We continue our series of articles on real estate in Dubai and the laws relating to them. In the last article, we wrote about the New Decree and future projects in the field of real estate in Dubai. In this material, we consider the new law of real estate.
This year the UAE has introduced new laws this year that effectively widen the range of possibilities for expatriates to be more deeply involved in the long-term economic growth of the country. Many of the policy changes mainly concern foreign business ownership, visa regulations and curbing the cost of living.
In a country where 80 percent of the population is made up of foreign residents from all over the world, the new regulations are viewed as crucial in efforts to tap further into the expat population’s massive investment potential across different industries.
In the real estate sector, experts believe the new regulations are particularly effective in drawing more foreign direct investments. We look at the new laws and their impact on the real estate landscape.
The UAE Cabinet approved in May changes to foreign business ownership rules, which had previously restricted foreign businesses to designated free zones. Outside these zones, foreign establishments can only operate if they yield 51 percent ownership of the company to a UAE partner. The new law, which is set to take effect later this year, would allow 100 percent ownership of non-free zone businesses by foreign investors.
“For a long time, partial ownership of 49 percent has scared off prospective investors,” says Anna Skigin, CEO of Frank Porter. “If the law goes ahead, it will create more openness in the region and a huge surge in foreign investment. A more open and friendlier business environment will positively affect the real estate market — as the confidence in the region increases and more people will purchase properties to live in or for investment.”
His Highness Sheikh Mohammed bin Rashid Al Maktoum, the Vice-President and Prime Minister of the UAE and Ruler of Dubai, has issued a new law partially amending the law on interim property registration in Dubai.
The amendments aim to protect real estate investors and developers.
The new law specifies policies and procedures that will be applied in cases of breaches of sale contracts by the buyer.
The law specifies that in such an event, the developer must notify the Dubai Land Department (DLD). Once the notification is received, the DLD must give a 30-day notice to the buyer. The notice must be dated and given in writing and delivered to the buyer directly by registered mail, electronic mail or any other method specified by the DLD.
If the developer and buyer reach an amicable settlement, it must be added to the sale contract and signed by both parties. If the buyer fails to fulfill contractual obligations or accept an amicable settlement, the DLD may issue an official document stating that the developer has fulfilled his legal obligations, specifying the percentage of completion of the property.
After the developer receives this document, they are free to take any of the following actions:
If the percentage of completion is over 80 per cent, the developer can ask the purchaser to abide by the terms of the sale contract, confiscate the paid amounts and obligate the buyer to make the remainder of the payment specified in the contract or otherwise request the Department to auction the property to collect the remaining amount. The buyer is also obligated to pay any expenses arising from the auction.
The developer may also void the sale contract solely, retain up to 40 percent of the sale contract’s value and return the remaining amount to the buyer within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.
If the percentage of completion is between 60 percent and 80 percent, the developer may void the sale contract solely, retain not more than 40 per cent of the sale contract’s value and return the remaining amount to the purchaser within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.
If the percentage of completion is less than 60 percent, the developer may void the sale contract solely, retain up to 25 per cent of the sale contract’s value and return the remaining amount to the buyer within one year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.
If the developer did not initiate the work in the property for reasons beyond his control and without negligence, the developer may void the sale contract solely, deduct not more than 30 per cent of the paid money and return the remaining amount to the purchaser within 60 days of the date of re-selling the property, whichever is earlier.
According to the new Law, if the project is canceled by a resolution from the Real Estate Regulatory Authority, the developer must refund all payments made by the buyer, pursuant to the law concerning escrow accounts for real estate development in Dubai.
The procedures prescribed in the new law are not applicable to land sale contracts. Such a sale remains subject to provisions stated in the sale contract.
This law annuls any other legislation that contradicts or challenges its articles and is valid from the date of its publication in the Official Gazette.
New law reflects our continuous efforts to complete the legal system that regulates our real estate sector. Such amendments are announced periodically and follow an in-depth assessment of market needs. They reflect the aspirations of all parties in the real estate sector — from developers to investors — to proactively guarantee their rights.
“By issuing this law, Sheikh Mohammed has reassured all concerned parties in the real estate sector that Dubai will remain an oasis of security and stability.”