1 Legal framework
1.1 What legislation governs real estate in your jurisdiction?
The Civil Law (14/2002).
1.2 What special regimes apply to different types of real estate?
- The Real Estate Registry Law (39/1991);
- The Law on Non-Yemenis' Ownership of Real Estate (23/2009); and
- The Investment Law (15/2010).
2.1 What types of ownership rights exist in your jurisdiction?
There are two types of ownership rights in real estate under the Civil Law:
- bare ownership (in-kind right); and
- usufructuary ownership (in-kind right subdivided from bare ownership).
2.2 What ownership structures are commonly used in your jurisdiction?
Local partnerships and corporations frequently prefer to buy real estate for their businesses. However, foreign corporations and their branches prefer long-term tenancies.
2.3 Are there any restrictions on real estate ownership in your jurisdiction?
Restrictions on real estate ownership apply to foreigners. Under the Law on Non-Yemenis' Ownership of Real Estate, foreigners can own real estate by means of bare ownership, provided that the following requirements are met:
- The real estate to be owned is located within a city or is covered by an investment licensed project, and the construction plans have been approved;
- The requisite licence to carry out the relevant activity has been obtained; and
- The real estate conforms (in size and number) with the activity to be carried out.
2.4 Is ownership of land and buildings constructed thereon legally separable?
Pursuant to the Real Estate Registry Law, for the purposes of registration, the land together with the buildings constructed thereon are legally deemed to be one real estate unit. However, it is legally possible for the building on the land to be owned by a different owner from the land owner.
2.5 What security interests can attach to real estate? How are they prioritised?
Based on the rules regulating security on real estate, as stated in the Civil Law, a security interest is attached on the basis of an agreement of real estate security, which must be registered with the Real Estate Registry Authority. Once the registration has been duly effected, the security interest will have priority over other security interests.
3.1 What body administers the land register in your jurisdiction?
Pursuant to the Real Estate Registry Law, the body that administers the Land Register is the Real Estate Registry Authority.
3.2 Is registration of real estate rights, transactions and encumbrances mandatory? What are the consequences of failure to register?
Yes, registration is mandatory under the Real Estate Registry Law. In case of failure to register, the real estate rights may be subject to dispute before courts.
3.3 What are the formal and documentary requirements for registration?
The agreement of sale or mortgage must be legalised by a notary public and submitted to the Real Estate Registry. The Real Estate Registry Authority will appoint an engineer to conduct a survey of the land to be registered, taking aerial photographs to confirm the size and borders of the land.
3.4 What is the process for registration?
See question 3.3.
3.5 Is registered information publicly accessible?
4 Commercial leases
4.1 What types of commercial leases exist in your jurisdiction?
The Law Regulating the Relationship Between Lessor and Lessee (22/2006) sets out specific rules on commercial leases. In other words, commercial leases are governed by the general rules on leases set out in this law.
4.2 Are the terms of a commercial lease regulated or freely negotiable? What do they typically cover (eg, duration; security deposit; rent; sub-letting; termination)?
The terms of a commercial lease are freely negotiable. They cover the typical issues, such as duration, security deposit, rent, sub-leasing and termination.
4.3 What are the formal and documentary requirements for conclusion of a commercial lease?
Under Yemeni law, commercial lease agreements are deemed a kind of consensual agreement that does not require a formal procedure.
4.4 What is the process for concluding a commercial lease?
See question 4.3.
4.5 What are the respective obligations and liabilities of landlord and tenant under a commercial lease, and what are the consequences of any breach?
The respective obligations and liabilities of landlord and tenant under a commercial lease are the same as those under a non-commercial lease – that is, the general rules set out in the Law Regulating the Relationship Between Lessor and Lessee. For example, they enable the lessee to use the leased property.
4.6 How are rent variations typically effected throughout the term of the lease?
This depends on the agreement concluded between the parties.
4.7 What taxes are levied on rental income?
Under the Income Tax law, tax is levied on the landlord on the basis of one month's rent for each year of lease.
4.8 Can a commercial lease be triple net?
The elements of triple net – namely rental income tax, insurance and maintenance of the lease – are regulated by the law, which makes them obligatory for the landlord, except for insurance.
4.9 How are landlord and tenant disputes typically resolved?
If an amicable resolution cannot be reached, disputes are resolved by the courts or by the Commercial Court in the case of a commercial lease.
4.10 What types of guarantees are market practice and required by landlords to secure the tenant's obligations
The only form of guarantee is a money deposit (normally a payment of between one and three months' rent).
5 Real estate transactions
5.1 What form do real estate transactions typically take in your jurisdiction?
Real estate transactions involving sale and mortgage are concluded on the basis of formal contracts – that is, they are concluded and legalised before a notary public in court. However, lease contracts are consensual agreements that require no formalities.
5.2 Which players are typically involved in a real estate transaction in your jurisdiction?
- The notary public;
- The court;
- The Real Estate Registry Authority; and
- The tax authorities.
5.3 Is the seller bound by a duty to disclose? What representations and warranties will it typically make?
The seller is not bound by a duty to disclose under the law. The buyer, on the other hand, is bound to observe the sale of the real estate itself and state this in the agreement of sale, with the exception of any legal guarantees that are binding on the landlord.
5.4 What due diligence is typically conducted in a real estate transaction?
The due diligence typically involves investigating whether there are any outstanding disputes involving ownership of the real estate. Only a small portion of the payment will be handed over until it has been determined that there are no problems or disputes regarding the real estate.
5.5 What are the formal and documentary requirements for conclusion of a real estate transaction?
See question 5.1.
5.6 What is the process for concluding a real estate transaction? How long does this take? What costs are incurred?
The main cost to be taken into account is the cost of registering the real estate with the Real Estate Registry Authority, which is calculated as a certain percentage of the total value of the real estate.
5.7 What are the respective obligations and liabilities of buyer and seller, and what are the consequences of any breach?
The respective obligations and liabilities of buyer and seller are the typical obligations as per the general rules set out in the Civil Law. In case of breach, the court will decide on the appropriate remedies.
5.8 What taxes are payable on a real estate transaction?
Under the Income Tax Law, a tax on conveyance, which is levied on the seller as a one-off payment.
6 Real estate finance
6.1 Who are the most common providers of real estate finance in your jurisdiction? Do any restrictions apply in this regard?
Banks are the most common providers of real estate finance. Restrictions take the form of guarantees.
6.2 What forms of real estate finance are available in your jurisdiction?
6.3 What formal, documentary and other requirements do lenders typically require of borrowers?
Guarantees and securities in any satisfactory form.
6.4 What type of security interests are typically required by lenders?
Commercial guarantees; mortgages of moveable or immoveable property.
6.5 What is the process for obtaining real estate finance? What costs are payable?
The procedure is the same as that for obtaining a loan.
6.6 How is security enforced in case of any breach?
This depends on the form of security. If it is a commercial guarantee, the lender can enforce the security by filing an action against the guarantor before court. If it is a mortgage, based on a mortgage agreement which is registered with the Real Estate Registry Authority, the lender can enforce the security by selling the mortgaged real estate.
7 Real estate investment
7.1 Who are the most common investors in real estate in your jurisdiction? Do any restrictions apply in this regard?
Individual merchants. No clear restrictions apply.
7.2 What investment vehicles are typically used in your jurisdiction? What are the benefits and drawbacks of each?
No such vehicles are typically used in Yemen and there is no stock market in Yemen.
7.3 How are these vehicles established and administered in your jurisdiction?
See question 7.2
8 Planning and zoning
8.1 How is land use regulated in your jurisdiction?
Land use is regulated by the General Authority for Lands, Areas and Construction Plans.
8.2 What is the process for obtaining planning permission? How long does this take? What costs are incurred?
This will depend on the project and will thus vary on a case-by-case basis.
8.3 Can a planning decision be appealed?
Yes, it can be appealed before the competent administrative court in the form of a claim for the annulment of an administrative decision.
8.4 What are the consequences of failure to obtain planning permission or to comply with a planning condition?
This affects obtaining the permission of the activity.
8.5 Is expropriation of land possible in your jurisdiction?
This is possible as an exception only for purposes in the public interest, based on certain very limited conditions that are rarely applied as per the applicable laws.
8.6 Is confiscation of land possible in your jurisdiction?
See question 8.5.
9.1 What main environmental legal provisions apply to the development, use and occupation of real estate?
The Law on the Protection of the Environment (26/1995).
9.2 Who can be held liable for environmental contamination and how are clean-ups effected?
The owner of the project or entity.
9.3 What environmental provisions and considerations should be factored into real estate transactions?
Whether there are potential sources of environmental contamination.
9.4 What initiatives are in place to promote green buildings and energy efficiency in your jurisdiction?
Personal initiatives and unofficial initiatives.
9.5 What types of environmental certifications apply in your jurisdiction?
A statement of environmental effect, issued by the Environment Protection Council.
10 Trends and predictions
10.1 How would you describe the current real estate market and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The local real estate market is growing fast, despite the current war in the country and the low rate of the local currency. Once the war is over, the real estate market is expected to boom.
11 Tips and traps
11.1 What are your top tips for the smooth conclusion of a real estate transaction and what potential sticking points would you highlight?
Parties that intend to conclude a real estate transaction in Yemen should familiarise themselves with the legal procedures and local practices, in particular by engaging experienced advisers and real estate offices.
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.