How Abu Dhabi’s new property law affects you

The new Abu Dhabi Property Law (Law No. 3 of 2015 on the regulation of the real estate sector in the emirate of Abu Dhabi) retains many basic fundamentals of the existing law, such as requirements for information and registrations associated with various dimensions of dealing in property and procedural market practices. However, its scope has been expanded to include many aspects which were previously either unclear or unaddressed. 

 

1. Rights over off-plan units

 

The most important regulation of the new law concerns off-plan sales, by giving rights to investors over property that is intended to be built by a developer. An investor can terminate the off-plan sale contract if there is any gross breach of contract by the developer. 

Likewise, investors can also exercise their rights if the developer delays construction of the project, delays meeting project milestones, or fails to complete construction in breach of contractual obligations. 

   

2. Sales of off-plan units 

 

Developers are not allowed to sell off-plan units unless they prove their rights over the proposed project land, open an escrow account for the project and follow specific requirements for payments from and into the account, and comply with various conditions for advertising and marketing off-plan projects.

 

3. Licensing of all parties 

 

No one can engage in any kind of real estate activities, or claim associated remuneration and fees, before obtaining a licence from the Abu Dhabi’s Department of Municipal Affairs (DMA). Entities and/or persons allowed to obtain licences are master developers, sub-developers, brokers and their employees, owners’ association managers, appraisers and surveyors. 

 

4. Punishments for erring parties 

 

Any person who conducts the real estate activities listed above without appropriate licences are likely to be punished by imprisonment and/or fines ranging between Dh 50,000 and Dh 200,000.

 

5. Licensing of mortgage providers 

 

All providers of home financing or mortgages, whether it is a bank, finance company or financial institution, have to be registered and licensed by the UAE Central Bank to engage in real estate financing in Abu Dhabi. 

 

6. Financing for developers

 

Developers are prohibited from mortgaging the land for a proposed project - or any real estate rights related to it - unless the mortgage is specifically for the purpose of financing the building of the project. 

This is further subject to three clauses: the loan amount has to be paid directly into an escrow account, the developer must officially notify all purchasers about the mortgage, and the developer and mortgage provider must release mortgage over sold units once they are fully paid for.

 

7. Financing for buyers (mortgages)

 

Buyers do not have to pay developers any fees for registering their mortgage, and instead have to only pay administrative expenses for the registration process. 

If a buyer defaults in the repayment of a mortgage instalment, the bank will be able to enforce action immediately after giving notice to the debtor, without having to obtain a court judgment.

 

8. Registration of mortgages 

 

All mortgages have to be registered with the Real Estate Register or Initial Real Estate Register in accordance with described procedures, and those that are not will be considered void. 

If multiple mortgage applications are received at the same time, the priority of mortgages will be listed in order of time and date registered, and each will be assigned the same serial number. 

A registered mortgage will be considered as an execution deed, and can be directly executed and/or enforced before the execution court. 

 

9. Transfer of mortgages  

 

The transfer or assignment of a mortgage is now allowed, subject to the consent of the mortgage provider. The transfer must then be recorded in the original title deed and duly registered. 

 

10. Setting up owners associations

 

In multi-unit real estate developments, owners’ associations must comprise owners of all units. When formed, the owners’ association will be considered as an independent legal entity that hold the title and is responsible for all common parts of the development

The chairman of the DMA has the discretion to replace an owners’ association with either the developer of the project or a specialised entity until all practicalities are well established

 

Sources: Al Tamimi & Company, the Department of Municipal Affairs (DMA), Gulf News Archives