Tim Elliot: Welcome to Lawgical, the U.A.E.’s first, and only, regular weekly legal podcast. My name’s Tim Elliot. Lawgical is recorded at the Dubai-based legal firm, HPL Yamalova & Plewka. As ever, the Managing Partner is Ludmila Yamalova. It is nice to see you.
Ludmila Yamalova: Great to be here with you, Tim, as always.
Tim Elliot: Ludmila, this time we’re broadly discussing property registration, but we’re going to take a particular angle, I guess, a particular case, and we’ll change the names to protect the innocent, as it were.
Ludmila Yamalova: Or less innocent.
Tim Elliot: Or the not so innocent. Can I start with this very simple assertion? The only way you may own a property in the U.A.E. is if it is registered in the land 9egistry, and that is final. Property registration in the land registry is considered undisputed evidence of property ownership. That is the case.
Ludmila Yamalova: Correct. To own property legally in the U.A.E. and for that interest to be protected, it needs to be registered with the relevant authorities, and in your specific name, or in the name of a legal entity that is owned by you, if that is your property.
There are two ways of owning, (1) either directly in your own name, solely or jointly with someone, or (2) through a legal entity, and it could be a company.
In fact, if the property is based in the U.A.E. the company also has to be registered here. There was a time when you could have a BVI or an offshore entity elsewhere and then that entity would directly own property in the U.A.E. That has been disallowed many, many years ago. Now if you want to own property in the U.A.E., other than in your own personal name, then yes, it has to be owned through a company that is based here. For example, it could be a Jafza Offshore or any other entity in the U.A.E. that would own your property interest here.
That is the only legal way of owning property here, and that same interest has to be registered at the relevant land registry. In the U.A.E., which is a country of seven emirates, every emirate has its own authority to regulate real estate matters and the real estate market, including their property registration, so every emirate has its own dedicated land registry in which it keeps track of all the registration and ownership and transfers of real property interests.
Dubai is one of the more developed emirates specifically for land registry in terms of having dedicated authorities that oversee or manage land registry. For example, in Dubai we have what is called the Dubai Land Department and also under it sits the Real Estate Regulatory Agency (RERA), basically a separate authority, and the Dubai Land Department is where all property interests are registered. In Abu Dhabi, for example, that is managed by the Abu Dhabi Municipality. In Dubai we have the Dubai Municipality that manages municipality-related matters, and then anything related to property interests is part of a different authority which is the Dubai Land Department.
In Abu Dhabi, it is just the Abu Dhabi Municipality, and from what we know in other emirates, it is also very similar and in Abu Dhabi it is governed by the same sort of existing entities like the municipality, for example. In Dubai, it is just the Dubai Land Department.
You have to have the property in your name, and it has to be registered with the land department. Now there are two types of registrations, at a high level. One is if the property is fully paid off or is already ready actually, then you will have what is called a title deed, and that title deed will be registered with the land department, and you will receive the title deed that is issued by the land department.
There is also property that is under construction, and that same interest has to be registered with the land department in Dubai, and that document is called, not the tittle deed, but it is called the Oqood. It is a preregistration. The Oqood, document wise, almost looks like a title deed. It is just called Oqood and basically it shows that the particular transfer of real estate property has now been registered to your name, and specifically with the Land Registry in Dubai, and therefore that particular property cannot be resold to someone else, because remember, we are talking about off-plan property, properties that are not finished yet, so you don’t have a title deed to it yet.
One way or the other, there is an interest, your interest in property that is registered with the governing authority, and it’s official, and not only is it the only legal way to own property in the U.A.E. and in Dubai in particular, but also it becomes, as you rightfully said, undisputed evidence of ownership of property.
Tim Elliot: Okay. That’s the background. That’s the situation. Let’s talk a look at a real-life example, a case that I know you’re going to share today. We will change names and nationalities, etc., but let’s just say that these are two European nationals, expatriates, and they are business partners. You have a particular story to tell.
Ludmila Yamalova: Indeed. What this comes down to is what in other ways is called nominal ownership, a nominal holding of an interest. In other words, fictitious ownership or fictitious registration, and that is a scheme that perhaps has existed for eons, and certainly has been fairly prevalent among certain nationalities, among certain countries, for the last several years in particular, as the world has become a little wealthier and more people have come into a lot of money very quickly, so often people don’t want to hold properties or other interests in their personal name, so they hold it in somebody else’s name. For example, this often applies to government officials who don’t want to be seen as owning property in particular in foreign countries, and similarly to other assets, cars, boats, yachts, planes, and so on and so forth. Ultimately there are people, for different reasons, who don’t want to have certain interests to be registered directly in their name. They could be, as I said, politicians, they could be people who are just wealthy businessmen, or people who have just inherited money, but ultimately it comes down to people with money, because if you don’t have money, you don’t have these kinds of problems. That is the silver lining for those of us who don’t this kind of money, and we have fewer problems to deal with.
Tim Elliot: More money, more problems, Ludmila. It’s an old adage.
Ludmila Yamalova: Indeed. Indeed. Exactly. Basically, those people who ultimately have money, either because of tax considerations or even in cases of inheritance purposes or divorces or some other kind of disputes, perhaps legal disputes, that they are afraid that they may be subject to, there is a list of considerations of why people might not want to hold certain interests in their personal name. The U.A.E. is no exception, and obviously, it has attracted over the years a lot of people with money, and it has been easy for expats in particular to own property here, unlike so many other countries where expats cannot necessarily own properties or cannot own companies directly. The U.A.E., in particular Dubai, has been very welcoming of these kinds of investments, and with that obviously comes that nuance of how to own property. Even in my time here, when I started working here in 2008, there were some properties owned by offshore companies, like in Belize, Cayman Islands, and BVI, because that was at that time, in 2008, before the Financial Crisis, that was a very popular way of owning property. At that time, Dubai did not regulate that kind of ownership at this level and so you could own properties in these offshore entities here directly. The problem became, who actually is the owner of these properties, and who is the ultimate beneficiary? If anybody knows how offshores are structured, often there is no ultimate beneficiary that is listed or anything official. It is always through an agent, some representative, or a management company, and such.
I remember this as when there was a problem, the authorities here caught onto that issue of not being able to identify who it is that can actually sign off. Let’s say if you had a property here that was owned in the name of a Belize company, how do I know as an authority here that you, Tim, can sign off on a transfer of the property if you want to sell it to me. I don’t know that. Long story short, back then that practice was outlawed and the authorities required that because they wanted to be able to trace the ownership and that all properties in the U.A.E., in particular in Dubai, had to be owned by an entity that is registered here so they could always tell who the ultimate beneficiary is and who the actual decision maker is for that property. That is basically the history of why things changed.
That being said, there are still a lot of people who like to own properties is somebody else’s name. This, by the way, I have seen before in my years here, but this is a more recent case and so we thought it would be interesting to share it. As you said, the two European nationals, Amy and Bob, and the property, a pretty big villa, was registered in the name of party A, who we shall call Amy. The name of the property was listed and registered with the Land Department in Amy’s name directly, but then Bob said the property was actually his. That was the scenario. Bob said the property was his because he is the one that paid for it, and Amy only held it for him as a nominal owner or as nominal shareholder, and that in fact, he was the actual owner. It all worked as long as things between them worked. This, by the way, is a very typical arrangement between a lot of couples as well. Because you have couples where the breadwinner or the moneymaker does not want the property to be listed directly in his name and so he puts it in the name of maybe his significant other or in his other half’s name for that very reason. Then when there is a dispute between them, all of sudden, Bob says, hey, Amy, now we are no longer friends and I want the property transferred to me and this is my property, and Amy says, well, no, this is my property, and there is evidence that the title deed is in my name.
It was interesting that Bob kept saying, no, this is absolutely mine and he had correspondence that showed that they had this arrangement, and he said the property ultimately belongs to him. Since the parties did not agree and did not figure out a compromise, there was no meeting of the minds. In the meantime, the property has gone up in value, and all of a sudden Bob was very upset because if he actually had control over the villa, he could sell it and maybe make three or four times the price from the time the villa was bought. He was very angry for all of those natural and logical reasons.
Then Bob brought a case in the Dubai courts and argued and made the request that the property should be transferred back to him because it is his property and Amy has no right to it. Ultimately the court issued a decision which was quite unequivocal, stating that as long as the property was in Amy’s name, basically the property is Amy’s, and this is exactly the purpose of the land registry and the land department, and why the title deed is registered with the land department in the person’s name. Because otherwise, the whole registry and the practice and the title deed would basically just be rendered meaningless if the person who is listed in the title deed ultimately could be challenged. The court said that unless there is fraud involved, unless somehow Amy defrauded Bob into transferring the property into her name, the only way to perhaps challenge the ownership in this particular case would be to prove fraud. Since there was no fraud, the court said that that the title deed was undisputed evidence of property ownership and that it cannot be challenged. The court also held that the parties are not allowed to own property outside of the way it was registered in the land registry. In other words, you cannot have a side agreement to own this property because that ultimately bill be not just taking it outside of the registry, but ultimately it has the effect of circumventing the law.
That is a general premise of any kind of lawful society is that parties cannot be allowed to contract around the law. You and I can do it and as long as you and I are on the same page, okay, but in the event we go our separate ways and challenging that contract, as long as it ultimately has the effect of acting outside the law or contrary to the law, it will not be enforced.
Tim Elliot: Okay.
Ludmila Yamalova: The court said a few other interesting principles and why it reasoned that parties are not allowed to own property outside of how it is allowed by law is because such actions would contradict the principles of security and assurance, confirmation of the property registration, and then also honesty of the land registry which is reflected in the reality and the truth. Therefore, the court also held that in the event there is some kind of a transaction that is attached to this particular property, then it has to be registered with the authority. For example, if you take out a mortgage on a property, there is another party that has an interest in the property, and in that case, the mortgage also has to be registered with the authority. Similarly, if you are selling the property or you are transferring part of the interest in the property to me, that has to be registered with the authority. But anything that is not registered is ultimately not deemed to be valid.
Tim Elliot: So, Amy is essentially there waving a title deed. It has got her name on it. There is nothing Bob can do. The buck stops with that title deed.
Ludmila Yamalova: Yes. However, as I said, there is one exception.
Tim Elliot: Apart from fraud.
Ludmila Yamalova: Apart from fraud. However, let’s say Bob had a different claim, but this claim is also not so easy to prove. That would be a claim separate from the property. For example, Bob can show that he paid for the property and he transferred a million dirhams for this property, and here it shows. What Bob has is potentially a claim for repayment of a loan, but it will be considered a loan. The burden will be on Bob to prove that the million dirhams that he transferred to Amy to buy the property in fact was a loan, and in these kinds of cases that can be very difficult to prove.
In any event, let’s say if Bob was successful in proving that this was a loan, he could only request and reasonably expect the repayment of the loan only, but not the repayment of the current value of the property.
Tim Elliot: It would not take into account that appreciation. There is no way of arguing it.
Ludmila Yamalova: Correct because Bob’s claim for Amy is not property based, but more money based. It is a loan and I am giving you money, but it has nothing to do with the property. I gave you money to buy something for yourself, and now you have to give me that money back. Therefore, if the property is now worth 6 million dirhams versus 1 million dirhams, then Bob can only request the repayment of the money that he paid to Amy, and that is it, and nothing related to any kind of appreciation or an increase in the property value.
Furthermore, an interesting argument is that also with loans, Bob could argue that Amy owes him interest. This is quite an interesting subject that we can perhaps talk about and dedicate a separate podcast to this because we have had a few questions and clients with similar examples, asking if interest can be charged on the loan. The U.A.E. crime and punishment law actually has a provision which I think is subject to different interpretations but ultimately there is a premise that only financial institutions that are properly licensed have the right to ultimately expect a loan. Therefore, if private parties loan money with interest it is actually illegal. There is that premise and so in this particular case if Bob wanted to claim Amy owed him 6 million dirhams because the property value has gone up, it is almost like claiming when he gave the 1 million dirhams, the interest is 600% or something like that. That interest claim also would not hold water.
Therefore, basically the only way to legally own and have ultimately an enforceable right and expectation of a protected right is by having the property registered in your name and all other arrangements are ultimately not going to be enforced because they have the effect of contradicting the law.
Tim Elliot: And the burden really is on Bob in this case. It’s worth point out, isn’t it, that these two European expats, we have changed names to protect the innocent, as I said earlier, but this would apply to family members, to business partners. It applies equally assuming a case such as this.
Ludmila Yamalova: For sure. Yes. Basically, this is the general principle, and this is why we thought it would be important to talk about it because we know of a lot of arrangements like this. People have this expectation that this will somehow be enforceable, but it doesn’t matter that in this particular case the parties were Europeans or any other nationality or even their standing. The legal principles are the same, and in fact, the court cites some of the previous Court of Cassation cases, principles from 2009 even, again basically stating that due to the fact that the title deed is considered an absolute authority in the case and that the only document which can be used to prove the ownership of the property is this registration before a registry evidenced by the document called the title deed.
Tim Elliot: Now we’re recording this episode of Lawgical, nominal ownership of property interests in the U.A.E. We’re also live on TikTok while we are recording. A couple questions for you, Ludmila, that have come in. I’ll start with this one. I have an off-plan property. Is it possible for me to sell it before settlement in Dubai?
Ludmila Yamalova: Yes, it is. An off-plan transfer of property rights has been very commonly used in Dubai and is perhaps one of the tools that has allowed Dubai to benefit so much from bringing in so many investors because it has been easy to sell off-plan property. There are some conditions that are attached to this. To sell off-plan property, first of all, you have to have an Oqood, which is the presale or preregistration, and then also you will still need to get what’s called the approval or signoff of the development company or the developer, and we have seen this before, that they may contractually have their own fee that will be attached to the transfer of interest prior to completion. This was introduced when flipping was a very common practice in Dubai in particular, so that practice was introduced where not only the land department would charge their interest, but also even the developer would add on their interest. You can sell off-plan property, but first of all in order to get the Oqood, you will have had to pay the 4% of the total value of the property to the land department, and then second of all, when you transfer your off-plan property to someone else, they too would have to pay 4% on the new property value or on the value of the transaction. Then in addition to that, the developer may have their own fee to allow for the transfer. Yes, it is all possible, but it has to be done by virtue of conditions and a specific mechanism through the authorities and with the developer’s help.
Tim Elliot: Okay. Another question for you. What areas, and this is a very broad question, in what areas can expats buy property in Dubai?
Ludmila Yamalova: There are many areas. The default in the U.A.E. used to be that only nationals can buy properties in the U.A.E. That was the default rule. Then from there, everything else was an exception, unless it was a special designated area, or designated as a freehold in that designated area, then expats could buy property. It started out and Dubai perhaps led the way in that department, and it opened up one area. The Dubai Marina, for example, was one of the first areas, and since then, they have all grown. These are all codified. This was not just announced in the newspaper. There are regulations, resolutions, and circulars specifically designating a particular area as a freehold area, and these are all codified in specific documents from legislative authorities. Those areas are called freehold areas where expats can own properties. In Dubai, basically these days there are too many areas to mention perhaps, and it is easier to say where you cannot own property in Dubai, but more and more areas are being designated. Certainly, for example, Jumeirah, and there are a lot of expats that live but who have been renting villas from locals and those properties in Jumeirah, for the time being right now, in terms of villas in particular, that is still reserved only for U.A.E. nationals, but otherwise as long as it is a freehold area, then expats can own.
While we are on TikTok, those who are still listening live, there is another question that just came. I will answer it if you are still online.
If I buy property on a loan which is under my friend’s name, and I lose my job, would I still be liable for paying the remaining amount?
The loan is the same as perhaps as a title deed. If the loan is in your friend’s name, then it’s your friend that is responsible for the loan. For the same reason, that is the loan is a contractual document, a document that would be registered not only with the banks, but also with the authorities such as the land department because if it’s a loan, it is perhaps a mortgage, and the mortgage would be registered with the land department. In that case, it is whoever the party to that loan agreement or to that mortgage in the title deed that will ultimately be responsible for the liabilities that are still outstanding, and the liability being the loan. Therefore, unfortunately for your friend, it will be your friend that would still be liable for that loan. Whether you lose a job or not, it’s not your legal headache. Now, obviously you have moral obligations and ethical obligations to your friend, and your friend can still have a claim against you, for example, for repayment or compensation for damages or repayment of whatever amount they are able to show that they have incurred on your behalf. But otherwise it is very dangerous arrangement, and I perhaps would not recommend for this to be a common practice because the friend is the one who will be held liable on the one hand, and on the other hand, also if anything were to happen, let’s say, what if your friend lost a job? Then, the bank would foreclose on the loan and then you would lose the property. There is that. Also, if the loan is in your friend’s name and then chances are the property is also in his name. Once again, we go back to the same problem that we said before. If the property is in your friend’s name, then the property is your friend’s property, and not yours.
Tim Elliot: A nice friend to have if that friend sticks by you. There is another question that has just come in there. This is an interesting one because it relates directly to what we were talking about on the podcast. If I buy a property as a gift for my fiancé, and now we’re separated, is there a way to claim it back? By inference, you would think that property is in the fiancé’s name. What happens then?
Ludmila Yamalova: A great question. Yes. In this case as well, the property is obviously your fiancé’s because it is in her name. Now, the gift one is interesting. The short answer is that you should not have a reasonable expectation to get the property back. The best scenario is if you get part of the payment back or the money that you paid for the property back. That would be the best-case scenario. But if it was a gift, it was a gift. A gift is very hard to undo and then in this particular case, the circumstances around this particular transaction would be instrumental. For example, if there are messages saying, listen, this is a gift, love you very much. I am very generous, and here is a gift, that in and of itself perhaps would be very difficult to dispute. Even if there is that kind of a relationship, it’s not an official relationship, it’s not codified, for example, as a marriage, but just by saying it’s a gift, certainly that would be very difficult to undo. If there are some other kinds of documents or messages where, for example, she says, thank you very much for this generous gift, and I understand this is very generous, but as we’ve agreed before, if we separate and so forth, I will give this back to you. These kinds of messages might help you, and at least it will give you perhaps a chance to try to challenge it. But I would say ultimately it would be very, very difficult and certainly you would not be able to get the property back, but you might be able to, depending on the express and written proof or with documents you might be able to claim at least some of the payment back, but manage your expectations. Usually if it’s a gift, it’s just a gift, and we have seen recently courts, by the way, issue decisions but these were more in the marriage context, but even then, if it’s a gift, it’s a gift. You have to basically prove that somehow there it was not just a gift, but there was an expectation to get it back and what the terms of that ultimately were.
Tim Elliot: So, if it wasn’t an acrimonious split. One more question, Ludmila, for you. Can I sell a property which was under my father’s name? He meant to gift it to me before he passed away, before he was able to transfer it.
Ludmila Yamalova: No. You will not be able to because officially that property is now in your late father’s name and until the probate process has been finalized, i.e., the distribution of the estate has been finalized, and until the actual new owner steps into the feet of your now deceased father, you won’t be able to do anything with the property. In other words, even if you have probate and you have to do it through the court, and need to get a court order that states that the property goes to you, but even in that case, before you are able to sell it, you would have to be registered as a holder and owner of the property on the title deed before you are able to register it. Just because your father meant to give it to you, even if it was in the will, until officially it is reflected in the land registry, you won’t be able to dispose of it.
Tim Elliot: That’s pretty much it for this podcast, I think. Have we missed anything? Is there anything? I guess it’s worth reasserting that if you have a title deed registered with the land registry that is in your name, that property is yours. That is the whole point of this whole discussion.
Ludmila Yamalova: Exactly. In other words, no fictitious or nominal ownership of property interests in Dubai or in the U.A.E. is enforceable. The only evidence of actually owning property or owning any kind of interest is that interest being registered in your own name, and therefore in the context of property, a title deed is the absolute evidence of ownership and it cannot be disputed or challenged unless it was based on fraud.
Tim Elliot: That’s another episode of Lawgical, this time property registration, a recent real-life example, the perils, the tribulations, the trials of Bob and Amy, as we called them. Our legal expert, as always, Ludmila Yamalova, the Managing Partner here at Yamalova & Plewka. Thank you.
Ludmila Yamalova: Thank you, Tim.
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