RECENT DEVELOPMENTS IN DUBAI PROPETY LAW AND THE REAL ESTATE MARKET
Dubai has experienced an unprecedented property boom and developed a successful and lucrative global property market. With the issuance of new legislation in recent years, foreign nationals are now buying, selling, and living in Dubai. Dubai is home to many internationally recognized developments-both built and under development – including: Burj Dubai, The World project, The Palm projects (including the Atlantis Hotel), Palazzo Versace and Dubai Sport City. Although the government-backed developments (Emaar properties, Nakheel, and Dubai properties) were responsible for the vast majority of the initial freehold developments, private developers like Emirates Sunland, Sungwon, Al Barari, Tameer and IFA Hotels & Resorts have staked a claim to providing Dubai with the most prestigious new developments. Despite property markets in recession in other major countries in the world and high fluctuation with currency rates, Dubai has continued to remain enticing to buyers and from around the world.
Real Estate Authorities in Dubai
The Dubai Land Department oversees the registration of title and all other related property rights in Dubai. Dubai Law No. 7 of 2006 (the “Property Registration Law”) created the property register within the DLD. The Real Estate Regulatory Authority (RERA) created last year is positioned under the umbrella of the DLD and serves as the regulatory and enforcement arm of the DLD. It is envisioned that RERA will undertake all licensing of real estate related activates and entities by the end of the year.
Property Laws
Since the issuance of the Property Registration Law in 2006, which, among other things, explicitly permits foreign freehold ownership of land in Dubai in designated areas, several key pieces of legislation have been issued to deal with increased demands in the market for investor protection and the regulation of real estate developments and brokers.
The Brokerage Bylaw
Bylaw No. 85 for 2006 (the Brokerage Bylaw) states that all real estate brokers – in addition to brokerage houses – operating in the Emirate of Dubai must be licensed by RERA. The Brokerage Bylaw requires brokers to submit documentation of qualifications and credentials, as well as pass an examination. If an applicant satisfies all requirements of RERA, he or she will be issued a brokerage card.
The Escrow Account Law and Regulations
Law No. 8 for 2007 (the “Escrow Account Law”) was issued in response to the calls of investors previously defrauded by the purported development who took deposits for fictitious development – and then fled the country, outside of the powers of any extradition treaties.
The Escrow Account Law calls for the deposit of funds by purchasers and financiers alike for off-plan projects into an escrow account opened for that specific project by the developer. The escrow account is to be opened with a bank and managed by a professional trustee (also a financial institution) and government by the provisions of an escrow agreement between the developer and the trustee. The bank and the trustee must be selected from a list of institutions approved by the DLD.
The Escrow Account Law also requires development to satisfy a number of conditions before a developer can register an off-plan project and commence advertising, marketing and selling of property, including approved architecture design and layouts, financial statements for the development certified by a certified accountant, and an undertaking from the development in respect of commencement and completion of the project.
Other conditions must be fulfilled for the developer to withdraw monies from the escrow account during construction - primarily based upon the meeting of construction milestones. Recently, RERA issued regulations (the Escrow Account Regulations”) to provide further clarification as to payments that can be made from escrow accounts. The Escrow Account regulations, for example, state the developers cannot extract any amount of profit until 60% of the project has been completed.
Furthermore, the Escrow Account Law calls for stiff penalties to be imposed on developers in breach of its provisions – including hefty fines and / or imprisonment.
Upon completions of the project developers can withdraw all the remaining monies in the escrow account, except 5% of the total sum of monies received, which shall only be released to the developer one year after the units are registered in the name of purchasers.
Jointly Owned Property Law
The Jointly Owned Property Law (Dubai Law No. 27 of 2007) deals with the regulation of freehold in multi-unit buildings or joined property. Jointly owned property (or “ Strata property”) is defined in the Jointly Owned Property Law as a whole building, or any part thereof, or land, where such property is divided into units designated for absolute ownership. A part of the building, or land, shall be designated as common parts. This law therefore applies to and regulates all jointly owned property in Dubai, from apartments within a tower to attached villas, which share common walls.
The Dubai Jointly Owned Property Law calls for the delineation of common areas within a site plan, the creation of an owners’ association to regulate the jointly-owned property and the assessment of service charges for the respective properties.
Where does Dubai head from here?
The latest developments in Dubai have definitely alleviated concerns of investors with respect of security to investments and completion of projects. With title registration open to expatriates, thousands of projects available to invest in, and a myriad of new laws being enacted over the past few years, Dubai is on the road to becoming a safe and healthy mature real estate market.
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