How a Real Estate Attorney could be of any help to investors in the UAE?
It is fundamental to have a full inspection of the fundamentals of the asset and the parties involved in the agreement whether you’re buying or selling property in the United Arab Emirates. The more valuable the deal, the more important it is to conduct due diligence in these areas. Before you pay the deposit or sign any contracts, a Real Estate Attorney will evaluate the authenticity of proof of title to ensure that the property is clear of encumbrances or legal barriers.
Real Estate Attorney’s responsibilities include: explaining and creating the Memorandum of Understanding; reviewing completion dates and advising on any potential special conditions relating to the acquisition; and advising on any potential special conditions relating to the purchase. Keeping the deposit checks until the transfer is completed; Assuring that all maintenance/service payments are paid in accordance with the developer’s NOC application requirements; drafting and certifying the final transfer documents, which includes a breakdown of all amounts involved.
If your attorney works for a full-service law practice, they can ensure you have a legally valid Will in the UAE as well as a UAE Power of Attorney at the same time as the property purchase. In the UAE, buying property and making a Will go hand in hand, as failing to do so could result in your estate being subject to Sharia Law if you pass away in the UAE.
Before explaining what Real Estate Attorney’s responsibilities include, we shall give some context regarding the UAE Real Estate Market, especially in the cities of Dubai and Abu Dhabi.
- The UAE Real Estate Market
The all-residential property price index (RPPI) in Dubai dropped by 6 percent from February 2019 to February 2020. Dubai property prices declined 5.01 percent when adjusted for inflation. In the year leading up to February 2020, apartment prices in Dubai declined 5.39 percent (-4.39 percent inflation-adjusted). During the same time period, villa prices dropped by 10.04 percent (-9.09 percent inflation-adjusted). The housing market in Abu Dhabi is likewise in a slump. In February 2020, Abu Dhabi’s all-residential property price index fell 7.62 percent year on year. When adjusted for inflation, property prices in Abu Dhabi fell 6.65 percent. The price of an apartment in Abu Dhabi has dropped by 7.65 percent (-6.67 percent inflation-adjusted). The price of a villa has dropped 7.74 percent (-6.77 percent inflation-adjusted). The market is being dragged down by a tremendous excess supply of flats. Over 35,000 apartments were finished in Dubai in 2019 (the most ever delivered in a year), raising the total residential stock to about 555,000 units. In 2019 in Abu Dhabi, around 4,000 units were added to the market, increasing the total stock to 261,330.
Other factors that led to the housing market’s downturn include: The Federal Mortgage Cap, which was implemented in 2013, halted residential price increases in Abu Dhabi and Dubai; the introduction of a 5 percent value-added tax (VAT) in January 2018, which applies to property sales after three years of project completion. The Dubai Land Department boosted property registration fees from 2 percent to 4 percent to reduce property demand. Sales within three years of completion receive a 0 percent VAT rate.
According to the Central Bank of the UAE, the UAE’s overall GDP grew by 2.9 percent in 2019 compared to the previous year, an improvement above the preceding year’s 1.7 percent expansion. Last year, the country’s hydrocarbon industry increased by 7.6 percent, while the non-hydrocarbon sector rose by 1.1 percent.
- Rental Yields
Dubai’s gross rental yields are now moderate. In Dubai, apartments presently sell for between US Dollars 4,400 and US Dollars 6,000 per square meter: The average price per square meter for a medium-sized apartment (120 per square meter) is US Dollars 5,900. Smaller flats (90 square meters) are less expensive, costing roughly US Dollars 4,400 per square meter. We estimate that much smaller apartments of 70 per square meter and under might generate rental yields of up to 7 percent based on past years’ study. That’s where the real money is made. Gross rental yields or the gross returns on investment assuming the unit is fully rented out, range from 5.2 percent for medium-sized apartments to 5.9 percent for somewhat smaller flats, with the difference due to the smaller apartments’ lower per-square-foot cost. Smaller flats are normally more expensive than larger apartments per square meter in other major world cities, which is an atypical pattern. Medium-sized apartments rent for an average of US Dollars 25.6 per square meter per month, while smaller flats rent for US Dollars 22 per square meter per month. According to these rental levels, a 90 per square meter apartment may make roughly US Dollars 2,000 per month in rental income, while a 120 per square meter unit can earn around US Dollars 3,100 per month in rental income.
- Taxes and Costs
Dubai has a low tax rate on rental revenue. Rental Income: There is no income tax, but there is a 5 percent tax on residential leases, which is assessed on the rental income. In Dubai, capital gains are not taxed. The problematic topic of inheritance has sparked much discussion. Once the new Land Law is passed, it is hoped that the situation would become clearer. The charge for renewing a resident’s visa is AED 1,360 (US dollars 370) every three years.
- Buying Guide
In Dubai, total transaction expenses are quite cheap. Total round-trip costs are in the range of 5 percent to 9 percent. Dubai has no property-related taxes, which explains the cheap transaction costs. A registration cost of 2 percent of the property value is paid by both the buyer and the seller. The fee charged by a real estate agent ranges from 1 percent to 5 percent of the property value.
- Landlord and Tenant
The renting law in the United Arab Emirates is pro-tenant. In 2006, the government imposed a 15 percent rent restriction, which was later reduced to 7 percent in 2007. In an effort to decrease inflationary pressures, the rent cap was reduced to 5 percent in 2008. Dubai’s Real Estate Regulating Agency (RERA) introduced a new rental index to replace rent limits in January 2009. A new rental law in Dubai was enacted as a result, creating the rental index as a standard for rent increases. RERA, on the other hand, has been chastised since the new rent values were far higher than existing market rental rates. The rental index, which was created in mid-2008 (at the height of the property bubble and before the global financial crisis), offers an exaggerated picture of rents in Dubai. Tenants were outraged and perplexed as their landlords raised their rents to unjustified levels as a result of the difference. RERA was forced to update the new rental index earlier than expected as a result of this. In April 2009, the revised index will be issued. Tenants who have not yet renewed their leases are likely to keep their current leases until the new index is published.
2. Real Estate Attorney’s responsibilities
Real Estate Attorneys in the UAE can help you with the following:
- Conducting a title search
The title search of a property is one of the most significant responsibilities of a property Attorney. This will assist the parties in learning essential data such as current judgments and any other impediments that may influence the owner’s ability to legally manage the property. Through the search reports, a property Attorney can ensure that the property is free of any obstructions.
2. Preparation of Legal Contracts
Property law involves a variety of legal contracts that property Attorneys can handle. Purchase contracts, mortgage agreements, and title deeds are among the legal papers they can prepare. Property Attorneys can help ensure that a contract adequately handles any property issues as well as any contingencies that must be addressed prior to closing.
3. Legal filings at relevant Authorities
When deeds need to be filed with relevant authorities, an attorney is familiar with the regulations and can handle the filing in a timely and efficient manner. They are well-versed in all of the rules and regulations that apply to the filing process.
4. Facilitate Transfer of Property
Property acquisition is a time-consuming and costly process that involves numerous legal procedures. Hiring a professional Attorney can assist in a smooth transfer that does not violate any of the country’s laws. A Real Estate Attorney can guarantee that a purchase deal does not conflict with any existing company or partnership agreements.
5. Proper closing of the sale on Purchase Transactions
Reviewing the sale papers and verifying the final signatures are all part of the closing process. To avoid any potential legal claims or litigation against the parties, property Attorneys assist in ensuring that all of the agents are in writing. Before attaching signatures to the final property agreements, a professional Attorney can evaluate the paperwork and provide legal guidance.
6. Negotiations during Real Estate disputes
Negotiation strategies are used by property Attorneys. Using the talents of an Attorney who is well-versed in legal complexities might be advantageous while negotiating with other parties to resolve any Real Estate property dispute. When it comes to purchasing and selling a home, there are numerous variables to consider. It’s possible that neither the buyers nor the sellers are aware of the potential problems. A professional has extensive expertise in evaluating legal documents and resolving legal challenges.
7. Decreasing the risk of being sued
Failure to disclose faults or other material facts puts you at risk of being sued by others. All pertinent issues that necessitate disclosure. A property Attorney will ensure that you are in compliance with all of these requirements and will assist you in clearing the title of any improper disclosures.
8. Support in litigation
If there is any litigation or disagreements during the procedure, a property Attorney may be required. Occasionally, there may be disagreements between the buying and selling parties over terms or discussions. A Real Estate Attorney may be required for the property, easements, or document misrepresentation. To ensure that rights are upheld and the transaction is fair, the property attorney can evaluate, negotiate, or create revisions.
9. Licensing & Permit processing
When a person needs assistance on how to use a property, a property Attorney can be very helpful. When a party applies for licenses or permits, a property Attorney’s responsibility is to guarantee that the following set of regulations are followed.
