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The New Dubai Property Law - Part III

The New Dubai Property Law - Part III

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

Common hold Registration (Multi-Owned Buildings)

There is only one Article in the new Law that deals with the registration of individual apartments and offices in a multi-storey building. The reason for this is that the Land Department is working on a new Strata Law which will be issued within the coming few weeks and will fully deal with issues such as ownership and management of the common areas in the building, co-owner's associations, rules of occupancy and so on. In the meantime, dealing very narrowly with the issue of title registration in these multi-owned buildings, we have Article 23 of the Law which provides, 'Subject to the provisions of any other law, a multi floor or apartment real property shall be considered as a single Real Property Unit and a folio shall be designated thereto in the Real Property Register. Supplementary folios in the names of the owners of such apartments and floors and common areas shall be added to the original folio'?. Our understanding of how this will work is that the Land Department will open a main register for the building itself, and within this main register there will be a sub-register for each apartment or office. The owner of an apartment or office will be registered as owning the freehold interest in his unit together with an undivided share in the common areas of the building calculated in accordance with his participation quota. Thirty party interests affecting his title will be registered on the sub-register maintained for his unit and he will be issued with a Title certificate evidencing his ownership.

Registration of Third Party Interests

Article 24(2) of the new Law provides that, 'Any conditions, undertakings, encumbrances or any other liabilities related to Real Property Rights shall be stated in the designated folio of the Real Property Unit'?. Third Parties may claim an interest in a property for any number of reasons. A bank may wish to register a mortgage as security for a loan that it has granted to the property owner. A neighbor might have a right of way or other easement over the property. The property owner may have made certain promises, or covenants, in relation to the use of his property, for example to use it as a residence only or to pay a service charge for certain facilities that the property owner is entitled to use. These types of third party rights can and should be registered on a property title. They then become binding on the property itself, and not just a personal obligation of the property owner. Anybody to whom the property is transferred will be subject to the third party interest if it is registered. Without registration, the third party interest is enforceable only against the original owner personally through a claim for breach of contract.

Many of the new private communities that we see in Dubai are managed and maintained through a Master Community Declaration and Multi-owned buildings are managed through a Constitution of the Co-owners Association. These two documents contain a number of covenants and easements, the promise to pay service charges and so on. The Land Department has confirmed to us that the third party interests contained in these documents will be registered on the individual property titles. That is good news as it ensures that these private communities and buildings can be well managed and maintained through the years as changes of ownership of the individual properties occur. As briefly mentioned earlier, there is a possibility of a Sale & Purchase Agreement being registrable on a seller's title as a third party interest. This still needs to be confirmed by the Land Department, but if it is possible this will serve to give a purchaser some protection against the seller dealing with his property in any way that is adverse to the purchaser's interests before legal transfer of the property to the purchaser has occurred.

Practical Issues on Registration

Whilst we have been waiting for the enactment of the Law, developers have in the meantime completed and handed over several thousand villas and apartments to their new owners. These owners will want to secure registration of their title at the Land department as soon as possible. Likewise, mortgage companies will want to register their mortgages. We still await publication of this Law as well as Sheikh Mohammad's approval of the specific areas in which foreigners can own freehold title. Once we have those, the process of registration can begin. We understand that the Land Department will be opening a branch shortly in the Al Barsha area of Dubai to deal substantially with these registrations. The developers will be asked to batch their applications to expedite the process and appointments will be given to purchasers and their mortgage companies to attend the Branch to undertake the registration formalities. There will be a need for the Sale & Purchase Agreements and accompanying scheme documentation to be translated into Arabic, which we imagine the developers will undertake.

Over and above this, purchasers will be asked to sign the Land Department's standard transfer form. Reference is made in Article 6 to the Land Department having its own '˜standard contracts'. These are not documents that will replace or contradict the Sale and Purchase Agreement already signed by the seller and the purchaser, but forms more for the internal use of the Land Department that will capture the details of the parties, the property, and the purchase price and so on. The seller and purchaser will also be asked to pay the Land Department's fees at the time of title registration. These currently amount to 2% of the purchase price, 1.5% payable by the purchaser and 0.5% payable by the seller, although we understand that they are currently under review by the Executive Council and are subject to change.

Dealing with Property Disputes

According to Article 10 of the new Law, 'The liability for breaching an undertaking to transfer any Real Property Right shall be limited to payment of indemnity, whether or not such undertaking provides for an indemnity'?. Therefore if a seller defaults in his obligations in a Sale & Purchase Agreement and fails to transfer the property to the purchaser, the purchaser can claim damages from the seller for his losses suffered, but cannot force the seller to transfer the property to him. In other words, specific performance is not available as a remedy. The question arises as to which forum should be utilized for settling disputes arising under this Law? Article 27 of the Law specifically repeals a Decree dated 6th November 1977. That 1977 Decree prevented any property-related disputes from being filed at court unless the case was referred to it by the Land Department. Now that Decree has been repealed, any aggrieved party can now file a claim direct with the Dubai courts or implement any agreed arbitration process. There is the possibility of the Land Department establishing its own Arbitration & Conciliation service to assist in the settlement of property related disputes, but no firm decision has yet been made on this.

In the fourth and final continuation on the new Property Law, the topics discussed will be:

Unregistered long leases

Related Articles

The New Dubai Property Law - Part IV

The New Dubai Property Law - Part II

The New Dubai Property Law - Part I

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