Jorg Seifert, a member of the Property Lawyers Abroad Network (PLAN), answers questions about the legal side of buying in Dubai
What is the market currently like in Dubai?
The property market in Dubai is buoyant. More and more projects are coming up. Although some people are calling the Dubai property market a bubble waiting to burst, this is not true since prices are still on the rise and demand for rental space is bigger than availability. At present each month 15,000 people are coming to Dubai to become residents. By 2010 the population of Dubai is expected to double.
Of course no one can expect today premiums on the secondary market of 150 per cent, which was experienced at the beginning when the property market opened for foreign investors. However, a healthy growth is and will be seen also in the long-term future.
Taking into consideration that Dubai is located in the middle between the Asian and the European markets and its tax free environment, more and more investors will come to Dubai.
What should the buyer look out for when purchasing in Dubai? Are there any issues specific to this location?
Buyers should deal with top developers and top real estate agents. In March 2006, Dubai issued its long awaited Property Law, and the legal aspects of any property purchase are now safeguarded. Property owners will be entered in the register of the Lands Department and receive a Title Deed (the process of registering will start soon). A notarization of the property purchase contract is not required. The purchase contract itself should hence always be checked by a lawyer.
How does the legal process work in Dubai?
It depends whether a property is purchased on the primary or secondary market. On the primary market the property will be directly sold by the developer. Buyers usually sign a reservation form and make a down payment; thereafter they receive the purchase contract.
It is advisable to make any such payments through an escrow account (PLAN provides an escrow facility) of a law firm rather than to the developer or real estate agent. Once the property is fully paid the developer is obliged to register the property with the Lands Department.
On the secondary market a transfer takes place whereby the developer, the seller and the purchaser first sign a deed of assignment, then the purchaser pays the seller the amount the seller has already paid to the developer plus the premium asked by the seller. The seller pays a transfer fee of up to two per cent to the developer, and the developer issues a new purchase contract to the purchaser. The seller and the buyer can be represented by a lawyer who shall hold a notarized and legalized power of attorney.
Of course no payments shall be made by a purchaser to the seller prior to the sale. Sellers are advised to make any such payments through an escrow account of a law firm. On the date of transfer the lawyer will then present banker’s cheques to the seller.
What legal costs can buyers expect?
The legal costs depend on the services required by the lawyer. Usually if the lawyer fully represents e.g. the buyer on the secondary market, a certain percentage of the sales price is charged.
How long should the legal process take?
Due to the fact that no notarization is required a transfer can be completed in one day.
Should buyers trust legal services offered by their developer or agent?
Recommendations made by developers or agents may be trusted since the top developers and agents only deal with top law firms and vice versa.
Is it safe to buy in Dubai?
Definitely.
What is the most important piece of advice you would give to someone looking to buy in Dubai?
Location is critical.