Ask the expert: Property registration

Dubai Land Department has banned the registration of property in the name of virtually all ‘offshore companies’ or companies not registered onshore in Dubai. This came into effect on January 1, 2011.

The one exception to the ‘offshore company ban’ is the Jebel Ali offshore company. But how are individual investors affected?

Individuals can still buy property in their own names, but the change is that previously they could use any foreign company to hold their property (if they wanted to), but now they can use only a company that is registered with a trade licence in Dubai, or a Jebel Ali offshore company.

Here are some frequently asked questions and their answers which will inform non-GCC purchasers and investors about the implications of the Land Department’s new rules, and how the recent changes will affect foreign companies purchasing and registering property in Dubai.

Why would one use a company to purchase a property in Dubai?

There are a number of good reasons why the use of offshore companies has become so popular when buying property in Dubai. The most obvious reason would be the avoidance of complicated inheritance procedures.

A company does not die. If your property is held in a low-cost offshore company, you (and your partner or partners) can own the shares of it as you see fit. So rather than have your individual names on the title of the property, you have a company name.

This is a very easy method for joint investment, for confidentiality, and for organising one’s assets under a manageable structure (and in many cases, in a common-law structure).

So the only ‘offshore company’ that I can currently use to buy property in Dubai is the Jebel Ali offshore company?

Correct. This applies only in Dubai. For example, you can still buy property in Abu Dhabi through a BVI (British Virgin Islands) company.

The Land Department decision of January 1, 2011, has confirmed that it will not register property title to any foreign company, unless that company is registered offshore with the Jebel Ali Freezone (Jafza).

But can a foreign company own the Jebel Ali offshore company?

Yes. You can, for example, use a BVI company or a common-law trust to hold the shares of your Jebel Ali offshore company. You will still need to show the Land Department evidence of the ultimate individual owner(s), with attested share certificates and passport copies.

What if my property is not yet delivered? I signed the sale and purchase agreement before January this year in my personal name. Can I now switch to a company name?

The Dubai Land Department has an interim property register, and a main property register. Until your property is listed on the actual main property register (which happens after handover), then it is possible to change the title from an individual name to a Jebel Ali offshore company, provided you can show that there is no change in the beneficial ownership (which means the individual on the initial agreement is the owner behind the company as well).

But will there be an additional transfer fee, if the sale and purchase agreement is not currently in the name of a Jebel Ali offshore company?

In order for the registration of title to take place, the developer of the property must issue a no objection certificate (NoC) consenting to the registration in the name of the Jebel Ali offshore company.

As mentioned above, normally the developer will want to see clear evidence that the person named on the sale and purchase agreement is the same person as the beneficial owner behind the new Jebel Ali offshore company. The developer normally charges an administration fee, which should not be more than Dh3,000 – Dh5,000, to issue the NoC.

If the developer and Jafza both issue NoCs to the Land Department authorising the registration in the name of the Jafza offshore company, it is normal that the registration can be completed without charging an additional transfer fee, again provided that the ultimate beneficial owners of the new Jafza offshore company are the same as those mentioned in the original sale agreement.

What if my BVI company already holds the title deeds to my property in Dubai?

The recent changes to the policy only apply to registrations of titles taking place from January 1, 2011, and do not affect any that took place prior to that date.

Does Jafza allow offshore companies to own property anywhere in Dubai?

Through the 2006 Circular that Jafza issued, it states that Jebel Ali offshore entities can own property in any projects in Dubai that were owned by Dubai World, Dubai Holdings and Emaar Properties.

While we understand that there is no restriction on any freehold property, Jafza offshore companies must still obtain an NoC from Jafza in order to register title at the Land Department.

To date, we have not ever had a refusal for an NoC when clients are looking to own property outside the projects listed on the 2006 circular.

How is the Jebel Ali offshore company set up? How much will it cost me?

The set-up [of the company] is fairly straightforward, with normal due diligence required on all proposed directors and shareholders. It will take about four to five days to incorporate, and requires the shareholders of the company to visit the freezone and sign [the agreement] or provide a power of attorney to someone to act on their behalf.

The cost is $4,250 (Dh15,598), and annually there is a registered agent fee of $1,950 (Dh7,157). Sovereign Dubai is one of the oldest registered agents with Jafza, and the firm has a dedicated corporate services department of 25 people who are there to assist with all company formation related enquiries.

What if I want to sell my property and it is owned by the company, how do I do it?

You have two choices here, you can either sell the property out of the company, by simply signing the sale documents as a director of the company, or you can sell the shares of the company, (assuming the company only holds one asset, which is the house).

The Land Department will need to be notified of the change in beneficial ownership of the company, with certified documents to be provided from Jebel Ali Freezone (all of which Sovereign Dubai can assist with).

Questions answered by John D. Hanafin, Managing Director of Sovereign Group: www.sovereigngroup.com