Monday, July 30, 2007

Law No 8 - Prevent real estate malpractices in Dubai

A new law has been issued by the government of Dubai to prevent malpractices and fraudulent activities in the real estate sector. Under Law No 8 on Guarantee Accounts (commonly known as trust or escrow accounts), people buying properties in Dubai off plan will make their payments into special accounts managed by banks, instead of directly into property developers.

From now on all developers launching new projects have to produce certificates showing that building work has reached certain pre-selected stages before trust account managers give them access to buyers' money.Government officials say money in these accounts will be released to developers only when certain stages of construction are completed, encouraging companies to keep building work on time and easing fears that they will gather payments and flee the country before a brick has been laid.

1 comment:

Kristian said...

New Dubai property law, currently being debated and soon to be finalized, will inject a new burst of energy to the Emirate’s booming property market. The ‘fuzziness’ surrounding the exact status of ‘freehold’ and ‘long term lease’ properties in ‘exempt’ areas will finally be eradicated with its ratification. So far the legal vacuum has not had a negative affect on land sales due to strong backing by the Government of Dubai.
. . .
The current legal framework governing Dubai can generally be classified under two main categories: those laws governing properties lying in exempted areas where foreigners may buy freehold and long lease property, and the remaining areas where only UAE and Gulf Cooperation Council (GCC) nationals may own.
In essence, the Government of Dubai ‘exempts’ certain geographical locations and develops them in cooperation with quasi-government companies such as Emaar, Nakheel and Dubai Properties. Foreign ownership is the main driver for setting up these ‘exempt’ areas – an idea that is not lawfully permitted in the rest of Dubai where only UAE and GCC nationals may own land.
“Trust plays a key role in promoting the ‘exempted’ areas where no laws exist but where Dubai’s governance and courts system does have a certain amount of jurisdiction. Transactions are governed by contractual agreements between the main developers, the secondary market developers and brokers or the end buyers.”
These contracts, whether they pertain to villas, apartments or commercial space, are not considered as titles or deeds to ownership. Solving this issue is the main thrust of the new legislation, which will also include clauses to properly manage communal areas and public spaces as well as regulate new ideas, such as timeshare properties.
The law will also examine the relationships between the main developers and the secondary developers. Additionally, it will give banks the legal standing to be able to better enforce bad debt recovery and, therefore, reduce the costs of home loans to benefit the buyers.
There has, I believe, been some differences of opinion on whether property law in the UAE falls under federal or local emirate jurisdiction. The article quoted above did not address this issue.