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Buying Property by Expatriates in Abu Dhabi

June 2015 - Corporate & Commercial. Legal Developments by Motei & Associates.

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The basics of buying freehold property in Abu Dhabi are the same as anywhere else in the United Arab Emirates. However, unlike Dubai, Abu Dhabi does not till date have specific laws/regulations regulating sale and purchase of real estate by foreigners (i.e. off plan sale, real estate brokers and agents, escrow accounts, jointly owned property (Strata Law), etc). Such being the case one needs to be even more careful and exercise greater due diligence while purchasing property in Abu Dhabi.

There are some restrictions to buying property in Abu Dhabi, as foreign ownership is largely restricted to designated areas. Such designated areas have been classified as “Investment Zones” by the Abu Dhabi Executive Council.

Is the property you are intending to purchase located in an area where non-UAE and non-GCC nationals are permitted to purchase freehold property in Abu Dhabi?

Abu Dhabi property laws permit foreigners to acquire interests in properties located in certain areas of Abu Dhabi designated by law in 2005 which are known as Investment Zones. These Investment Zones are areas of land within Abu Dhabi in which GCC and non UAE/ GCC nationals are entitled to real property rights. However, such rights specifically exclude ownership rights to land for expatriates.

Your broker or lawyer will be able to assist you in determining whether the property you wish to buy is located in an Investment Zone or not. Some of the investment zones are Reem Island, Raha Beach, Al Reef, Yas Island, Saadiyat Island.

Extent of property rights conferred on expatriates

Under Abu Dhabi’s property laws, you (as a non-national, non-GCC) are entitled to own, purchase, sell, lease out, mortgage, and invest in floors and apartments (excluding lands) in Investment Zones. Further you can enjoy 99-years leases of already built-up land, (known as usufruct leases), and 50-year development leases (known as musataha leases), which shall allow you to built and enjoy undeveloped land. Both “usufruct” and “musataha” leases may be renewed for like periods of time upon agreement between the parties. Unless otherwise agreed between the parties, a person holding a “usufruct” or “musataha” right for more than 10 years may transfer that right without the permission of the owner/landlord of the land. However, unless agreed otherwise, the owner or landlord may not mortgage their interest without the consent of the owner of the “usufruct” or “musataha” right.

Recently it has been announced by the Abu Dhabi Municipality that foreigners will now be allowed to own property in Abu Dhabi on a freehold basis in designated investment zones as opposed to leasehold arrangements with 99-year leases. However, the situation would be clearer once details of such freehold arrangement or an explanation would be provided on how exactly it shall differ from other property rights in Abu Dhabi.

Are you purchasing an ‘off-plan’ or ‘resale’ property?

There are different sets of protocols applicable depending on whether you purchase a property under construction or a completed property. With regards purchasing “off-plan” properties take note of the following:

The most important initial step is to ensure the developer is registered with the Department of Economic Development in Abu Dhabi. Whenever you are purchasing property that has yet to be completed, ensure that the purchase agreement includes the completion date and the compensation awarded if the property is not completed by that date. Furthermore, if the property is to be furnished, decide on an appropriate deadline for furnishing and attach a schedule identifying the furnishings.

Unlike Dubai, at present Abu Dhabi does not have legislations relating to off plan sales or imposing escrow account requirements, making it even more important for you to exercise caution at the time of purchasing such off plan properties.

Purchasing “resale” property in Abu Dhabi

You should not pay any part of the purchase price without having a sale agreement or other form of contract in place. A simple sale agreement is the only document required for purchase. However, this is legally binding and should only be signed when all reasonable due diligence on both the property and verification of seller’s ownership have been undertaken and all negotiations completed. If you are purchasing on the secondary market it is advisable that the deposit should be held by the broker or your lawyer in escrow pending transfer.

Verification of ownership and property details

Your due diligence should include verification of the seller’s ownership of the property and his ability to on-sell the property to you, inspection of the property and verification of the size and other particulars of the property, identify the warranties to be assigned to you at the time of purchase and whether the property is currently tenanted, because by law the sale is subject to tenancy rights. In respect of off-plan sales additional due diligence in relation to the developer, construction progress and his ability to complete the project should be undertaken. It is also important to have a construction linked payment plan rather than having the liability to make payment on specific dates to the seller.

It is also very important to accurately determine if the property you intend to purchase has existing finance, and from which lender as the seller’s existing mortgage has to be cancelled before the property can be transferred into your name. It is also advisable to have professional assistance with the due diligence and purchasing process, though this is not a formal requirement in Abu Dhabi.

In 2005, regulations were introduced in relation to registration of real property and a department under the name of “Property Registration Department” was established at Abu Dhabi Municipality. All dispositions will be recorded in your name in the Real Estate register maintained by the said department. Such registration shall be evidenced by issuance of a registration certificate/ title deed.

Abu Dhabi laws do recognize the right for mortgages to be created (over property and property rights inside and outside the Investment Zones) and requires the registrar to record these on the land register maintained by Abu Dhabi Municipality.

Under Abu Dhabi laws there is a clear requirement that every deed creating, transferring or extinguishing real property rights, (including leases with a term exceeding 4 years) is required to be registered. Failure to have such registration would render such rights ineffective. For further information regarding documents required, registration procedures and applicable fees you may consult the Abu Dhabi City Municipality website.

The above information relates to property ownership in the Emirate of Abu Dhabi. Abu Dhabi is one of the seven Emirates of the United Arab Emirates. The other Emirates, namely Dubai, Fujairah, Ras Al Khaimah, Ajman, Sharjah and Umm Al Quwain, each have their own unique property laws and procedures applicable to property ownership in their respective Emirate.

We recommend you seek professional advice prior to investment and purchase of freehold property in Abu Dhabi or in any of the other Emirates of the UAE. If you have, however, purchased a property and are encountering difficulties, you should seek qualified independent legal advice on your rights and methods of redress.

ABOUT THE AUTHOR:  Ashraf El Motei, managing partner of Motei & Associates. As part of his commercial litigation practice, Ashraf advises multinational Dubai based companies on contentious issues arising out of commercial contracts and cross border transactions including commercial agency, franchise, distributorships agreements, trade contracts and private equity. Ashraf will always consider alternative methods of disputes resolution and has succeeded in reaching amicable settlements in numerous disputes.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.