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Real Estate Matters: Legal Aspects of
Investing and Renting
Real
Property
in
D
U.A.E.
Welcome
DMCC Knowledge Series
Real Estate Matters: Legal Aspects of
Investing and Renting Real Property in U.A.E.
By Ludmila Yamalova, Attorney/Managing Director
March 24, 2015
Real Property Framework in the U.A.E
OUTLINE
PRESENTATION OUTLINE
• Part I – General Principles for Investing in Real Property
• Legal Framework
• Financial Aspects
• Part II – General Principles for Renting Real Property
• Applicable Laws and Jurisdiction
• Common Issues and Problems
Presentation Part I
General Principles of Investing in Real
Property in U.A.E.
General Principles of Investing in Real Property in
U.A.E.
• Keep in mind applicable U.A.E. real estate laws.
• Perform thorough due diligence.
• Ensure that underlying contracts and related documents are based on
applicable laws and address essential commercial terms.
• Address financing of property early and in detail, factor in delays.
• Agree on financial terms and parties’ respective obligations.
• Enforcement of contracts or obligations should be last resort.
• Consider choices for litigation forum to resolve disputes.
• Keep in mind common issues and problems.
Relevant U.A.E. Real Estate Laws Federal/Emirate
• Freehold vs. Leasehold Laws
– General rule – no foreign ownership, except freehold areas
– Exceptions for foreign ownership – freehold areas, specifically designated
– Different rules and choices across the Emirates
– Ownership rights protected by U.A.E. Constitution
• Real Estate Laws
– Particular to each Emirate
– Examples: freehold, registration fees, owner’s associations, escrow
• Contractual Laws
– Federal laws, across the U.A.E.
• Mortgage Laws
– U.A.E. Central Bank regulations – federal law, across the U.A.E.
• Enforcement – Jurisdiction
– Choice of jurisdiction: local courts, arbitration, DIFC Courts
Due Diligence in Real Estate Transactions
• Property Specifications
– Title deed – verification of ownership
– Property inspection – maintenance, defects: blatant vs. latent
– Liabilities – financial and legal
• Parties
– Individual vs. corporate
– Representative authority/documents
• Commercial Aspects
– Registration fees
– Brokers fees
– Service fees
– Financing fees
• Real State Brokers/Representatives
– Licensed by RERA
– Proper POA or form of representation
Key Contractual Terms to Address in Real Estate
Agreements
• Commercial Terms
– Price
– Registration fees
– Service fees
– Maintenance fees
– Brokerage fees
– Financing
• Deposit
– Amount of deposit
– Form of deposit
– Terms of deposit
• Parties
– Individual vs. corporate
– Joint ownership
• Parties Obligations
– Specific and mutual
• Timing/Due Dates
– Specific dates for specific
stages
– Final transfer date
– Extensions
• Conditions Precedent/Caveats
– Ownership
– Financing
– Inspection
• Default/ Remedies/ Termination
– Specific language
– Specific timeline
– Automatic provisions
• Forum and Laws for Dispute
– Local courts
– Arbitration
– DIFC
Property Financing and Other Nuances
• Property Financing
– Mortgage eligibility
– Mortgage cap
– Cost of mortgage
– Value of mortgage
– Form of security
– Islamic mortgage
– Variability of interest rate
– Repercussions for default
• Foreclosure
– No voluntary foreclosure
– Court involvement
required
– Potential liability for
deficiency
• Escrow
– “Escrow laws”
– Escrow agent definition &
role
– Clear escrow agreement
• Banking/Transfer Nuances
– Local bank account
– Authorized signatory
• Inheritance/Probate
– Sharia
– DIFC properties?
Enforcement of Contracts and Dispute Resolution
• Enforcement of Contracts
– Strong and clear contracts reduce risks of litigation.
– Only courts have the authority to enforce performance.
– Litigation is always expensive and uncertain.
• Dispute Resolution
– Local Courts
– Arbitration
– DIFC Courts
– Alternative dispute resolution
Presentation Part II
General Principles of Tenancy Laws and
Practice
General Principles of Tenancy Laws and Practice
• Tenancy laws are individual to each Emirate.
• Perform thorough due diligence, both tenants and landlords.
• Landlords must understand their rights and obligations.
• Tenants must know their rights and obligations.
• Tenancy contracts should be drafted in accordance with the law and include
all essential terms.
• Understand the role and limitations of real estate brokers.
• Keep in mind forum for dispute resolution.
Tenancy Laws in U.A.E.
• Different tenancy laws across different Emirates/zones.
– Constantly evolving
– Regularly updated
– Different government authorities
• Key provisions in all tenancy laws:
– Form of contract
– Term of tenancy
– Rent increase
– Eviction requirements
• Forum for dispute resolution
– Restricted to specialized centers
– DIFC Courts
Due Diligence in Tenancy Transactions
• Property
• Condition of the property
• Condition of the building
• Included facilities, e.g. pool,
gym, parking
• Property management
• Parties
• Landlord/tenant
• Authorized representative
• Liabilities
• Services fees
• Outstanding utilities/dues
• Real estate brokers
• Authorized
• POA
• Fees
• Documents
• Original title deed
• Parties’ passport copies
• Parties’ direct contact details
• POAs
• Receipts
• Copies of fully executed
contracts
• Ejari registration (in Dubai)
• DEWA bill (in Dubai)
Tenants’ and Landlords’ Rights and Obligations
• Landlord’s Rights
• Rental payments
• Deposit
• Property inspection
• Use restriction
• Restriction on sublease
• Landlord’s Obligations
• Service fees
• Maintenance fees
• Access to facilities
• Parking
• Property notices re:
amendments and eviction
• Not to disturb tenant
• Tenant’s Rights
• Quiet enjoyment
• Proper maintenance
• Access to property and
facilities
• Automatic renewal on same
terms (in Dubai)
• Tenant’s Obligations
• Timely payment of rent
• Payment of deposit
• Maintain property in good
condition
• Not to sublease, if landlord
does not agree
• Proper notice
Important Contractual Terms in Tenancy Matters
• Rent amount and bases for
calculation
• Property inspection/visits
• Parties/occupants
• Included services/facilities
• Property specifications
• Late payments
• Rent increase
• Brokerage fees
• Amendments in terms
• Insurance
• Renewal/expiry of tenancy
• Deposit conditions and refund
• Eviction/vacation
• Property inventory
• Notices
• Termination of tenancy
• Exceptions
Involvement of Real Estate Brokers
• Real estate brokers are not required.
• No restrictions on real estate broker commissions.
• No restrictions on brokerage renewal fees.
• Must be RERA registered (or equivalent).
• Payments should be made only directly to landlords.
• Request direct contact information of landlords.
• Make sure contracts are signed by landlord, not real estate brokerage.
• Verify POA and extent of authority.
• Brokers not liable/responsible for property maintenance or payment of
fees.
Dispute Resolution for Tenancy Matters
• Each Emirate has its own specialized forum for tenancy disputes, e.g.:
• Dubai – Tenancy Dispute Center Resolution
• DIFC – DIFC Small Claim Courts
• RAK – Specialized Rent Committee
• No requirement of advocate/lawyer.
• Parties can represent themselves.
• Submitted documents must be in Arabic.
• Hearings can be conducted in English, with limitations.
Thank you
TO CONTACT US:
Jumeirah Lakes Towers
Reef Tower, Suite 1806
Cluster O
Dubai, U.A.E.
O: +971 4 427 9812
[email protected]
www.lyhplaw.com
D
Thank You!
DMCC Knowledge Series