Host
UAE-based investors are experiencing significant savings as they spot opportunities in the London property market ahead of Brexit. This is according to the annual Ultra Prime Barometer report, which cites currency shifts as a driving force behind a fresh wave of property buyers from the Middle East targeting London real estate. For instance, the report revealed that Ultra Prime residential property in Mayfair has dropped 10.6% since 2015.
Host
Ludmila Yamalova is here! She’s the managing partner at HPL Yamalova and Plethke Legal Consultants. Great to have you back, Ludmila.
لودميلا يامالوفا
It’s good to be here, thank you.
Host
So, before we dive into the text line—lots of messages coming through already—there’s some big news today. You came in and said, “Listen, I know we planned to talk about something else, but I’ve just found out what’s going to happen to property when VAT, or value-added tax, comes into effect here in the UAE.” So, Ludmila, what did you learn? Will VAT affect property sales?
لودميلا يامالوفا
Great question. First, we received quite a few questions during last week’s show about this. Many clients have raised concerns about their properties being subject to an additional 5% VAT when it’s introduced in 2018. People are worried it’ll stack on top of the current 4% land department fee, prompting some to consider selling before VAT kicks in.
However, the latest information I’ve received indicates that VAT will not apply to property sales—at least not in most cases.
Key Insights:
- Personal Properties: If you’re selling a property you own personally—whether residential or commercial—you’re not in the business of selling properties, so VAT won’t apply.
- Developers: Developers, however, are in the business of selling properties. Even so, VAT likely won’t apply to their sales because properties are already subject to a 4% transfer fee to the land department.
Host
And what about associated services, like maintenance or management fees?
لودميلا يامالوفا
Good point! Those will likely be subject to VAT, as they’re considered business activities. For example, developers or management companies charging maintenance fees for properties will need to include VAT on those services.
Host
So, if I sell my apartment to someone next year, I won’t need to pay VAT?
لودميلا يامالوفا
Correct! Whether you’re selling as an individual or a company, VAT won’t apply to the property itself. But keep in mind, these laws are not finalized, and everything remains subject to confirmation once the official VAT guidelines are published.
Host
Okay, let’s move to the text line. A listener asks:
“We won a court case against a developer, and they appealed, but we won the appeal as well. Now our lawyer says the court is trying to locate the developer’s assets to enforce the decision. It’s been a month. How long does this process usually take, and what happens if no assets are found?”
لودميلا يامالوفا
Unfortunately, asset location can take a long time, and there’s no standard timeline. It depends on whether the developer has disclosed their assets and if they have any at all.
- Asset Search: The court typically sends inquiries to the land department, banks, and vehicle registries, but the claimant must request these specific searches.
- Worst Case: If no assets are located or liabilities exceed assets, even a favorable court ruling might be unenforceable.
Host
That sounds frustrating. What can listeners do to avoid such scenarios?
لودميلا يامالوفا
Before pursuing a lawsuit, conduct thorough due diligence to ensure the defendant has assets. It saves you time, money, and effort.
Additional Topics:
- Rent to Own Properties:
Rent-to-own agreements are not legally enforceable under UAE law. Proceed with caution and consult a lawyer to safeguard your investment. - Service Charges:
Homeowners can expect service charges to vary depending on the quality and facilities offered. They typically range from AED 7 to AED 25 per square foot and must be approved by RERA. - Owners Associations:
Owners associations in the UAE cannot yet pursue legal action against non-paying owners because they lack legal status as entities. However, this may change soon as regulatory frameworks evolve.
Host
Thank you so much, Ludmila, for all the clarity today. We’ll have you back next week to answer more property and legal questions.
Ludmila
Always a pleasure. See you next week!
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