18 September 2011
"The Federal Law No.13 of 2008 Regulating the Interim Real Estate Register in Dubai came as a ray of hope for greater protection of investors after the crash of real estate market. This article attempts to explain the rights of a buyer of an off-plan property and the kind of interest a purchaser acquires on pre-registration" The ownership of a piece of land remains one of the most rich and complex relations of human with the Earth. It is an idea that seems to evolve from man's territorial consciousness and now defined as the most extensive form of right in rem. The world has seen rigorous development in protection of this right; the most secure method for absolute record of it till date is the registration of ownership of property adopted in most jurisdictions influenced by the Torrens style registration system in Australia. Needless to say, a purchase of real property is an epic and even emotional moment for a buyer whose relationship with the property as its owner binds the whole world once evidenced and secured by proper registration.
The case with established property is a straightforward one. After concluding a sale and purchase agreement (SPA), the purchaser can head towards registering its name in the relevant local land's department or registry. In the Emirate of Dubai, registration of proprietary interest in the Real Estate Register in the Land Department is governed by Federal Law No. 7 of 2006.
There is a growing trend, mostly in developing countries, of selling off-plan units which serves as a useful investment vehicle and benefits both the buyer and purchaser. While there are advantages of acquiring properties in this way, say where a purchaser get to buy a property at 'today's market price' but only pay the majority of the purchase price many months down the track, the risk associated with the same also lurk around. Some examples of these risks include the possibility of developer not proceeding with the development within the time specified in the contract or a marked difference in the structural plan as opposed to what was agreed for. In an era of economic crunch prevailing in the Emirate of Dubai, these risks surfaced and have been well documented. However, the aim of this article is directed more towards how adequately the law in the Emirate of Dubai protects the purchasers of the off plan unit from such associated risks with specific emphasis on the kind of rights and interest acquired by the purchaser by such law.
The interim registration and Law No.13 of 2008
The Federal Law No.13 of 2008 Regulating the Interim Real Estate Register in Dubai (the "Law No. 13") came into force on 31 August 2008 ensuring greater protection to the investors in off the plan property by mandating the pre-registration of the off plan sales for real estate units in Interim Register in the Lands Department. The effect of Law No.13 is that sales or transfers that are not recorded in Interim Register are considered void. It further required developers to register sale and purchase agreements entered into prior to Pre-Registration law within a time-limit of sixty days of the law coming into force.
The maintenance of Interim Register in the Emirate of Dubai sets up a registration system which goes beyond any ordinary registration system whilst envisaging the need to accommodate new developments in how title to land is perceived in different kinds of property. Further, by setting up time-limit for registering the off-plan units sold prior to coming into force of the Law, the Emirate of Dubai has shown a serious and pro-active commitment in ensuring a robust and effective registration system.
The Interim Register is maintained parallel to the Real Estate Register and is supplementary to it; however, a significant difference to be borne in mind is that technically a purchaser of the off plan unit registered in the Interim Register does not obtain ownership rights in the unit until it is physically complete and the full purchase has been paid to the developer. In the event the property is complete and the purchaser has paid the full purchase price, it is the right of the purchaser to have the title to the property registered in his name in the Real Estate Register maintained by the Land Department which is the conclusive evidence of the ownership of property.
Article 8 of the Law No. 13 provides:
"Developers must register completed projects in the Real Estate Register maintained by the Department as soon as a completion certificate has been obtained from the Competent Authorities, including any units that were sold to purchasers who have fulfilled their contractual obligations according to the applicable procedures of the Department."
Hence pre-registration of a sale and purchase agreement provides a sort of security to the purchaser of its title-to-be until the period the final registration is eventuated in accordance with Article 8 of the Law No. 13.
Another important and distinctive provision of Law No. 13 is Article 6 whereby a real estate property registered in the Interim Register "may be sold, mortgaged or otherwise legally disposed of". Article 6 provides an opportunity for the purchaser to use the property in ways outside the contractual agreement. It gives the right to create interest in favor of a third party and hence is one step ahead of acquiring a mere personal interest. On look of it, the pre-registration system endues the characteristic of alienability to a contract of sale of off-plan unit. An alienable right or interest, by definition, is the one that is capable of being transferred from its existing holder to a third party. Seen in this way, the alienable right or interest is not personal to the holder as now its can bind people beyond the original parties to the contract.
It would be interesting to further inspect this peculiar right or interest granted to the buyer by the pre-registration law, but given the lack of space, it is suffice to conclude that the effects of pre-registration of a contract to sale a property is by no means a commonplace.
Ms. Shadha Zawawi is an associate in the real estate practice group at The Legal Group and can be contacted on +971 4 4477044. The views expressed in this article do not necessarily constitute the views of Zawya.
© The Legal Group 2011
"The Federal Law No.13 of 2008 Regulating the Interim Real Estate Register in Dubai came as a ray of hope for greater protection of investors after the crash of real estate market. This article attempts to explain the rights of a buyer of an off-plan property and the kind of interest a purchaser acquires on pre-registration" The ownership of a piece of land remains one of the most rich and complex relations of human with the Earth. It is an idea that seems to evolve from man's territorial consciousness and now defined as the most extensive form of right in rem. The world has seen rigorous development in protection of this right; the most secure method for absolute record of it till date is the registration of ownership of property adopted in most jurisdictions influenced by the Torrens style registration system in Australia. Needless to say, a purchase of real property is an epic and even emotional moment for a buyer whose relationship with the property as its owner binds the whole world once evidenced and secured by proper registration.
The case with established property is a straightforward one. After concluding a sale and purchase agreement (SPA), the purchaser can head towards registering its name in the relevant local land's department or registry. In the Emirate of Dubai, registration of proprietary interest in the Real Estate Register in the Land Department is governed by Federal Law No. 7 of 2006.
There is a growing trend, mostly in developing countries, of selling off-plan units which serves as a useful investment vehicle and benefits both the buyer and purchaser. While there are advantages of acquiring properties in this way, say where a purchaser get to buy a property at 'today's market price' but only pay the majority of the purchase price many months down the track, the risk associated with the same also lurk around. Some examples of these risks include the possibility of developer not proceeding with the development within the time specified in the contract or a marked difference in the structural plan as opposed to what was agreed for. In an era of economic crunch prevailing in the Emirate of Dubai, these risks surfaced and have been well documented. However, the aim of this article is directed more towards how adequately the law in the Emirate of Dubai protects the purchasers of the off plan unit from such associated risks with specific emphasis on the kind of rights and interest acquired by the purchaser by such law.
The interim registration and Law No.13 of 2008
The Federal Law No.13 of 2008 Regulating the Interim Real Estate Register in Dubai (the "Law No. 13") came into force on 31 August 2008 ensuring greater protection to the investors in off the plan property by mandating the pre-registration of the off plan sales for real estate units in Interim Register in the Lands Department. The effect of Law No.13 is that sales or transfers that are not recorded in Interim Register are considered void. It further required developers to register sale and purchase agreements entered into prior to Pre-Registration law within a time-limit of sixty days of the law coming into force.
The maintenance of Interim Register in the Emirate of Dubai sets up a registration system which goes beyond any ordinary registration system whilst envisaging the need to accommodate new developments in how title to land is perceived in different kinds of property. Further, by setting up time-limit for registering the off-plan units sold prior to coming into force of the Law, the Emirate of Dubai has shown a serious and pro-active commitment in ensuring a robust and effective registration system.
The Interim Register is maintained parallel to the Real Estate Register and is supplementary to it; however, a significant difference to be borne in mind is that technically a purchaser of the off plan unit registered in the Interim Register does not obtain ownership rights in the unit until it is physically complete and the full purchase has been paid to the developer. In the event the property is complete and the purchaser has paid the full purchase price, it is the right of the purchaser to have the title to the property registered in his name in the Real Estate Register maintained by the Land Department which is the conclusive evidence of the ownership of property.
Article 8 of the Law No. 13 provides:
"Developers must register completed projects in the Real Estate Register maintained by the Department as soon as a completion certificate has been obtained from the Competent Authorities, including any units that were sold to purchasers who have fulfilled their contractual obligations according to the applicable procedures of the Department."
Hence pre-registration of a sale and purchase agreement provides a sort of security to the purchaser of its title-to-be until the period the final registration is eventuated in accordance with Article 8 of the Law No. 13.
Another important and distinctive provision of Law No. 13 is Article 6 whereby a real estate property registered in the Interim Register "may be sold, mortgaged or otherwise legally disposed of". Article 6 provides an opportunity for the purchaser to use the property in ways outside the contractual agreement. It gives the right to create interest in favor of a third party and hence is one step ahead of acquiring a mere personal interest. On look of it, the pre-registration system endues the characteristic of alienability to a contract of sale of off-plan unit. An alienable right or interest, by definition, is the one that is capable of being transferred from its existing holder to a third party. Seen in this way, the alienable right or interest is not personal to the holder as now its can bind people beyond the original parties to the contract.
It would be interesting to further inspect this peculiar right or interest granted to the buyer by the pre-registration law, but given the lack of space, it is suffice to conclude that the effects of pre-registration of a contract to sale a property is by no means a commonplace.
Ms. Shadha Zawawi is an associate in the real estate practice group at The Legal Group and can be contacted on +971 4 4477044. The views expressed in this article do not necessarily constitute the views of Zawya.
© The Legal Group 2011
