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While its property laws predate real estate legislation in other emirates, Sharjah has been a lot more deliberate in introducing changes to property regulations. Law No. 10 of 1972 established a Real Estate Registration System in Sharjah, while Law No. 4 of 1980 or the Joint Ownership Regulation introduced the concept of strata ownership, which was a first in the UAE.
However, for more than 40 years since it became the first emirate to regulate real estate, Sharjah kept its property market strictly off limits to non-Arab buyers and investors. Even during the real estate boom, when other emirates started announcing long-term leasehold and freehold regulations, Sharjah remained adamant.
Abdullah Khalid, Associate Partner at law firm Al Tamimi and Co., talks about the history of real estate legislation in Sharjah.
- How has Sharjah's real estate laws evolved over the years?
Sharjah was the first emirate to regulate its real estate market by the issuance of Law No. 10 of 1972 concerning the Real Estate Registration System. It was recently replaced by Law No. 5 of 2010 Concerning Real Estate Registration.
Article 4 of the new law restricts the ownership of real property rights in Sharjah to UAE and GCC nationals, companies fully owned by UAE and GCC nationals, or a combination of both. Furthermore, Sharjah has regulated strata ownership through the issuance of Law No. 4 of 1980 concerning joint ownership regulation.
- His Highness Dr Shaikh Sultan Bin Mohammad Al Qasimi, Member of the Supreme Council and Ruler of Sharjah, issued Executive Council Resolution (ECR) No. 26 of 2014 last November. What are the key points of this law?
It permits the sale of usufruct rights through a usufruct system managed by the Sharjah Real Estate Registration Department (SRERD). Foreign nationals are now permitted to purchase real estate through a usufruct property right for a maximum period of 100 years. They can also assign the usufruct right to a third party subject to the SRERD's approval.
- Is it correct to call ECR No. 26 of 2014 Sharjah's leasehold law?
Legally speaking, the new resolution is not considered a leasehold law. It only regulates usufruct, which is similar to leasehold in Dubai.
- How would a project be eligible for leasehold under the new law? Are there any special requirements?
Article 3 of ECR No. 26 of 2014 lays down the requirements for granting usufruct licence to developers:
1) The usufruct period shall be for a maximum time of 100 years.
2) The project plot shall be owned on a freehold basis by the licensed developer.
3) The developer must register the project with the SRERD prior to marketing or selling usufruct rights.
4) The developer shall furnish the SRERD a guarantee from a UAE bank equal to 20 per cent of the value of the project prior to the sale of usufruct rights
5) The licensed developer will be required to sign the SRERD commitment form
- Does Sharjah's new leasehold regulations differ from those in other emirates, particularly Dubai and Abu Dhabi?
Dubai and Abu Dhabi do not have a detailed regulation with respect to usufruct as both rely on the provisions of the Federal Civil Code, Law No. 5 of 1985. Sharjah is the first emirate to issue an ECR, which regulates the usufruct right in such detailed manner.
- Does the new law also cover leasehold arrangements for industrial and commercial property?
The law is silent regarding this point. However, we would like to highlight that it has not been tested at the SRERD. The next regulation to be issued may determine further investment zones and provide detailed planning regulations covering industrial and commercial properties.
- What happens if the lease expires?
Article 10 of ECR No. 26 of 2014 states that the usufructuary — beneficiary of the usufruct right — shall return the property and annexes upon expiry of the usufruct period or for any of the reasons of usufruct termination, unless the agreement has stipulated otherwise.
Property legislation timeline by Al Tamimi and Co.
Law No. 10 of 1972 — Sharjah becomes the first emirate to regulate its real estate market. The law, however, was silent on foreign ownership.
Law No. 4 of 1980 — Law on jointly owned buildings that contain several floors or apartments. The law did not have provisions for foreign ownership.
Law No. 5 of 2010 Concerning Real Estate Registration — Replaced Law No. 10 of 1972 and has provision for ownership by GCC citizens.
Executive Council Resolution No. 26 of 2014 — Permits the sale of usufruct rights through a usufruct system managed by the Sharjah Real Estate Registration Department. The law opens the market to foreigners through long-term leasehold arrangements of up to 99 years.
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Source: Jobannie Tabada, Features Editor, Property Weekly