United Arab Emirates: Real Estate 2018 – A Practical Cross-Border Insight Into Real Estate Law

Last Updated: 21 December 2017
Article by John Peacock

Real Estate Law

1.1 Please briefly describe the main laws that govern real estate in your jurisdiction. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 12.1.

The United Arab Emirates ("UAE") is a federation established in 1971 between seven Emirates, namely Abu Dhabi, Ajman, Dubai, Fujairah, Ras al Khaimah, Sharjah and Umm Al Quwain; all of which adopt a free market economy.

The UAE legal system is essentially a civil law jurisdiction influenced by Islamic, Roman and French law, and lately by the principles of Egyptian law.

UAE federal law is the law applicable to all of the Emirates; however, each Emirate passes its own legislation regarding mainly administrative issues; such law supplements the federal law. If federal law is silent on an issue, then the provisions of laws issued on Emirate level prevail, and should there still remain doubt as to the legal position, then Islamic Shariah law is applied. UAE federal laws also apply to all free zones and investment zones (essentially, free trade zones offering full ownership to non-UAE nationals of companies accompanied by a tax-free status), except for the Dubai International Financial Centre ("DIFC") and the Abu Dhabi Global Market ("ADGM"), which have their own independent legal systems and real estate legislation applicable to real estate situate within these free zones.

The UAE does not have any specific property legislation at federal level and each emirate's particular real estate laws are promulgated at Emirate level by way of laws, decrees and resolutions passed at various levels of Emirate governance, and resulting in each Emirate being discussed separately below. The laws were mainly initiated as a result of the federal codes not dealing with the specifics and complexities of real estate transactions which emerged after the opening up of the real estate market to foreigners in the UAE.

Emirate of Dubai:

In Dubai, the legislative framework relating to real estate developed existentially between 2002 and 2010. With the creation of Dubai's Real Estate Regulatory Agency ("RERA") in 2007 by Law No. 7 of 2006, and Law No. 16 of 2007, a strong regulatory authority was created. Regulation No. 3 of 2006 determined the designated areas in Dubai where real estate can be owned by non-UAE nationals. Bylaw No. 85 of 2006 regulated the operation and regulated the real estate broker industry Law No. 8 of 2007 Concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai afforded protection for a buyer's money invested in off-plan sales in developments under construction; such protections were later reinforced by the introduction of the Interim Property Register in which off-plan sale contracts were required to be registered.

Law No. 26 of 2007, amended by Law No. 33 of 2008, regulates the relationship between landlords and tenants and affords tenants protection against unscrupulous landlords. The Direction for Association Constitutions issued in 2010 in accordance with Law No. 27 of 2007 (jointly, the "Strata Laws") regulates multi-storey and multi-use property developments. Law No.13 of 2008 and Law No.14 of 2008 created a framework for the registration of lenders' pre-mortgage interests on the Interim Property Register, as well as mortgages on the main Property Register and mechanisms for the enforcement of the sale of property by public auction.

Law No. 9 of 2009 (amending Law. No 13 of 2008) introduced dispute resolution mechanisms to deal with the process and consequences of the cancellation of any real estate or project development contracts. These provisions were confirmed by Executive Council Resolution No. 6 of 2010.

Law No. 56 of 2009 established a special tribunal for settling cheque disputes relating to real estate transactions.

Law No. 7 of 2013 officially established the Dubai Land Department ("DLD"), initially established by a Declaration in 1960 that established its predecessor, the Tabou (Land) Department. The DIFC has its own real estate laws, based on English Law principles and consists of DIFC Law No. 4 of 2007, known as the Real Property Law, and DIFC Law No. 5 of 2007, known as the Strata Title Law. The DIFC has its own property register and the registration of property transactions for properties situated within the DIFC are dealt with by the DIFC Registrar of Real Property.

Emirate of Abu Dhabi:

Law No. 3 of 2005 initiated the regulation of the real estate market in Abu Dhabi by establishing a Land Registration Department at the Abu Dhabi and Al Ain Municipalities and requiring that every deed creating, transferring or extinguishing real property rights (including leases with a term exceeding four years) be registered and without which any transaction would be void.

Law No. 19 of 2005 (later amended by Law No. 2 of 2007) introduced provisions relating to ownership, development, leasing and mortgaging of land and real estate in Abu Dhabi and differentiated between the rights of UAE, Gulf Community Council ("GCC") and non-UAE/GCC nationals. This law also introduced the creation of "investment zones" in which GCC and non-UAE/GCC nationals were entitled to own real property rights and specifically excluded ownership rights to land for non-UAE nationals.

Executive Council Resolution No. 64 set out specific directions regarding the registration of ownership rights (including the registration of long term leases) and directions to issue registration certificates (title deeds) to non-UAE nationals for property rights located within the "investment zones". It further dealt with the registration of property rights in respect of property located outside the "investment zones" and the registration of mortgages over property and property rights, both inside or outside the "investment zones".

Law No. (3) of 2015 introduced strata laws in Abu Dhabi and established the requirements for new developments and projects and to protect the interests of investors. This law mandated the establishment of escrow accounts and lead to the establishment of real estate registers for developers, projects and interests therein, including an 'interim' real estate register for off-plan sales. The law also established the decennial (10-year) liability on the developer for the structural integrity of a building.

The Abu Dhabi Global Market ("ADGM") is a financial free zone, established on similar principles as the DIFC, whose geographic area of Al Maryah Island is governed by both property regulations and strata title regulations.

There is, however, still minimal legislation and regulations regarding property rights within the "investment zones", and although the laws have established legal principles, they do not yet have sufficient enforcement provisions.

Emirate of Sharjah:

Through Law No. 10 of 1972 and its implementing regulations, Sharjah established a real estate registration office which allowed for UAE nationals to own property in Sharjah. Exceptions were permitted only with the Ruler's approval.

Law No. 4 of 1980 regulates ownership of multi-storey buildings which provided an early concept of strata ownership. Amiri Decree No. 1 in 1981 further regulated the rights and obligations of owners in multi-owned buildings and provided for the formation of coowners' associations.

Law No. 5 of 2010 Concerning Real Estate Registration and Executive Council Decisions No. 32 and No. 38 of 2005 extended the scope of Law No. 10 of 1972, thereby permitting GCC nationals the right of ownership of property in Sharjah.

In terms of Executive Council Resolution No. 26 of 2014, the sale of usufruct rights was permitted, and non-UAE/GCC nationals were permitted to purchase real estate through a usufruct property right for a maximum period of 100 years, which right may be assigned to a third party subject to the approval of the Sharjah Real Estate Registration Authority. This law also opened the real estate market to non-UAE nationals through what is essentially a long-term leasehold arrangement.

Emirate of Ras Al Khaimah:

A 2003 law introduced the concept of ownership of apartments and floors in multi-owned buildings and provided a system of registration of strata ownership of apartments and floors within a building. Decision No. 20 of 2005 provided that UAE and GCC nationals could own property in all areas of Ras Al Khaimah and this was expanded to non-UAE nationals by Decision No. 12 of 2007, which specifically allowed non-UAE nationals and corporate bodies owned by them to own freehold title to property in certain "investment projects" such as those owned by RAKIA, Al Hamra and Rakeen.

Amiri Decree No. 15 of 2006 permits the registration of mortgages by way of security over long-term leases (i.e. leases with a term exceeding 20 years) in a "Temporary Register" in the Ras Al Khaimah Lands Department.

Amiri Decree No. 22 of 2008 established the system for the sale of off-plan properties and of "Guarantee Accounts" similar to escrow accounts. It became compulsory for developers who sell off-plan properties to be registered on the Real Estate Developers Register and to obtain permission/licence for all development projects.

Emirate of Ajman:

Amiri Decree No. 7 of 2008 was introduced to permit UAE and GCC nationals (and companies/entities owned wholly by them), together with public joint stock companies incorporated in the UAE and public corporations and authorities incorporated in Ajman) to own a freehold right over land in Ajman. Non-UAE nationals are only entitled to own a right of freehold or usufruct, including long leases, for a term of 50 years, with the approval of the Ruler of Ajman.

Amiri Decree No. (8) of 2008 requires all developers in Ajman to register as such with the Ajman Land Department, and to open an escrow account for the development project and also regulates the constitution of jointly-owned properties and common areas within such property. Local Order No. 4 of 2008 contains further requirements for, and restrictions on, developers protecting interested parties and even the previous owner of the development property.

The Ajman Real Estate Regulatory Authority ("ARRA") was established in 2008.

Emirate of Umm Al Quwain:

By way of Law No. 3 of 2006, UAE and GCC nationals and public joint stock companies are allowed to own real estate property anywhere in the Emirate. Non-UAE nationals were granted the right to own "floors" without ownership of the land in terms of a 99-year usufruct right or a 50-year "musataha" right (similar to usufruct right but with development rights) in designated investment areas.

Law No. 3 of 2007 prevents any developer from carrying out real estate development unless it is registered in the Developers' Register at the Survey and Planning Department in Umm Al Quwain. A developer may also only sell units off-plan after applying to open a "Guarantee Account" in the name of the project, to receive funds which are to be used exclusively for the purposes of construction.

Emirate of Al Fujairah:

There are no specific laws regarding property registration and ownership in the Emirate of Fujairah and the provisions of the Civil Code, along with the instructions of the Ruler, prevail in respect of the real estate sector. There is only one type of freehold property that non-UAE nationals can own and a few areas, such as the Fujairah Free Zone, where long-term leases are available.

It can be seen that the real estate laws are somewhat scant and that there is no one comprehensive statute regulating the real estate industry in the UAE.

1.2 What is the impact (if any) on real estate of local common law in your jurisdiction?

As explained in question 1.1 above, the UAE is a civil law jurisdiction, and common law has no impact on real estate law in the UAE.

1.3 Are international laws relevant to real estate in your jurisdiction? Please ignore EU legislation enacted locally in EU countries.

There are no international laws that specifically apply to real estate in the UAE.

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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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