All
owners must meet the October 31 cut-off date issued by Land Department
Located
in Downtown Dubai, the South Ridge towers comprise an impressive collection of
one-, two- and three-bedroom apartments.
On
March 19, Dubai Land Department issued a circular to all developers, purchasers
and owners of properties in Dubai requiring mandatory registration of the units
in the register maintained by it before June 30. This led to a huge rush from
individual purchasers wanting to register directly, not forgetting the hundreds
of purchasers who tried to register with the help of developers.
As the
deadline approached, the numbers seeking to register were still high. So the
Land Department took the sensible decision to extend the deadline by three
months. The new deadline is October 31 and applies to all properties. We
understand that this registration deadline is both imminent and final.
What
does this mean for new investors/purchasers of incomplete properties?
If you
have purchased an off-plan property which has not been registered in the
interim register (Oqood), you should immediately approach the developer and ask
him to register your interest and make payment of any appropriate fees. If your
property is registered in Oqood, but fees have not been paid yet, you should
review your SPA (sales purchase agreement) to see if you are required to pay
these.
If you
are, you should seek to do so at the earliest opportunity because the developer
will need to pass these on to the Land Department before October 31 and provide
you with the registration certificate. Don’t leave it until the last minute.
What
does this mean for owners who are in possession of a property but do not have
the title deed?
You
should immediately approach the developer to find out the reasons for the delay
in obtaining a title deed and whether your interest is registered with the Land
Department. If the developer cannot be contacted or is not cooperating, you
should approach the Land Department directly to secure the title deed.
Does
this circular cover long term leases as well?
Until
now, the focus has been more on the registration of freehold properties;
however, the Law also requires registration of leases that are 10 years or
longer. Please note this is separate to the Ejari registration requirements for
short term leases.
What
are the consequences of not registering the property under the new directives?
Dubai
law requires all legal disposition in respect of real property to be registered
in the register. Any sale or legal disposition which transfers or restricts
ownership or any ancillary rights will be void if not registered. It is equally
imperative that the developer and investors/purchasers should come forward and
ensure that all sales are registered with the Land Department to secure the
rights of both parties.
For
individual purchasers, they should think of the risks in not registering their
interest in the property. If one buys a property and does not take transfer of
legal title by registering, the property remains in the name of the seller and
can be subjected to claims made against the seller or could be sold to another
person or mortgaged without the buyer’s approval. Non-registration therefore
exposes you to a risk of fraud or third-party claims against the property.
Are
there any penalties for not registering properties?
Yes, if
the circular was to be strictly adhered to. The Land Department could take
action against defaulters by levying fines or suspending all transactions relating
to those individuals/companies until the situation is rectified. It is not
clear if penalties will be applied to individuals who fail to pay the fees, or
to developers who fail to collect the fees from purchasers and remit these to
the Land Department.
If the
latter, then it is probable the penalty will be passed on by the developer to
the purchaser if the purchaser delays submitting documents or fees because most
SPAs explicitly require the purchaser to pay the fees.
A
possible reason for an increased rush to register the properties before the
[earlier] deadline of June 30 were the unfounded rumours the Land Department
will increase registration fees to 8 per cent instead of the existing 4 per
cent. Indeed, those who failed to register when the fees were 2 per cent have
already incurred a penalty of sorts when the fee was doubled.
We have
also seen written communication between representatives at the Land Department
and purchasers which suggests there will be a penalty levied equivalent to 4
per cent, if a property is not registered by the deadline. It remains to be
seen whether that actually occurs or not.
What
about cancelled projects?
The
initiative clearly has good intentions; however, some questions remain
unanswered on the scope of the directive from the Land Department. The
directive does not distinguish between viable off-plan projects and those under
cancellation with Land Department.
Our
enquiries have revealed that registration is not required for cancelled
projects. However, recent circulars dealing with projects such as Dubai Pearl
requiring purchasers to register their interests (albeit without paying a fee
for now) have cast doubt over the status of such projects and registration
requirements.
In
addition, it is not immediately clear whether there will be any follow on
impact for a purchaser’s right to seek a remedy through the Judicial Committee
if a project is liquidated and their interests are not lodged with the Land
Department by October 31. A prudent approach for those with interests in
cancelled projects is to seek written confirmation from the Land Department
that they do not need to register and a failure to register will not affect
their legal rights.
The
registration of real estate interests in Dubai is mandatory and a matter of
public policy. Those who fail to ensure registration of their interests expose
themselves to risks of losing their asset, either through fraud or through
claims made against the existing holder of the title, and — potentially — to
penalties imposed by the Land Department.
Registration
is clearly in the property owner’s interest and all should make it a priority
to ensure such interests are registered as soon as possible.
—The
writer is Senior Associate at the law firm Hadef & Partners.
