authority to attend at the Dubai Land Department to transact any business. The current registration fee is AED 5,000 per annum for a brokerage company and AED 500 per annum for each individual broker.
    • There are certain criteria to be met as a condition of the broker's registration in the register including obtaining a certificate from an accredited training course provider and the passing of a professional test administered by the Dubai Land Department.
    • All registered brokers are required to comply with the code of ethics published by the Dubai Land Department.
    • Breach of the Brokers Registration By-Law or the code of ethics may result in a warning, notice, suspension from work for a period of up to six (6) months or, in extreme cases, the black listing or cancellation of the broker's registration.

    RERA undertakes the function of approving, registering and regulating brokers pursuant to the Brokers Registration By-Law.