Tim Elliott
Welcome to Lawgical, the first regular podcast navigating the latest legal updates here in the UAE. I’m Tim Elliott, and I’m here with Ludmila Yamalova as ever. She’s the Managing Partner of Yamalova & Plewka. Ludmila, always good to see you.
Ludmila Yamalova
Great to be speaking with you here, Tim, in real time.
Tim Elliott
This time, it’s a big deal actually, because if you’ve ever been around anybody associated with Dubai, real estate comes up as it’s a topic of huge interest. Specifically today, we’re going to be considering common legal mistakes that buyers and property sellers as well make during real estate transactions. So, let’s start there. What are some of the more common legal mistakes that buyers make during real estate transactions?
Ludmila Yamalova
Where do I start? And the list is long. But perhaps before I go through the list, just to add on to what you said, the UAE has a very, very exciting, very rapid, dynamic, rapidly developing, moving, diverse—all those fun words—real estate market.
Dubai, in particular, and as long as I’ve been here, real estate has been a hot commodity with a few cycles, a few dips, but ultimately always tends to recover and always presents an opportunity to invest and to make money—or at least claim it as your home and make it your home base.
The reasons are many, and they just never seem to go away. There’s new real estate, new projects, new investors, and new appetite. That being said, even as long as I’ve been here—fast forward 16 years—in terms of what we consider as normal, standard, sort of expected, it’s still not quite there. We’re still very much in developing stages.
For example, if you were to compare the real estate market in the U.S., for the most part, nobody actually drafts real estate agreements. There are sort of standard template agreements that are all managed through brokers. The brokers do everything from A to Z, and they’re able to do that because there’s this whole ecosystem of properly drafted agreements, trustees, escrow laws, and compliance regulations that apply to this whole ecosystem.
The ecosystem has developed such that it kind of covers all the bases for investors or buyers in the U.S., as an example.
Tim Elliott
How does the UAE compare to that?
Ludmila Yamalova
In the UAE, from a legal standpoint, we don’t have this kind of cohesive, all-inclusive, and well-vetted ecosystem. It’s still a bit ad hoc, depending on where you invest—Emirate, project type, whether you have a mortgage, or whether it’s one investor or two.
More importantly, it’s also about the type of investors coming into the UAE. Perhaps this is the biggest issue: Investors here often come in so excited about parting with their money. They issue checks and trust representations made by brokers, people holding powers of attorney (POAs), and even neighbors or friends.
To me, this is still one of the most peculiar aspects of Dubai’s real estate market—how gullible or naïve investors can sometimes be. They’re so excited that they don’t do basic due diligence.
Tim Elliott
What does that lack of due diligence look like?
Ludmila Yamalova
I’m talking about any kind of due diligence—the basic vetting of the property and seller. This includes checking whether the property has any liens, loans, encumbrances, or disputes, and verifying the developer’s reputation and project status.
Instead, buyers often rely on representations—what they see online or on social media. People are too eager to believe what they hear or, perhaps, what they want to hear. They go in with eyes closed, start issuing checks as deposits without documentation, and commit to further investments without fully understanding the implications.
Starting from questions like:
- What are you investing in?
- Have you heard of this developer?
- Does the developer have a reputation?
- Is the project or unit something you’ve actually seen?
The off-plan market adds its own risks. If you can physically inspect a ready property, it at least gives you some assurance—it’s there, it exists, you can move in, or rent it out. But off-plan buyers often rely on pictures and presentations, which can be misleading.
Tim Elliott
That sounds like a recipe for disappointment.
Ludmila Yamalova
Exactly. Investors imagine themselves living in the picturesque building surrounded by greenery, waterways, and open spaces they see in marketing materials. But if they visited the site, they’d see that the building is surrounded by other buildings, and the view or greenery doesn’t exist.
They rely on brochures, marketing presentations, and representations by agents or developers. Many don’t even visit the site, let alone conduct any inspections. Part of the rush is a fear of missing out—believing they’ll get a better deal if they buy now rather than later.
Even with ready properties, many buyers stop at seeing the unit and fail to conduct proper inspections. Issues like latent defects—problems behind walls or in ceilings—are overlooked.
Tim Elliott
What should buyers do in such cases?
Ludmila Yamalova
Hire inspectors or experts to thoroughly assess the property. For instance, a client recently moved into a property that smelled like sewage. They loved it on the surface but didn’t dig deeper. Such inspections cost AED 5,000–15,000, which is minimal compared to the investment amount.
The rush to invest often leads to incomplete documents, checks issued prematurely, and decisions made without a full understanding. Recently, a client excitedly came to us for advice, only to reveal they’d already issued a deposit check and signed a booking confirmation.
Pressure from agents, sellers, and developers compounds this. Clients often feel they must sign today or lose the deal. They sign blank documents, issue checks, and commit without a clear picture.
Tim Elliott
And what role do agents play in this?
Ludmila Yamalova
There’s no shortage of real estate agents here. But finding quality agents is a challenge. Many specialize in specific areas, so even if you refer someone, they might not have expertise in the desired location.
Agents often pressure buyers to share personal documents—Emirates ID, passport, bank statements—while buyers don’t even have a copy of the title deed or seller’s name.
Some buyers take the DIY route, handling legal documents and property inspections themselves. They think they know better than professionals, which often leads to oversights.
Tim Elliott
And sellers?
Ludmila Yamalova
Sellers, too, rely heavily on agents, often failing to engage directly with buyers. Many believe they’re required to use agents, which isn’t true. Over-reliance on agents leads to misunderstandings.
Sellers also try to chase the highest price, sometimes breaking commitments to one buyer to pursue another. This can lead to legal complications.
Additionally, sellers must navigate a series of steps to sell a property—like obtaining no-objection certificates (NOCs) from management companies, developers, and utility providers. These steps have their own timelines, which sellers often don’t account for.
Tim Elliott
Let’s talk about foreign ownership in Dubai. Are there restrictions?
Ludmila Yamalova
Foreign ownership is allowed in designated freehold areas. Dubai was the first emirate to open its market to foreigners, offering freehold rights—which are unlimited and indefinite ownership.
While most areas are now freehold, some, like old Dubai and parts of Jumeirah, remain restricted to UAE nationals. The introduction of golden visas, tied to investments of AED 2 million or more, has further incentivized foreign investments.
Tim Elliott
What about off-plan properties? What should buyers consider?
Ludmila Yamalova
Off-plan properties are those that are not yet built or are in the process of being built. While the market has become more transparent and regulated, buyers must remain cautious.
First, vet the developer and project. The Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA) now provide tools to check whether a developer is registered and whether the project is legitimate. You can also monitor construction progress and ensure there’s an escrow account in place.
Payments should go directly into the escrow account, not to the developer’s general account or an agent. This includes deposits.
Second, understand the payment plan and how it’s linked to construction milestones. The law requires payments to align with these milestones, but some developers still pressure buyers to pay ahead of schedule.
Finally, keep meticulous records—receipts, invoices, contracts, and any correspondence. It may seem tedious, but proper documentation is essential if a dispute arises.
Tim Elliott
What protections exist for developers?
Ludmila Yamalova
Developers who follow the law and operate within the regulated framework are well-protected. For instance, they are allowed to retain payments if an investor defaults.
The current system—requiring developers to register with RERA, provide project details, and operate through escrow accounts—has created accountability. Legitimate developers feel more secure because investors have fewer reasons to default.
Additionally, trustee centers streamline property transfers, allowing transactions to be completed within minutes. This has further reduced disputes and delays.
Tim Elliott
What recourse do buyers have if things go wrong?
Ludmila Yamalova
The good news is that legal recourse is much more predictable now. Buyers can file complaints with RERA against brokers or developers. They can also block property transactions in cases of suspected fraud or file court cases to recover funds.
However, compensation beyond refunds is rare in the UAE. Unlike jurisdictions where punitive damages are common, UAE courts typically limit compensation to refunds plus a small percentage in interest.
Tim Elliott
What about defaulting on a mortgage? What happens then?
Ludmila Yamalova
This is a nuanced area, but significant progress has been made. Previously, bounced checks were treated as criminal offenses, and many borrowers faced arrest. Today, bounced checks related to mortgages have largely been decriminalized.
However, the UAE doesn’t have voluntary foreclosure. Borrowers can’t simply return the property to the bank. Instead, the bank must go through the courts to auction the property.
That said, banks are now more collaborative, often working with borrowers and agents to find alternative buyers instead of pursuing legal action.
Tim Elliott
How can buyers protect themselves from fraud?
Ludmila Yamalova
Fraud risk is significantly reduced when dealing with registered developers and regulated transactions managed through escrow accounts. However, fraud can occur with alternative payment arrangements, like crypto.
The key is to stick to legitimate channels, verify developers through RERA, and ensure all payments go into the escrow account. Avoid unverified developers or unconventional payment methods, which are ripe for exploitation.
Tim Elliott
Let’s talk about digitalization. How is it transforming real estate law?
Ludmila Yamalova
Digitalization is transformative. It has increased transparency, reduced transaction times, and minimized fraud. Blockchain, for instance, is being explored for secure payments and transparent transactions.
Government portals now allow buyers to verify title deeds, register properties, and access services online. The use of technology has made the UAE’s real estate market much safer and more efficient.
Tim Elliott
What about upcoming regulations? What should buyers and sellers expect in 2024?
Ludmila Yamalova
We’re seeing stricter compliance regulations, particularly around anti-money laundering. Brokers and other service providers, including lawyers, are under greater scrutiny.
There are also new rules against unsolicited sales tactics, like cold calling. Additionally, there’s a growing focus on digital transactions, including blockchain, although some of these initiatives are still in development.
Tim Elliott
What if a deal isn’t going well? Can it still be salvaged?
Ludmila Yamalova
In most cases, if both the buyer and seller are willing, disputes can be resolved amicably. Misunderstandings often arise from a lack of communication, so establishing a direct dialogue is crucial.
For more serious issues, mediation is an option. While still developing in the UAE, mediation can help parties reach mutually acceptable resolutions without resorting to court.
Tim Elliott
And if someone feels they’ve been cheated?
Ludmila Yamalova
They can file a complaint with RERA, block property transactions in cases of suspected fraud, or pursue a court case. However, buyers should manage their expectations, as courts typically award refunds rather than additional compensation.
Tim Elliott
Final thoughts for those considering the UAE real estate market?
Ludmila Yamalova
Real estate transactions are rewarding but not without risks. Be diligent, proactive, and informed. Don’t rush, don’t rely solely on agents’ advice, and always seek professional guidance.
Tim Elliott
Thank you, Ludmila.
Ludmila Yamalova
Thank you, Tim.
Tim Elliott
That wraps up this episode of Lawgical. For more UAE-centric legal information, visit our website, lylawyers.com. If you have a legal question, reach out to us via the contact page.