changing legislation industry
LEGAL LANDSCAPE
Legsislation for the UAE real estate sector has developed in tandem with city skylines and clarity on the nuances of the various property laws is often lacking. Claire Malcolm talks to Brent Baldwin, associate at Dubai-based Hadef & Partners about the key issues
To start with, if there was a really good nationwide, publicly accessible land title registration system and rules relating to ownership of land, then that would greatly aid the market and, for example, improve the ability to take inter-emirate security over land. In addition, you still don’t have total consistency in terms of foreign ownership rights. Dubai allows foreign ownership of land and buildings in designated investment areas, however Abu Dhabi and some of the other emirates still only allow leasehold rights. A nationwide regime would aid certainty and improve the attractiveness of the property market here.
Are the other emirates drafting radically different real estate laws or is Dubai the model for the majority of current legislation?
Currently, there is some inconsistency but they are not radically different,
and I believe that before the downturn most emirates were slowly moving towards something similar to the Dubai model, for example escrow laws and title registration systems. Different emirates were, however, taking varying amounts of time to push legislation through, and when the market downturn occurred, some of these initiatives slowed down or were put on hold. One has to keep in mind that Dubai introduced its laws to cater to different
Is real estate legislation at federal level a possibility, or will the seven emirates retain their legislative independence?
Many people do not appreciate that there are already federal laws that govern real estate matters across the Emirates. Those laws are contained in the UAE Civil Code, which covers matters such as musataha leases, rights of usufruct and a range of other contract and property related issues. Despite this, different emirates have introduced their own more specific real estate laws, with Dubai leading the charge in overlaying a more modern and sophisticated land registration system and supporting laws over the base Civil Code provisions. Dubai’s initiatives were aimed at creating a system to support the granting of freehold ownership and leasehold rights to foreigners, as well as more regulation to an over-heating market. Many other emirates have followed Dubai’s lead but at different speeds and results, with the outcome being a degree of inconsistency between the different emirates regarding freehold ownership rights and other real estate related issues. In an ideal world, a new comprehensive, nationwide UAE property law regime would
be an excellent way of increasing certainty and improving the efficiency of the property market across the UAE. I am aware some market participants have already expressed support for federal initiatives, but these have not yet translated into moves at higher levels. It will take a change in attitude and a willingness to effect such a law across all of the emirates, and we’re not quite there yet because, historically, different emirates have had the authority to introduce their own laws. It would however, ease a lot of the confusion about how property laws are applied in individual emirates.
market demands as its property market developed and it was a challenge to have new laws keep pace with an over-heated property market. At the time Dubai couldn’t foresee how the market would change and how new legislation would be tested by changes in the market. There’s been a lot of criticism of Dubai’s property laws recently, but people have to appreciate that nobody could have predicted the full extent of the downturn. Suddenly you’ve got thousands of investors questioning whether they still want to go ahead with their purchases and looking at ways to get out of them, plus the lack of liquidity means that developers have trouble moving forward with construction. Cumulatively, all these elements have put a lot of pressure on the property laws and highlighted areas where the laws have some gaps. Abu Dhabi is one emirate that has, until now, not pushed ahead with comprehensive regulations and laws covering all aspects of the real estate market. This may become necessary as the Abu Dhabi market develops and new laws are apparently fairly close to being issued. The opportunity for Abu Dhabi is to observe and learn from the practical experience of what has happened in Dubai, analyse the challenges and produce laws which address some of those challenges. The consolidated Abu Dhabi property law (which will apparently cover a range of matters such as escrow, strata and registration) represents a great opportunity to take advice from those that have seen the way the Dubai laws have reacted to market forces, so that the same issues are not repeated in Abu Dhabi.
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/apr-may 2010
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