When schools or universities are looking to operate in the
United Arab Emirates, one of the basic considerations that must be
taken into account is the form of real estate ownership that the
institution can hold. Land tenure in the United Arab Emirates can
be a complex issue and, by comparison with many jurisdictions, is
relatively restrictive, being generally based on nationality and
its impact on land tenure.
This article will look at one of the forms of real estate
ownership most commonly used by schools or universities, the
musataha, and some of the steps that should be taken to better
protect the institution when investing in the UAE by way of a
What is a musataha
A musataha is a right to occupy property coupled with a right to
build. Internationally, it is comparable with a development lease,
combined with a long term right to occupy.
A right of musataha arises in the UAE by virtue of the Civil
Code. Individual Emirates can, and have, passed real estate
specific laws governing their own Emirate which further legislate
on musatahas, with Abu Dhabi's Law No 3 of 2015 (Concerning the
Regulation of Real Estate Sector) being an example.
The institution should undertake due diligence both on the
proposed site and the supporting infrastructure. In particular,
attention should be paid as to the delivery of the required
utilities to the proposed plots.
The title to the site should be investigated and confirmation
should be sought from the owner that they have not granted title to
another third party or granted security over the relevant real
Further, master communities will often have management rules
binding on all owners and occupiers within the master community,
which the institution must comply with. As such, these rules should
be carefully reviewed to ensure awareness of the requirements and
that they do not infringe or impede plans for construction and
building. These may include imposition of deadlines for
commencement of construction and delivery of completion,
restrictions on assignment, approval of contractors, etc.
The Musataha agreement
The musataha will often provide that the building will be owned
by the musataha holder (ie the school or university) throughout the
term. Subject to the parties agreeing to the contrary, some of the
essential features of a musataha are that:
The musataha interest is limited to a
term of fifty years that may be renewed for up to the same term by
agreement of the parties
The holder of a musataha for a period
greater than ten years may dispose of that right without the
permission of the owner. This includes an entitlement to mortgage
An owner granting a musataha (often a
master developer) for a period greater than ten years may not
mortgage the underlying property without the permission of the
Subject to registration, the musataha
rights are greater than purely contractual rights
Development through musataha is a common form of development
right granted in the United Arab Emirates. Where ownership of the
land itself is restricted to UAE nationals (or GCC nationals), it
is commonly one of the only ways non-UAE citizens and entities may
undertake development works of the type contemplated.
The basis of obtaining a right in real property in most
developed jurisdictions is effected by procuring registration of
that right in a register maintained by a designated government
body. In the case of Abu Dhabi, that body is the Department of
Municipal Affairs (DMA) which oversees Abu Dhabi Municipality, Al
Ain Municipality and the Western Region Municipality. In the case
of Dubai, that body is the Dubai Land Department.
Registration of the musataha agreement is necessary in obtaining
the relevant protection of title. It would be advisable (if
commercially possible) to make registration in the name of the
school or university a condition precedent of any transaction.
Prior to this, as part of the diligence process, the school or
university would need to establish with the owner its position with
respect to issuing title documentation and the authorities'
position in relation to the development.
Without the benefit of registration, a musataha may be deemed
ineffective against the claims of third parties. However, the
transfer or grant should still be recognised as a contractual
bargain between the two transacting parties, however, this will
ultimately depend on the Emirate in question and the circumstances
of the transaction.
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