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The New Dubai Property Law - Part II

The New Dubai Property Law - Part II

As continuation of our previous article, the topics under discussion in this article are:

Registration at the Land Department, Void Transactions, How a person can prove his Ownership of a Property and How one can inspect the Property Register.

Registration at the Land Department

Article 6 of the new Law provides that the Land Department 'shall solely, to the exclusion of others, be authorized to register the Real Property Rights and long terms leases as provided under Article 4'?. In other words, if this new Law allows for a property right to be registered by a purchaser, the only place that it can be registered so as to be recognized, is at the Land Department. Any register or other type of database maintained by a developer is not recognized under this Law. This is not to say that the registers that have been maintained internally by developers have no purpose. Up until now, they have served as a very valuable tool to record property sales and they will continue to be a useful internal administrative tool. However, once we have the Ruler's approval, the formal process of the Land Department registrations of property in permitted areas can begin. Where property purchases have been completed and physical handover has taken place, the developers' internal registrations will be replaced by formal registrations in the Land Department. However, in those cases where property is still under construction, developers will no doubt continue to maintain their own internal registers to record Sale and Purchase Agreements up to their legal completion date, when applications will be made to register titles in favour of the purchasers at the Land Department. It is important to note here that there is a distinction to be drawn between the two phases of buying a property that is still under construction, i.e. off-plan purchases. During Phase 1, whilst the property remains under construction, a purchaser has no ownership rights in his property. He has a mere contractual right arising from the Sale and Purchase Agreement that he has signed. That contractual right cannot be registered at the Land Department by the purchaser, except maybe on the developer's title as a third party interest. Once the property has been completed and handed over to the purchaser and the purchaser has paid the full purchase price, we reach Phase 2 and the purchaser becomes the owner of the property and can seek registration of title at the Land Department.

Article 7 of the new Law provides that 'A Real Property Register shall be established at the Lands Department'?. Infact, the Real Property Register is already established and has been for many years. It now needs to become more sophisticated and detailed, but that process is well under way. What this Law does is bring the current Register under the ambit of the new Law and capable of being maintained in accordance with the new Law and the Rules that the Land Department issues pursuant to it.

Article 7 further provides that 'All Real Property Rights and any amendments thereon shall be registered in the Register, which shall have absolute power of evidence against all parties'?.

Article 9 of the Law provides 'All dispositions that may create, transfer, vary or terminate a Real Property Right and all final judgments confirming any such dispositions shall be registered in the Real Property Register. Such dispositions shall not be valid unless they are registered in the Real Property Register'?. Therefore, if your right of ownership is capable of registration, register it otherwise it will not be recognized. The
Property Register maintained by the Land Department is conclusive evidence of the existence of all rights of ownership pertaining to a property. An owner may have a contractual right to pursue, but he will not have an ownership right to exert unless it is registered.

Void Transactions

Article 26 (1) of the new Law provides that 'Any agreement or disposal made in violation to the provisions of this Law or with the intent to circumvent its provisions shall be null and void'?.

Article 26 (2) gives any interested third party, the Land Department and the Public Prosecution the right to request the court to declare such a transaction void. This is aimed at the so called '˜sham arrangements'. This provision is not saying, for example, that long leases granted to foreigners in areas that do not have specific Ruler's approval are illegal'“they are not, as they give only personal or contractual rights to a tenant. What this provision is aimed at are those agreements that purport to give a property ownership right to someone who is not entitled to own it and is not entitled to register it. What would be void, for example, is a Sale & Purchase Agreement for the sale of a freehold right in favour of a foreigner in respect of a property in Deira, as foreigners do not have the right to own freehold property in Deira. That is an obvious example.

A more subtle example might be the '˜nominee ownership' type arrangements that we sometimes see, where a foreigner who wishes to own property will reach an arrangement with a UAE national, wherein the UAE national will hold title to the property at the Land Department, but for all intents and purpose the foreigner considers himself to be the property owner. The best advice to any foreigner wishing to '˜own' property in a location which is not approved for foreign ownership, is to take a long lease of the property. Whilst the lease cannot be registered, the foreigner would at least have contractual rights pursuant to the lease which can be enforced and the lease arrangement is not illegal or invalid.

How does a Person prove his Ownership of a Property?

Pursuant to Article 5 of the new Law, 'The original documents and judgments under which registrations are made shall be maintained at the Lands Department, and removing them outside the Department is prohibited'?. Article 22 of the Law provides that 'The Department shall issue title deeds of Real Property Rights in accordance with the current records in the Real Property Register'?.

Article 24 of the new Law provides that 'Title deeds referred to under Article 22 of this Law shall have absolute power of evidence to establish Real Property Rights'?. Therefore, the above three Articles provide that if a purchaser considers that he is the owner of a property, the contract or other agreement by which he acquires that ownership is insufficient to prove it. The purchaser needs to take the contract to the Land Department and apply for ownership to be registered in his name. If the application is in order, the Land Department will register his ownership in the Property Register and issue him with a Title Certificate. That is the document which proves his ownership.

If Title Certificates are conclusive evidence of property ownership, what if they have been issued incorrectly or contain incorrect information? Article 7 of the Law allows objections to the data recorded in the Property Register 'on the grounds of fraud or forgery'?. And Article 13 authorizes the Land Department to correct errors in the Property Register on its own initiative or at the request of an interested party. In conclusion, it is the Property Register itself at any point in time that is the conclusive source of information regarding property rights, and the Title Certificates contain a mirror record of that information as of the date that they are issued. If some time has passed since a Title Certificate was issued, and a party wishes to rely on the information that it contains, he should go to the Land Department and check it against the Property Register. The information may have changed since the Title Certificate was issued, perhaps because the Land Department has rectified the Register pursuant to Article 7 or Article 13. Or maybe subsequent entries have been made in the Property Register without the co-operation of the title holder, and therefore without amendment to his Title Certificate, for example, some form of third party interest or a court judgment.

How does one inspect the Property Register?

Provided that you can demonstrate to the Land Department that you have a legitimate reason for enquiry, Article 5 of the new Law allows a third party to inspect a Property Register and to obtain a certified copy of it. Thus a potential purchaser of a property, for example, will be able to make his own enquiries directly with the Land Department and verify for himself who the owner of the property is and what third party rights the property is subject to.

In the third continuation on the new Property Law, the topics discussed will include:

Common hold Registration (Multi-Owned Buildings)
Registration of Third Party Interests
Practical Issues on Registration
Dealing with Property Disputes

Related Articles

The New Dubai Property Law - Part IV

The New Dubai Property Law - Part III

The New Dubai Property Law - Part I

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