13 Nov 2019

Real Estate update - Dubai

Authored by: Michael Lunjevich Ashraf Sayed and Jessica Lambert

Real Estate Update

Dubai’s Jointly Owned Property Regime Overhauled

More than a decade after the first jointly owned property law, a new jointly owned property law, Law No. 6 of 2019 Concerning the Ownership of Jointly Owned Real Estate in the Emirate of Dubai (the new JOP Law) has arrived and will be in force from 18 November 2019.

Repealing its predecessor, the new JOP Law brings about a new era for jointly owned property in Dubai. Developers, owners’ associations and property management companies need to be compliant with the new law by 17 May 2020.

Key highlights are:

  • There are now multiple different categories of projects recognised, including separate rules for master communities, hotel projects and standard strata projects.
  • Owner associations (as legal entities) are now officially over and instead owners’ committees (without separate legal personality) will now provide a “voice” for owners in an advisory capacity.
  • Managing bodies are regulated by RERA and perform the legal functions required to maintain, manage and repair jointly owned property.
  • RERA obtains more codified powers to oversee jointly owned developments and to regulate all stakeholders.
  • The RDSC (Rent Disputes Committee) obtains exclusive jurisdiction over all disputes in respect of the new law.

Please click here to read more.

RERA’s new powers and structure

RERA has been brought into the Dubai Land Department’s (DLD) structure and afforded a much wider regulatory scope pursuant to Law No. 4 of 2019 on the Real Estate Regulatory Agency, which repeals its predecessor, Law No. 16 of 2007 establishing the Real Estate Regulatory Agency.

RERA’s investigatory and decision-making powers and regulation scope are now broader, clearer, and stronger.

Where RERA previously oversaw brokers, owners’ association, and escrow accounts, RERA now regulates all “real estate business activities”, consolidating all such activities within RERA. However, tenancy registration and regulation are now within the remit of the DLD.

RERA will also prepare policies and studies regarding the real estate market’s supply and demand.

Transactions defeating creditors

Law No. 7 of 2019 amending Certain Provisions of Law No. 7 of 2006 Concerning Real Estate Registration in the Emirate of Dubai, reaffirms the old position under Article 9 that property rights are not enforceable until they are registered in the real estate register. However, a new addition to that Article states that transactions performed with the intent to harm third party creditors’ rights are deemed invalid in accordance with the rules of the UAE Federal Civil Code. This new addition consolidates the existing principles of the Civil Code and clarifies their application in the context of real estate, and notably appears to preserve the rights of a person buying in good faith who is registered at the DLD. We believe the onus of proving such harm and/or whether the transacting parties’ have acted in good faith or not rests with the third party creditor claiming the transaction is invalid, and is therefore a difficult threshold to overcome.

Development and planning oversight

A committee tasked with enhancing the competitiveness of the real estate market, avoiding project duplication, achieving a balance between the supply and demand of Dubai real estate and encouraging private investors has been formed pursuant to No. 33 of 2019 Forming the Supreme Committee for Real Estate Planning in the Emirate of Dubai. This Decree extends to projects within the DIFC.

The Committee has a broad range of regulatory control to achieve its objectives. All government authorities are compelled to assist the committee by providing relevant information at the Committee’s request and implementing the Committee’s decisions.

New government owned (or partly-owned) projects must be approved by the Committee before any other government authority may approve such project.

Market Trends

We are seeing further continued supply in the market having a notable effect on sales and rental values particularly in secondary locations in Dubai. High demand areas seem to be stabilising, however, global economic turbulence and regional political factors are also weighing on investor’s minds. In respect of higher value commercial, industrial and hospitality assets we are seeing a continued mismatch in price and quality expectations between buyers and sellers.

We are also seeing developers increasingly offering incentives to attract buyers, including long term payment plans, service charge waivers, DLD registration fee waivers as well as other incentives and gifts. These are no longer passing gimmicks and are increasingly becoming the norm in a buyer’s market.

Looking back, we believe the effects of VAT on the market have not been significant now that stakeholders have a better understanding of how VAT works and what types of supply it relates to.

Looking forward, it remains to be seen how the new JOP Law will be interpreted by investors, and also how it will be implemented by RERA. It is too early to tell how much of a positive effect this will have on the market.

Further Steps

If you would like to learn more on the above, please contact Michael Lunjevich, Ashraf Sayed or Philip Sequeira, who are responsible for Hadef & Partner’s award-winning Real Estate team in Dubai.

Please also feel free to contact our Managing Partner, Sadiq Jafar, if you require any other assistance from our firm.