Introduction

Throughout the UAE the regulatory and legal framework is evolving to become more conducive to foreign investment. This has been driven, especially in the Emirate of Abu Dhabi, by the reported release of surplus oil revenues for major infrastructure, industrial, commercial and residential projects.

Abu Dhabi Overview

Prior to the enactment of the Abu Dhabi property laws, title to all land in Abu Dhabi resided in the Ruler, and construction, both commercial and residential, was financed by specialized government agencies. It is now expected that most property developments will be funded and developed by the private sector, since the government’s property ownership policies have been relaxed by the new Laws.

A construction boom is predicted in the Emirate over the next 15 years and evidence of this can been seen in the recent launch of numerous development projects. These new mixed-use developments include ‘Al Reem Island’, ‘Al Raha Beach’ and ‘Saadiyat Island’. Mega projects are also planned for the development of ‘Lulu Island’, Mina Zayed Port and various Industrial Cities throughout the Emirate under the umbrella of the Higher Corporation for Specialized Economic Zones.

An essential element to the success of these mega projects is a regulatory framework that provides legal protection and clarity that property ownership and investment requires.

Summary of Abu Dhabi Property Law

The initial two building blocks have been put in place with the passing of the property Laws summarized below. The cornerstone of these Laws is expected to be issued by the Executive Council of Abu Dhabi shortly. This will encompass a number of implementing rules and regulations to clarify and provide guidance on the practical effect and procedures to be followed under these Laws.

Law No. 3 of 2005: Regulating the Registration of Real Property in the Emirate of Abu Dhabi

This law regulates the registration of real property (defined as buildings or structures on the land and includes all rights and privileges related to the land) within the Emirate of Abu Dhabi. The law provides for the establishment of a Land Registration Department at both the Abu Dhabi and Al Ain Municipality.

The primary function of these Land Registration Departments is to:

• establish a real property register
• register dispositions of real property
• attest the parties signatures to deeds which are to be registered
• file original deeds and provide copies if required
• issue search certificates.

Fundamentally important to property ownership is that every deed creating, transferring or extinguishing real property rights shall, between those concerned and against others, be ineffective unless it is evidenced by registration. This similarly applies to leases exceeding four years, in that unregistered leases shall have no effect other than the personal obligations that those concerned would have towards each other. A person who has an interest in a lease of 4 years or less can make an application for that lease to be registered.

The Law further provides that UAE nationals may sell or purchase residential, commercial, investment or agricultural land allotted to them (other than industrial land or land leased from the Municipality) with the main proviso that at least five years must have passed since the date of such allotment.

The Law also schedules the various fees payable to the Land Registration Department which include fees for selling, mortgaging and registration of leases.

Law No. 19 of 2005: Regarding Property Ownership in the Emirate of Abu Dhabi

This Law was signed by HH Sheik Khalifa bin Zayed Al Nayhan, Ruler of Abu Dhabi, on 10th of August 2005 and applies locally within the Emirate of Abu Dhabi (including Al Ain). It contains provisions for ownership, development, leasing and mortgaging of land and property and differentiates between the rights of UAE nationals, GCC nationals and non-UAE nationals.

In terms of the Law, UAE nationals and legal entities wholly owned by them have the right to freehold ownership to property anywhere in the Emirate of Abu Dhabi. As an exception to the above, the Law grants GCC nationals the right to own freehold land within designated areas known as Investment Zones .

The Law also grants non–UAE and GCC nationals the right to own apartment units or entire floors in buildings in the Investment Zones . However, right of ownership of an apartment or floor in a building does not include by association a right to a share in ownership of the underlying land on which the building is situated. Non-UAE and GCC nationals may also acquire a right of usufruct (the right to use and exploit property belonging to another person) for a period of up to 99 years and a right of musataha (the right to build and develop on the land belonging to another person) for a period of up to 50 years, both being renewable by mutual consent. These ‘ownership’ rights are principal rights in rem and the Law recognizes that they are capable of being sold, mortgaged, pledged or assigned.

The Law allows for the inheritance of real property rights and upon death, ownership rights in the property will be registered in the names of the successors of the deceased after the presentation of evidence proving their entitlement to inherit. Where the successor is a non-UAE or GCC national, and the inheritance is for ownership of land or property rights which he may not own under the terms of the Law, he will not be entitled to take such title but must instead sell his interest. This can be ordered through the courts where necessary.

Implementation Rules and Regulations

These are to be issued by the Executive Council of Abu Dhabi pursuant to and supplementing Law No. 19 of 2005. It is anticipated that these will provide guidance on the:

• rules and procedures for transferring title to property and the registration of mortgage bonds
• establishing and managing common ownership associations for multi-storey buildings or for compounds containing more than ten villas/units
• provisions relating to ownership, management, maintenance, operation and financing of common areas of such buildings or compounds
• extent of a landlord or manager’s powers over common facilities situated in such buildings or compounds
• details identifying the location of the Investment Zones (current speculation is that the Investment Zones will include the ‘Al Reem Island’, ‘Al Raha Beach’ and ‘Saadiyat Island’ developments).

Conclusion

The issuance of the above Laws together with the anticipated Implementation Rules and Regulations has provided the necessary framework for the Abu Dhabi government to achieve its objective of attracting and promoting private sector property development.

Furthermore institutional investors, financial institutions and home-buyers can take some comfort in the fact the Laws, in principle, enable them to legally justify an investment in the Abu Dhabi real estate market.