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Sat 25 Mar 2006 04:00 AM

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Freedom to freehold: Will the new property law be enough?

With the signing off of the new Dubai freehold property law, investment in the local property market is expected to rocket, as homebuyers become more confident of their ownership rights. But, as Angela Giuffrida finds out, the new law will do more than just establish property ownership.

The release of the long-awaited Dubai freehold property law last week is expected to trigger a wave of new investment, as local and foreign homebuyers snap up property with the confidence that they are the ones who will actually own it.

It will also allow investors who have bought into the market, to register title with the Dubai Lands and Properties Department.

But the law will do more than just establish property ownership. It is expected to clamp down on issues that have hampered the Dubai property market for some time, such as zealous building owners selling property — potentially to more than one buyer — without prior consent from the master developer.

Up until now, the only way of ensuring title was by getting authorisation from the master developer, but because some agents were ignoring this, the names of many new homeowners slipped through the net.

The problem has been prevalent across some of Nakheel’s developments, prompting the company to issue a warning to homebuyers late last year.

“The law will clarify this issue to a certain extent, because clients will be more proactive about getting their properties registered legally, as opposed to just taking other peoples’ word for it,” said Manisha Dayaram, a project leader at Better Homes.

“But as yet, no documentation or procedure has been released stating exactly how this is supposed to happen; in fact, they have just said ‘don’t show up at the registry office until further notice’.

“So although the law is definitely a step forward, it has to be ratified a little more proactively in terms of stipulating that brokers must have an agreement with major developers, so that they have in their possession a document issued by the developer giving them the authority to sell that property to somebody else.”

Dayaram added that the Dubai property market could emulate practices taking place elsewhere in the world, such as in Canada, where property has to be sold at the developers’ site office and an introduction form signed when a broker introduces a client to a developer.

“In Dubai, it works a bit differently, and is even more confusing because developers such as Emaar and Nakheel have no control over how much commission a buyer actually pays.

“A good way to go about it might be for the developers themselves to pay commission to brokers, added to the price of the property; otherwise a buyer just hands over a cheque for the commission and price to the broker and developers have no clue as to what’s going on.”

Other questions that need to be clarified by the law include the question over which areas of Dubai will be opened up for foreign freehold ownership of land and property.

A number of bylaws governing the sector, such as quality of construction, penalties relating to project delays and a mechanism to resolve disputes, will also be issued over the next few months.

“Although the law makes it clear that foreign ownership will be permitted, exactly where is something that is unclear at the moment,” said Mohammed Kamal, a lawyer at Al Tamimi & Co.

“The main question that people are asking us is whether the law confirms the right of foreigners to own freehold or leasehold property interests in all those areas of Dubai where properties have been sold to them.

“We await the announcement of these areas, but the expectation is that they will include the projects launched and developed to date by Nakheel, Dubai Properties and Emaar. If this is confirmed, then the result will be a huge boost of confidence to the Dubai real estate market.”

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