UAE is fast emerging as a favorite destination for expatriates and non-UAE residents to make real estate investments. The Government of United Arab Emirates, in its part, is making noticeable efforts to invite more foreigners to invest in the UAE, leading to more foreign direct investment.

While the Federal Law No 5 of 1985 On the Civil Transactions Law of the United Arab Emirates State, commonly known as the UAE Civil Transactions Law, is the general law which deals with rights deriving from ownership of land, each Emirate has its own laws on purchase and sale of real estate which may differ from each other.

A non-UAE resident is a person who doesn’t have residence in the UAE, unlike an expat who resides in the UAE.

Kinds of Properties

Different types of property rights are recognized and regulated in the UAE. These include the following.

1. Freehold Ownership

Freehold ownership is the absolute and unlimited ownership right of the property. Free hold properties are available in specific designated regions of Dubai. For instance, under Regulation No. 3 of 2006 applicable in Dubai, free hold land in Dubai includes areas in Al Barsha, Sheikh Zayed Road and Jabel Ali.

2. Usufruct Right

Right of usufruct is a right entitling the usufructuary to use and exploit the real estate owned by another person for a fixed term, subject to the property remaining in the original condition (except for normal wear and tear).

3. Musataha

Musataha has been broadly defined in UAE Civil Code under Article 1353 as:

The mussataha is a right in rem giving its owner the right to erect a construction or to plant on a land owned by another.

Therefore, under a right of Musataha, the owner has the right to undertake construction on the property, whether through buildings or plants. This is unlike a usufruct where no additional construction is permitted. The owner of the Musataha right is the owner of the new construction and may dispose it along with its right of Musataha. The period of Masataha may not exceed 50 years.

Additionally, to boost foreign investment and foster business growth, UAE offers long- term residency visas to a non-resident real estate investor, who, if requisite conditions of such visa are satisfied, may obtain the long-term visa and enjoy exclusive benefits.

Procedure to Buy Property

If a non-resident is looking to buy property in the UAE, firstly, a property due diligence should be conducted on the property to confirm the seller’s right to sell the property in question. The title deeds should be inspected along with any bank or loan related documents. The property sight could also be physically inspected. Once due diligence is completed to the satisfaction of the buyer, mutually agreed terms should be recorded in a term sheet. The parties could also directly enter into a sale contract to set out the agreed position. The sale contract would provide details of the buyer, the seller, the property, the transfer of interests and rights, governing law and dispute resolution. The sale contract should be signed by the authorized persons.

Under Article 1277 UAE Civil Transaction Laws, ownership of an immovable property may not be transferred under it is registered in accordance with law.  Article 1277 of the UAE Civil Transactions Law states as follows.

Article 1277 – Transfer of Immovable Property and Real Rights

Ownership of immovable property and of other real rights are not transferred, either between parties or as regards third parties, except by registration in accordance with the relative law provisions

Each Emirate will have their own rules and regulations for property registration. In Dubai, establishing a property right must be recorded in the property register maintained by the authorities in Dubai. The title deeds issued by the authorities will be treated as absolute evidence in proving property rights under Article 24 of Dubai Law 7 of 2006, which deals with property registration.

Conclusion

Given the variation in rules for each Emirate, a potential investor should be aware of all rules applicable before making an investment and take advice from a local legal expert.

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