Property Owners and Tenancy Rights

Property Owners and Tenancy Rights

Property rights define the theoretical and legal ownership of resources and how they can be
used. Property is secured by laws that are clearly defined and enforced by the state. Real
property rights are defined as in rem rights over real property, as opposed to being purely
contractual rights, and include Musataha and Usufruct rights. All real property rights are
required to be registered, regardless of the term length. In Dubai all instruments affecting land
are registered at the Dubai Land Department.
Dubai recognizes Freehold title to land, leasehold, Usufruct and Musataha interests in land,
off-plan property and short-term leases. The Civil Code provides for the following types of
tenure:
Freehold, which is the most superior of real property right and provides for the right to use,
enjoy and occupy land or property permanently.
Musataha, which is the right to build on land for a specified duration not exceeding 50 years.
Usufruct, the right to use, enjoy and occupy land or property belonging to another person for
a fixed term not exceeding 99 years.

Real Estate Ownership and Rights

The right to own a Real property ownership is restricted to nationals of the United Arab
Emirates, Gulf Cooperation Council member states, the companies owned by them, and
public joint-stock companies. The Emirate of Dubai permits the aforementioned anywhere to
own freehold title to real estate and to acquire all types of real estate interests such as
usufruct, musataha, and long-term leases up to 99 years.
Non-UAE or Foreign nationals may, in certain areas and subject to the approval of the Ruler,
be granted the following rights:
Freehold ownership of real property without time restrictions
Usufruct or leasehold over real property for a period not exceeding 99 years
The designated areas where foreigners are permitted to acquire leasehold or usufruct
interests in property are determined by the Ruler of the Emirate of Dubai by way of an official
law order (decrees) and regulations issued from time to time.
Disposing and Subdivision of Jointly Owned Real Property Units and the
Exercise of their Pre-emption Rights
A Unit Owner have the rights to sell or dispose of his or her Unit in any legal manner, and
may mortgage the Unit to any bank or financing institution licensed to operate in the
Emirate of Dubai.
A Unit jointly owned by two or more Persons may not be subdivided amongst them unless
that subdivision is permitted under the Master Community Declaration, obtained DLD
approval, and the necessary licenses that are granted by the Competent Authority.
A co-owner of a Unit will have a pre-emption right to purchase another co-owner’s share in
the Unit if that share is offered for sale or disposition to a non-Owner. Where more than
one co-owner exercises this right, each of them will be entitled to purchase a share
proportional to his existing share in the Unit.
The pre-emption right prescribed under paragraph of this Article will not be established in
case of sale or disposition of the co-owner’s share to any ascendants, descendants,
spouse, relatives up to the fourth degree, or in-laws up to the second degree.
A pre-emption right may not be divided and may only be exercised or waived in whole. In
case of multiple co-owners, each of them may exercise his pre-emption right in
proportion to his share in the relevant Unit; and if any of them waives his right, it will be
transferred to the other co-owners in proportion to their existing shares.
A pre-emption right will be forfeited if the co-owner offering to sell or dispose of his share
serves on the other co-owners, through a notary public, a written notice that states the
name and address of the third-party purchaser and the terms of sale, but none of these
co-owners agrees to such terms of sale within thirty (30) days from receipt of that notice.
A co-owner agrees to purchase the offered share, he must notify his intention to the co-owner
offering to sell or dispose of his share, through a notary public, within the notice period of
thirty (30) days from receipt of that notice and must finalise the sale procedures with the
DLD within no later than ten (10) working days from the date of expiry of that notice
period.
If it is proven that the sale made pursuant to this Article is concluded under terms that are
more favourable to the purchaser than those mentioned in the notice sent to the co-
owners having the pre-emption right, these co-owners may file, with the RDSC, claims
against the seller for compensation for the damage they have sustained.

Documentation in real estate transactions

A transaction will usually begin when heads of terms or a memorandum of understanding is
produced by the broker on behalf of the seller and the buyer. This document sets out the
fundamental commercial terms that have been agreed between the parties. Once the seller’s
lawyer has received the heads of terms or memorandum of understanding, they will prepare
the initial draft of the sale and purchase agreement. In the meantime, the buyer’s lawyer will
carry out due diligence, the results of which will steer the negotiations on the sale and
purchase agreement received from the seller.
To effect registration in Dubai, a standard Form F agreement produced by the Dubai Land
Department will be entered into by the seller, buyer and broker and lodged with the Dubai
Land Department. The agreed sale and purchase agreement will be appended to Form F.

Dispute Resolution

Rental Disputes Settlement Committees (RDSC) under the legislation in force, will have the
exclusive jurisdiction to hear and determine all disputes and disagreements related to the
rights and obligations stipulated in this Law and the resolutions issued in pursuance hereof, in
accordance with the relevant rules and procedures adopted by the RDSC.
Any affected party may submit a written grievance to the Director General against any
decision or measure taken against him under this Law and the resolutions issued in
pursuance hereof, within thirty (30) days from the date of being notified of the contested
decision or measure. The grievance will be determined, within thirty (30) days from the date of
its submission, by a committee formed by the Director General for this purpose. Without
prejudice to the grievant’s right to recourse to the RDSC to seek any relief, the decision
issued in respect of the grievance will be final.

Tenancy Rights

If the Owner leases out the Unit, the Owner and Tenant must comply with the Statute, the
Master Community Declaration, and the Building Management Regulations towards other
Owners and Occupants, the Owners Committee, and the Management Entity.
Short-term leases in Dubai with a term of less than 10 years must be registered with the Real
Estate Regulatory Agency (RERA) on the Ejari system. 10 years up to a maximum of 99
years are considered to be long-term leases which must be registered on the Real Estate
Register of the Dubai Land Department. All mortgages must be registered with the Dubai
Land Department pursuant to Law No. 14 of 2008.
The Rent
The lessor and lessee shall define a rent in the lease. Depending on the location and size of
the property to be rented, rent rates can vary and tenants have the option of paying one
payment or making multiple payments together with the broker or landlord. In addition, some
brokers may require a commission fee, up to 5 per cent of the total rent amount.
In any case, the rent may only be increased and lease provisions may only be amended after
the elapse of two full years from the date of the commencement of the leasing relation for the
first time. RERA shall set forth criteria to determine the rent increase rates in the Emirate, in
accordance with the general economic conditions therein. The rent includes the use of the
property’s facilities such as swimming pools, courts, gyms, health club, and car parking lots,
etc. unless otherwise is agreed upon.
Service Charge
Service charges, also known as maintenance fees or common area charges, are recurring
payments made by property owners or tenants to cover the cost of managing and maintaining
shared facilities and common areas within a development or community. As stipulated in the
lease agreement, the Owner will be responsible for paying the Service Charges and Usage
Charges. In all cases, if the tenant fails to pay the Service Charges and Usage Charges
according to the prescribed schedule, the Owner is still responsible for paying the Service
Charges and Usage Charges.
Leasing Agreement
Leasing period shall be defined and if it happens to be the leasing period was not defined in
the lease or was difficult to establish, the lease shall be deemed to be binding for the period
defined for payment of rent. If the lease period ends and the lessee remains in the property
without objection by the lessor, the lease shall be renewed for another similar period or for
one year whichever is less, under same terms and conditions.
As part of concluding a lease contract with the landlord or real estate agent, the tenant must
present identification documents including his passport, visa and Emirates ID, along with
post-dated cheque for the agreed lease period.
The lessee shall pay the rent to the lessor on the due times mutually agreed upon. In case of
absence of any such agreement or if payment times were difficult to establish, the payment of
the rent shall be in four equal payments per year, each one shall be paid in advance.
Lessor shall handover the property in a fit-to-use condition and in a form that enables the
lessee to take full advantage of the contracted benefit. The lessor shall be responsible during
the lease term for maintenance works of the property and for repairing any malfunction or
failure that affect obtaining the desired usufruct, unless otherwise agreed by the two parties.
Lease Expiration and Extension
Upon expiration of a lease, a tenant is required to return the property to the landlord in the
same condition as when it was rented. Lessee may not, upon evacuating and handing over
the property, remove any fixed improvements added thereby, unless otherwise agreed upon
by the parties. Unless otherwise agreed upon between the parties, the lessee may not assign
the usufruct of the property or sublet same to third party unless upon a written approval by the
lessor.
Similarly, a landlord must hand over a property to a tenant in good condition, and if
environmental damage occurs, the person responsible is liable.
Subject to the provisions of the present law, and for the purpose of renewing the lease, the
lessor and the lessee may reconsider the rent. If they failed to reach an agreement in this
regard, and a necessity to extend the leasing period was established, the committee may
decide to extend the lease and determine the rent for such extension. The committee shall
determine the rent of an extension period according to the legislation issued on approving the
criteria and rents proposed by RERA in light of the condition of the property and the rent of
similar property prevailing in similar real market in same area. In case either part to the lease
desires not to renew the contract or to amend any of its terms and conditions, it shall notify
the other party of same at least ninety days prior to the expiration of the lease period unless
otherwise was agreed upon between the parties.
Dispute Resolution
The Rental Disputes Center (RDC) is an integrated judicial system focused on establishing a
secure real estate environment in Dubai. The RDC has the exclusive jurisdiction to determine
all rental disputes that arise between Landlords and Tenants of Real Property situated in the
Emirate, including in free zones, and counterclaims arising therefrom, as well as to determine
provisional and summary actions filed by any of the parties to a Lease Contract; and to
determine appeals from the decisions and judgments that are subject to appeal in accordance
with the provisions of the aforementioned decree and the regulations and resolutions issued
in pursuance hereof. The RDC also enforces decisions and judgments issued in rental
disputes falling under its jurisdiction. RDC’s objective is to provide a specialized judicial
system to handle rental disputes in the Emirate of Dubai.