Tim Elliott
Welcome to Lawgical, the UAE’s first and only legal podcast that we are aware of. My name is Tim Elliott. Lawgical comes to you from the Dubai-based legal firm HPL Yamalova & Plewka. As always, here is the managing partner, Ludmila Yamalova. Lovely to see you.
Ludmila Yamalova
Tim, great to see you too, in person and in real flesh and blood.
Tim Elliott
Today, we’re talking about transferring property. It’s a daunting thing to do; it’s not something that many of us do often. For most of us, property is the biggest investment we make in our lifetime. Here in Dubai, transferring property takes a few steps. I want to run through those, and I suppose it all starts with agreeing on terms.
Let’s imagine I’m a buyer. I’ve just agreed on terms with the seller of the property I want to buy. We need something to formalize the agreement. What should that include? Is that where we should start?
Ludmila Yamalova
Certainly, finding the property and identifying the party you’ll be buying from is the right starting point. Agreeing on terms is the next step. But before I dive into the terms and conditions that should be included in an agreement, let me set the stage in terms of the real estate market in the UAE, particularly in Dubai.
Unlike what many still believe today, Dubai has always had the option of buying freehold property—not leasehold, but freehold. Many still think that buying property in Dubai means some form of leasehold, such as a 99-year lease. While this concept exists in the UAE, it was historically more common in Abu Dhabi.
Ludmila Yamalova
Abu Dhabi initially offered properties primarily on a leasehold basis for 99 years. Perhaps that’s where the confusion stemmed from. In contrast, Dubai designated specific areas for foreigners to purchase freehold property as the emirate opened up to foreign investment.
As far as Dubai is concerned, I struggle to recall any areas designated as leasehold. Abu Dhabi has since introduced freehold areas as well, but in Dubai, when we talk about buying property, we’re talking about freehold.
Tim Elliott
What does freehold mean exactly?
Ludmila Yamalova
Freehold means owning the property outright with unencumbered and absolute rights to buy, own, and transfer it. While that is true in principle, Dubai does have some nuances. For example, if I am the seller and own my property freehold, I still need approvals to transfer it to you. This is not common in other jurisdictions where freehold property exists.
Depending on the property’s location, there could be several layers of approvals. These approvals define the process of property transfer, influencing timing, required documents, and associated costs.
Tim Elliott
So even with freehold property, approvals are required before transferring ownership?
Ludmila Yamalova
Exactly. Let’s go back to your original question: where do we start? The agreement is one of the first and most substantive parts of the exercise. However, the form of the agreement depends on who the parties are and their circumstances.
For example, it’s common in Dubai for both the buyer and the seller to be represented by others, especially if they are not physically in Dubai. Powers of attorney (POAs) are required for representatives to act on their behalf. These POAs must be properly notarized and legally attested.
Tim Elliott
It sounds like there are layers of complexity here, especially if multiple owners or representatives are involved.
Ludmila Yamalova
Absolutely. Another layer is whether brokers are involved. Do you, as the buyer, have your own broker? Do I, as the seller, have my own? Or is there one broker representing both parties? Surprisingly, it’s common for one broker to represent both, which carries inherent conflicts of interest.
Tim Elliott
I can see where conflicts might arise. Do I need a lawyer to review the agreement?
Ludmila Yamalova
There is no legal requirement to have a lawyer or broker for property transfers in Dubai. Most transactions involve brokers, but lawyers are much less common. That said, transferring property involves legal documents and undertakings, so having a lawyer review the agreement is prudent.
Tim Elliott
Can buyers and sellers handle the agreement themselves?
Ludmila Yamalova
Yes, they can. Buyers and sellers can draft their own memorandum of understanding (MOU) to formalize terms. Alternatively, if brokers are involved, they typically use a standard form, such as Form F, provided by the Dubai Land Department (DLD).
One key term in the MOU is the transfer fee—4% of the property value—paid to the DLD. While the law suggests the buyer and seller each pay 2%, it’s common practice for the buyer to cover the full 4%.
Tim Elliott
What about the other steps, like the NOCs you mentioned earlier?
Ludmila Yamalova
NOCs (No Objection Certificates) are required from various entities, such as utility providers, the management company, and, if applicable, the district cooling provider. These NOCs confirm that all dues have been settled.
Tim Elliott
How long does it take to get these approvals?
Ludmila Yamalova
Timelines vary depending on the service provider and management company, but they typically take one to two weeks. These steps must be factored into the process.
Tim Elliott
What about costs? What should buyers budget for?
Ludmila Yamalova
It depends on whether a lawyer or broker is involved. Brokers charge approximately 2% of the property value, and additional costs include the 4% DLD transfer fee, NOCs, and other administrative expenses.
Tim Elliott
That’s a lot to consider! Ludmila, thank you for outlining the process.
Ludmila Yamalova
Always a pleasure, Tim.
Tim Elliott
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