Recent developments have raised reasonable doubts regarding who is entitled to own real estate property in Dubai. This post aims to clarify who – particularly which entities – can own real estate properties in Dubai.
Pursuant to Law No. 7 of 2006 concerning Property Registration in the Emirate of Dubai and Regulation No. 3 of 2006 specifying areas where non-locals can own property in the Emirate of Dubai, foreign persons may be granted the following rights on properties situated in designated freehold areas in Dubai:
- The right to freehold ownership without time restrictions; and
- Usufruct right or leasehold right for a period not exceeding 99 years.
These laws lacked a definition of the term ‘foreign persons’ and the Dubai Land Department (“DLD”) initially interpreted this term loosely, accepting (i) corporate entities – whether onshore or offshore – and (ii) individuals – whether residents or non-residents – as ‘foreign persons’. Such interpretation was in accordance with Federal Law No. 5 of 1985, known as the Civil Transactions Law (“Civil Code”), which comprises under the definition of persons both natural and juridical persons.
As a result, many foreign offshore companies were registered as freehold property owners in the Emirate.
Recently, the authorities raised concerns about this practice and its failure in providing transparency regarding the ultimate beneficiaries of freehold properties located in Dubai.
Accordingly on 1st February 2010, the DLD issued an internal Directive – to become effective on 1st January 2011– instructing its Transactions Department to cease registering freehold titles in the name of foreign and local offshore companies (i.e. companies registered in the British Virgin Islands, Republic of Seychelles, Panama, RAKIA, etc.). The Directive did not affect freehold properties registered in the name of offshore entities whether foreign or local prior to 1st January 2011.
In mid-July 2010, the DLD and the Jebel Ali Free Zone Authority (“JAFZA”) reserved – pursuant to Memorandum of Understanding concluded between the two authorities – one exception to the above Directive that would allow JAFZA companies to own freehold property and be delivered a Title Deed.
Subject to the submission to the DLD of the JAFZA registration certificate, the shareholder certificate approving the transaction, and undertaking to notify the DLD of any change in ownership, the shareholding of a JAFZA offshore company holding a Dubai located property may be held by (i) another corporate entity whether onshore or offshore, foreign or local – i.e. a company registered in the British Virgin Islands, Republic of Seychelles, Panama etc. – or (ii) individuals whether residents or non-residents.
JAFZA is the only exception to the above directive; consequently Companies incorporated in other Free Zones cannot own property in Dubai.
In line with the above and on the basis of the information that has been made available to us; the DLD’s current practice can be summarized as follows:
JAFZA offshore companies are the only offshore structures permitted to own properties within Dubai and be delivered a Title Deed. The shareholding of a JAFZA offshore company can be 100% owned by foreign individuals or entities.
If you have a legal question regarding buying, selling or renting property in the UAE, this is your chance to ‘Ask an Expert’.
Arbitration & litigation expert, Maria Rubert, from the law firm Cramer-Salamian (in association with Abdulla Al-Ali & Associates) will be available to answer your questions each month right here on the blog. If you have a question for Maria, please email it to firstname.lastname@example.org. Questions will not receive personal replies, however up to three questions will be answered monthly in a Legal Q&A blog post by Maria.