25 Apr 2022

With the rapid developments over the past decade or so, and a greater range of expatriates flooding into the vicinity thanks to the investor-friendly rules, golden job opportunities, and dynamic company culture, the real estate market in Abu Dhabi is trending upwards in the region thus creating the need for more real estate units to meet the growing demand. Therefore, many want to buy real estate of all kinds in the Emirates to invest or live in it. The population of Abu Dhabi is approximately 2.9 million, according to mid-2016 statistics. The Emirate provides them with many housing options, from apartments for rent in Abu Dhabi or villas for rent in Abu Dhabi, where various types of housing units can be found throughout the capital. Given the increasing demand for rental properties, both tenants and landlords should know the rental laws in Abu Dhabi. This article, therefore, continues our focus on the development within the real estate market and the new laws concerning it and everything else you need to know about the tenancy laws and rental laws in the Emirate of Abu Dhabi.

Overview

Law number 3 of 2005 regulating the real estate sector in the Emirate of Abu Dhabi came at the right time to work to increase the regulation of this sector and improve transparency, as it includes rules and executive regulations to cover all issues that were not addressed in the past, such as the case of breach of the implementation of the sales contract on the plan and the failure to complete the project before the developer. All of these rules aim to protect the rights of developers and buyers of real estate units and to fill all legislative loopholes and gaps, which would create an attractive investment environment that ensures that the rights of all parties are preserved with complete transparency. Significantly, The UAE nationals were permitted to sell or purchase residential, commercial, investment, or agricultural land assigned to them by law, with the condition that at least 5 years ought to have passed since the date of such allotment. Subsequently, provisions were introduced by Law Number 19 of 2005 regarding possession, development, leasing, and mortgaging of land and property in Abu Dhabi, and discriminate between the rights of UAE citizens, GCC nationals, and non-UAE/GCC nationals. The Municipal affairs department is responsible for regulating the real estate sector in Abu Dhabi, developing it, and controlling and supervising everything related to this sector. It has the right to keep a record of all real estate, recording all real estate-related transactions, reviewing the sale documents, and verifying the signatories in the papers submitted to it. In 2015, the Abu Dhabi Government issued a brand-new law concerning the regulation of the real estate sector within the Emirate which contributed towards the expansion of the economy, likewise as attracting foreign investments, which will be discussed later.

Ownership of the real estate

In Abu Dhabi, according to the nationality of the investor, the acquisition of property rights is limited by local laws and practices. The UAE nationals face no restrictions. Nationals of a member state of the Gulf Cooperation Council (GCC) (other than the UAE) do, however, face some restrictions in respect of Abu Dhabi property rights. Persons falling outside of these two categories (foreign nationals) will find that they are subject to the most restrictions. The local government can disapply these restrictions in certain areas. Parties can invest in real estate in the following arrangements:

1. Freehold ownership

Freehold ownership gives the owner complete, utmost, and comprehensive ownership over the particular property, depending on their nationality or place of registration. There are four classes of people who would like to own property in Abu Dhabi: –

UAE nationals and companies wholly owned by UAE nationals;
The UAE Federal Government, governments of individual Emirates or their entities;
Entities owned by the Abu Dhabi government; and
Foreign individuals and businesses that do not come within the scope of the two categories above.

The Abu Dhabi Property Law has no limitations for UAE nationals and UAE companies from owning real estate property in the Emirate. The Gulf Co-operation Council citizens are allowed to purchase land in designated investment zones in Abu Dhabi. However, Non-UAE nationals, i.e. foreigners or expatriates are only permitted to own, purchase, sell, mortgage, and lease out a property in certain nominated areas which are known as Investment Zones. These include areas of land within Abu Dhabi where GCC nationals and foreigners are given real property rights. It is noteworthy that foreigners have the right to own apartment units and entire floors within Investment Zones, or usufruct and musataha rights. However, this right does not include an associated right to a portion of proprietorship of the original land on which the construction is situated. The following investment zones are included in Abu Dhabi:

Al Reef
Golf Gardens
Mangrove Village
Raha Beach Area
Al Bandar
Al Zeina
Al Manara
Al Reem Island

2. Leasehold ownership

It is like a temporary right of ownership. A leasehold means a property that can be taken on a lease from a freeholder for 99 years or 50 years in certain cases. Leasehold properties are offered in two forms “Musataha” and “Usufruct.” There is an obligation to register all leases inside the national capital. Failure to register a lease, or amendments to it, can result in the lease documentation (or such amendments) between the parties being thought-about to be not enforceable save for the private obligations between the parties.

In Abu Dhabi, there are 2 systems of lease registration:

Tawtheeq – for leases with a term of fewer than four years
Tamleeq – wherever a lease is for a term greater than four years

3. Jointly owned property

In Abu Dhabi, there are 2 systems of lease registration:

Tawtheeq – for leases with a term of fewer than four years
Tamleeq – wherever a lease is for a term greater than four years

Registration

The property rights and long leases ought to be registered with the Department of Municipal Affairs (Abu Dhabi Municipality) on its real estate register. The owner of a property then receives as proof of ownership a title certificate. Contracts for properties purchased off-plan ought to be registered with the national capital Municipality on its register of off-plan properties. Short leases ought to be registered with the national capital Municipality on its register of occupancy contracts (Tawtheeq) in line with the Law number 49 of 2018, the fees for the registration of sales and purchase are set by the chief committee mentioned under this law. The fees to be paid for registration are between a minimum of 1% to a maximum of 4% of the transaction value. The relevant authority has the discretion to decide according to the value of the related purchase. If there is any legal compilation you can reach out to the best real estate lawyers in UAE.

Abu Dhabi Global Market

Abu Dhabi Global Market (ADGM) is an international center located in Abu Dhabi formed in 2013 and has since been developing its infrastructure to position itself as a top recognized center with reliable regulatory rules, including jurisdictional and dispute resolution systems, under the long-term economic strategy of United Arab Emirates’ capital on a world scale. The free zone has its own civil and commercial laws and judicature which differs from federal regulations. The aim is to make a legal background in an exceeding manner through which international investors know, trust, and are conversant.

Legislative Framework

The legislation that governs real estate in Abu Dhabi is as follows:

Law Number 3 of 2005 concerning the regulation of Property Registration in Abu Dhabi
Law Number 19 of 2005 regarding the regulation real estate sector in Abu Dhabi
Law Number 13 of 2019 regarding the amendment of the real estate property law.

Law Governing Abu Dhabi Real Estate Investment

Law Number 19 of 2005 regarding the Regulation of the Real Estate Sector in national capital permits expatriates to possess properties within the form of floors and flats solely, not lands, through four main systems:

Ownership: The ownership system is based on ownership titles determined for foreigners that provide for the ownership of housing units only, without land, for a period of up to 99 years. This system gives them the right to fully dispose of the purchased housing units, whether real estate apartments or villas.
Musataha: A Musataha agreement gives its holder the right to construct a building, mortgage, sell, lease, purchase a plot of land that belongs to a third person for 50 years. Also, this is a renewable right and can be extended with the consent of the parties for a further term of up to 50 years. Musataha agreements have been defined in article 1353 of the UAE Civil Code as “an ownership right conferred upon a person allowing him o construct a building, alter the property or to plant on the land which is owned by another person for a maximum period of 50 years.” In Abu Dhabi, the Real Estate Ownership Law deals with all the rights and registration processes concerning the musataha rights. The musataha agreements must be registered with the land department incorporated within Abu Dhabi municipality. If the musataha agreement is not registered could lead to the unenforceability of the document. The property cannot be mortgaged by the landlord without the previous consent of the owner of the musataha right. The point of legislating such a special type of land ownership is primarily to encourage investment without the investor’s ownership, which is what is currently known in the world as freehold. The musataha right is also different from the usufruct right in that the latter confers upon its owner the powers of use and exploitation, but it also requires that the thing on which the usufruct is given be something that is not destroyed by mere use so that it can be returned after the expiry of its term. As for the musataha, it concerns only the land and does not include any existing facilities before the conclusion of the contract, as the musataha is the one who constructs the building or erects the planting
Usufruct: A usufructuary right is one of the civil law rights, which is the right to use the property of others provided that its content is not changed or damaged, it gives the right to own, use, or manage movable property or immovable property, or consumer or non-consumable property, and the enjoyment of the benefits resulting from the property subject to usufruct, and the right of usufruct may be determined for a certain period, or it may continue until the end of the thing on which the usufruct is contained, and usually this right arises through the application of the law, regardless of whether this act was voluntary by the property owner or not. Article 1333 of the UAE Civil Code governs the usufruct rights defining it as a right in rem given to the usufructuary to use a real estate owned by another and utilize it as long as it remains intact. Under the usufruct contract, foreigners can own housing units for 99 years within certain investment areas.
Long-term lease: long-run lease is given for an initial period, not less than 25 years.

Implementation of new property law

The ownership of real estate was restricted to UAE and GCC nationals before the most recent amendment. However, this amendment is of great importance since it allows non-nationals to purchase and conduct the sale of land and not only the property that stood on the land. In April 2019, the governor of Abu Dhabi His Highness Sheikh Khalifa bin Zayed Al- Nahyan, issued Law Number 13 of 2019 amending some provisions of Law Number 19 of 2005 regarding real estate ownership. The amendment allows foreigners to own real estate properties in Abu Dhabi investment areas. The new law stipulates replacing the texts of Articles 3 and 4 of the law. The new Article (3) states that the right to own real estate is limited to the following categories:

Citizens and the like, natural and legal persons
Public shareholding companies in which the shareholding of non-nationals does not exceed 49%
Anyone on whom a decision is issued by the Crown Prince or the Chairman of the Executive Council

The Law also stipulates that foreigners, whether natural or legal persons have the right to own and acquire all the original and dependent real rights over real estate located within the investment areas, and they have the right to make any disposal of these real estates. As for the new Article (4), it stipulates that whoever has a usufruct or a musataha right for more than 10 years, without the owner’s permission to dispose of this right, including mortgaging it, and the owner of the property may not mortgage it except with the consent of the owner of the usufruct or musataha right, and in both cases, the two parties may agree otherwise.

Foreign ownership in Abu Dhabi

Local law provides that foreign nationals, and entities owned in whole or partly by them (foreign entities), can own certain property rights within the investment zones of Abu Dhabi. The obtainable property rights include possession of flats and floors in buildings (with no right to the underlying land), usufruct, and musataha. The investment zones include projects like Al Raha Beach, Reem Island, and Saadiyat Island. Through exemption, the authorities will authorize possession outside the investment zones on an individual basis. Foreign nationals and entities can hold leases of property placed inside the investment zones by a written agreement for a term of 99 years. They can additionally hold leases of property placed outside the investment zones but are restricted to a written agreement term of 25 years. GCC nationals, and entities incorporated within the UAE or GCC that are owned wholly by GCC nationals or partly with UAE nationals, will own constant property rights as foreign nationals and, additionally, freehold within the investment zones.

Conclusion

The introduction of the new law was roundly received in Abu Dhabi. The implementation of the supporting processes administered by local government bodies is underway. It is hoped this will be completed promptly and comprehensively so that the greatest possible benefits of the new law can be realized. However, the challenges brought about by lower oil prices, fluctuations in global currency markets, and wider geopolitical issues are expected to remain for the foreseeable future, with public investment reduced and projects slowed. Having emerged from the global economic slowdown, the real estate sector continues to face defining challenges.

Understanding Real Estate Laws in Abu Dhabi