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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.
Check out the arbitration for off-plan disputes
Source: Philip Sequeira, Special to gulfnews.com
The writer is Senior Associate at the law firm Hadef & Partners