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Effective 1 January 2011, the DLD confirmed it will permit and
accept registration of title to freehold property provided the
corporate entities purchasing property are "offshore"
entities registered in the "Jebel Ali Free Zone
(JAFZ)".
Purchasers who have previously incorporated entities within
various local UAE free zones to purchase freehold property may now
be required to incorporate offshore entities in JAFZ and register
their freehold title at the DLD.
Developers in Dubai will now need to assess their customer
database and advise their purchasers in respect of registration of
title, requirements and applicability of the DLD Guidelines. We
recommend developers seek professional advice in respect of
assessing their customer database and notifying their
customers.
Effective 1 January 2011, the DLD confirmed it will permit and
accept registration of title to freehold property provided the
corporate entities purchasing property are "offshore"
entities registered in the "Jebel Ali Free Zone (JAFZ)".
These Guidelines only affect freehold properties registered at the
DLD on or after 1 January 2011.
While these Guidelines are clear for purchasers seeking to
purchase completed freehold properties in Dubai pursuant to 1
January 2011, it raises several other interesting issues that the
DLD may need to consider moving forward.
On 1 February 2010, the DLD issued guidelines discontinuing
registration of freehold titles in the name of foreign offshore
companies. All local (UAE-owned) offshore companies were, however,
permitted to register titles to freehold properties subject to the
shareholders being individuals. In response, several purchasers
incorporated entities within various local UAE free zones to
purchase freehold property. Where corporate purchasers signed
memorandums of understanding with completion dates in 2011, it is
now unclear whether they shall be given the benefit of the
guidelines issued by the DLD in February 2010. However, it is
likely the DLD will insist on such purchasers incorporating
offshore entities in JAFZ to register their freehold title at the
DLD.
The Guidelines are also silent in respect of purchasers that
have interests registered in the interim property register at the
DLD, commonly known as Oqood. It is not clear whether such
purchasers will need to incur further costs and incorporate a JAFZ
offshore entity to hold their property or how the transfer of
rights and obligations to such new entity will work in
practice.
Following the release of the Guidelines, corporate purchasers who
have incorporated entities in UAE local jurisdictions other than
JAFZ need to incorporate offshore entities in JAFZ to purchase any
additional freehold property. The Guidelines do not refer to any
DLD or approved developer costs to effect such transfers of
interests or change in purchasers which leaves a possibe loophole
in respect of such transfers where purchasers may validly be able
to transfer ownership in their freehold properties without having
to pay the 2% fee to the DLD in a bid to effect compliance with the
Guidelines. The Guidelines may also affect properties in the
process of being mortgaged and purchasers who are in the process of
incorporating other UAE local free zone entities with the intention
of purchasing freehold property in Dubai.
The Guidelines will boost JAFZ as the preferred free zone however
this may be to the detriment of other UAE free zones that have
marketed their services to property investors. The DLD has not
released any information why JAFZ was chosen as the preferred
entity and it remains to be seen how these Guidelines will affect
the other local UAE free zones and whether the DLD will consider
adding other UAE free zones to their preferred list in due course,
and on what criteria.
Developers in Dubai will now need to assess their customer
database and advise their purchasers in respect of registration of
title, requirements and applicability of the DLD Guidelines.
Further, purchasers need to assess their own circumstances based on
their position and future requirements and undertake steps required
to comply with the Guidelines. These Guidelines may be of interest
to purchasers seeking to transfer ownership from their personal
names and into trusts or foundations located outside UAE. We
recommend developers seek professional advice in respect of
assessing their customer database and notifying their customers. We
further recommend purchasers seek correct professional advice in
respect of structuring their investment vehicles for purchasing
freehold properties in Dubai.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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