Protecting Dubai Property Investors

We have put together some key points you should be aware of in Dubai as a property investor. The rules and regulations are ever evolving in the UAE and it can be hard to keep up. We will update this blog periodically with new information on what to watch out for.

UPDATE – 12/04/17

Touching further upon the final category below (New Rules Regarding Advertising), there has certainly been an increased push by RERA and DLD over the last number of months in an attempt to regulate and govern the marketing and advertising of properties in Dubai.  Permits are required to list properties for rent or sale.  They can be obtained from the DLD website under its Trakheesi system.

Real estate brokers should also now obtain an authorization letter from the landlord giving them the authority to market the property for rent in Dubai.  For selling, it is also mandatory now for the broker and seller to sign a RERA Form A contract.  This is essentially an agreement between the broker and seller to list the property for sale, stating the property details, price and commissions etc.  Passport copies and the Title Deed copy should also be obtained before listing any properties for sale.

All of this is perhaps more tiresome in terms of administration and paperwork however it should be seen as a positive step in the right direction.  It will not only remove those false or fake listings that have caused so many issues in the past but also regulate the market and protect both investors and brokers alike.

The Form A in particular, when signed alongside the now standardized MOU contract (Form F), will clearly outline the terms and conditions between all of the parties for the sale of the properties and thus reduce the risk of abuse of power and/or disputes over commissions etc.

It is worth adding that RERA also just recently launched (April 2017) a standardised Tenancy Contract which will be regulated by RERA and clearly outline all of the rules and responsibilities of both landlords and tenants.  It will also define the applicable laws and penalties that apply for any breach of such laws.  This will hopefully reduce instances of illegal subletting, non-payment of rent, disputes over security deposits and maintenance issues etc.  It should also help to alleviate the every-increasing number of rental dispute claims being filed at the Dubai Rental Disputes Settlement Centre.

New Rules Regarding Advertising

Finally, new rules have been established for those publishing property advertisements in Dubai. A circular issued by RERA requires that (from October 2016) permits must be obtained before issuing advertisements in newspapers, radio or social media campaigns.

The idea is to increase transparency in the market and prevent false advertising that has been a common occurrence in the past. This does seem another good measure to protect both sellers and buyers but one that will, of course, depend on how it is governed and enforced.

Over the last few years, there have been a number of measures introduced by RERA to improve the existing practices of real estate in Dubai and to add further protection for property investors. Below are some key examples:

Power Of Attorneys

The use of a Power of Attorney has always been a common occurrence in Dubai given the high volume of overseas investors. It is often the best way to ensure a transaction is handled quickly and efficiently. There is, of course, a level of trust involved so it is always important to choose your Power of Attorney wisely. There are however some important rules in place that offer you security.

Firstly, the Dubai Notary Public requires that a POA for selling must be specific to the property as per the Title Deed. This prevents abuse of power, as a general POA would allow the POA to sell any or all of your properties. On the date of transfer, the Dubai Land Department will also keep the original POA (given that it is specific) meaning it cannot be used again.

It is worth adding that the Notary Public will only attest a POA for selling if the original Title Deed (or certified true copy) is produced. This prevents POAs being issued on properties that have already been sold.

Oqood Registrations

Oqood (Arabic for “contract”) is the pre-registration with the Dubai Land Department. Under Law 13 of 2008, it is mandatory that all Dubai off-plan sales contracts be registered on an Interim Real Estate Register.

This is a key measure as property investors are now afforded a greater deal of protection when purchasing from developers. With the Oqood Certificate, investors have clear proof of ownership. This will certainly help to build investor confidence.

Developers & Escrow Accounts

Quite significant is the law that all Developers must open a RERA approved Escrow account for every project in which they wish to sell.   The account must be in the name of the particular project (NOT the Developer) and its proceeds must be used exclusively for the construction of that project. All the funds are held in trust. If the Developers breach these rules, they can face fines, cancellation of their license and even imprisonment.

This will certainly prevent some of the previous problems with Developers dipping into client funds, halted constructions due to lack of funds or the worse situation of Developers disappearing without completing projects.

Cancelled Projects

RERA has established a committee to rule over the liquidation of assets of cancelled projects in Dubai. The Committee contains judges from the Dubai Courts and has the power to decide upon claims, to liquidate projects and settle debts.

According to Law 13 of 2008, if a project is cancelled by RERA, the Developer shall refund the full amounts to the buyer. In theory, this is a major step as at last there is some legal recourse for those investors who have found themselves in this unfortunate situation. In reality, the Committee is a fairly new entity and it is likely to take time before any resolution is achieved following the cancellation of a project. This is also assuming that there are still funds remaining in the Escrow account.

Defect Liability Periods

By law, there is a Defect Liability Period on all new properties in Dubai. The Developer remains liable for ten years from the date of completion to repair any structural defects on the building itself. The Developer is also liable for one year to repair or replace any installation defects reported within this period.

(Nb) The liability period is one year from the date of completion of the building, not from the date of your individual Handover. After this date, always take appropriate insurance coverage.

Dubai Rental Disputes Settlement Centre

The DRDSC has come about as a result of the increasing volume of rental disputes in Dubai. The DRDSC is the judicial arm of the Dubai Land Department, where tenants and landlords can resolve any tenancy disputes that arise between the parties.  If an ongoing dispute cannot be resolved amicably, the legal option is to bring the case to the DRDSC.  The primary aim is to settle these issues in a quick, transparent and professional manner. This is an excellent measure for landlords and tenants alike.

DIFC Wills & Probate Registry

Inheritance has never been a straightforward subject in Dubai and for non-Muslims in particular, it can cause financial and emotional difficulties for families and even legal cases regarding succession and rights to ownership.

In May 2015, the DIFC introduced a Wills & Probate Registry.  It is a groundbreaking move as non-Muslims can now register a Will under international Common Law rather than Sharia law.  A non-Muslim can legally decide how their assets are to be distributed if he/she passes away.

The Registry works within the DIFC Courts and is enforceable in Dubai without the need to apply through the Dubai Courts.  Also, if an individual prepares a Will in DIFC, this will be registered with the Dubai Land Department as well.

The process is a relatively new one and is still in its early stages.  The benefits, however, are clear to see.  It will create certain precedents for future inheritance cases meaning greater clarity and legal certainty.

Real Estate Brokers – Training & Registration

Anyone wishing to sell real estate in Dubai must be registered as a broker at RERA. All brokers must sit annual examinations to maintain the license to practice in Dubai. This assists them to stay on top of all the rules, regulations and procedures as well as ensuring they follow the code of ethics expected from them – honesty, transparency and integrity.

(Nb) A real estate broker cannot be a Power of Attorney as this is a conflict of interest. Their job is to facilitate the transaction not represent either party in a legal sense.

Improved Online Presence

RERA has made significant steps to improve their online presence. The DLD website now has facilities enabling investors to track the progress of transactions, construction updates on off-plan projects and search real estate agents/agencies.

There are also a number of new apps such as “Dubai Brokers” that details the top registered brokers in the region and “Mushrooi” which provides information on developers, projects, and Escrow accounts.

New Rules Regarding Advertising

Finally, new rules have been established for those publishing property advertisements in Dubai. A circular issued by RERA requires that (from October 2016) permits must be obtained before issuing advertisements in newspapers, radio or social media campaigns.

The idea is to increase transparency in the market and prevent false advertising that has been a common occurrence in the past. This does seem another good measure to protect both sellers and buyers but one that will, of course, depend on how it is governed and enforced.

 

[NB the author of the above article is an LLB Bachelor of Laws graduate from the UK and is the Managing Partner of Your POA – Dubai (www.yourpoadubai.com). Your POA specialise in representing national and international clients as Power of Attorney in Dubai for a wide range of property related matters; from Property Handovers from Developers and Title Deed Registrations to Sales/Purchases and Gifts.

 If you need a Power of Attorney or have questions on any property related matters in Dubai, please email [email protected] or call Philip on +971 52 832 7420]