Extent of property rights conferred on expatriates

Under Abu Dhabi’s property laws, you (as a non-national, non-GCC) are entitled to own, purchase, sell, lease out, mortgage, and invest in floors and apartments (excluding lands) in Investment Zones. Further you can enjoy 99-years leases of already built-up land, (known as usufruct leases), and 50-year development leases (known as musataha leases), which shall allow you to built and enjoy undeveloped land. Both “usufruct” and “musataha” leases may be renewed for like periods of time upon agreement between the parties. Unless otherwise agreed between the parties, a person holding a “usufruct” or “musataha” right for more than 10 years may transfer that right without the permission of the owner/landlord of the land. However, unless agreed otherwise, the owner or landlord may not mortgage their interest without the consent of the owner of the “usufruct” or “musataha” right.

Recently it has been announced by the Abu Dhabi Municipality that foreigners will now be allowed to own property in Abu Dhabi on a freehold basis in designated investment zones as opposed to leasehold arrangements with 99-year leases. However, the situation would be clearer once details of such freehold arrangement or an explanation would be provided on how exactly it shall differ from other property rights in Abu Dhabi.

Are you purchasing an ‘off-plan’ or ‘resale’ property?

There are different sets of protocols applicable depending on whether you purchase a property under construction or a completed property. With regards purchasing “off-plan” properties take note of the following:

The most important initial step is to ensure the developer is registered with the Department of Economic Development in Abu Dhabi. Whenever you are purchasing property that has yet to be completed, ensure that the purchase agreement includes the completion date and the compensation awarded if the property is not completed by that date. Furthermore, if the property is to be furnished, decide on an appropriate deadline for furnishing and attach a schedule identifying the furnishings.

Unlike Dubai, at present Abu Dhabi does not have legislations relating to off plan sales or imposing escrow account requirements, making it even more important for you to exercise caution at the time of purchasing such off plan properties.

You should not pay any part of the purchase price without having a sale agreement or other form of contract in place. A simple sale agreement is the only document required for purchase. However, this is legally binding and should only be signed when all reasonable due diligence on both the property and verification of seller’s ownership have been undertaken and all negotiations completed. If you are purchasing on the secondary market it is advisable that the deposit should be held by the broker or your lawyer in escrow pending transfer.

Your due diligence should include verification of the seller’s ownership of the property and his ability to on-sell the property to you, inspection of the property and verification of the size and other particulars of the property, identify the warranties to be assigned to you at the time of purchase and whether the property is currently tenanted, because by law the sale is subject to tenancy rights. In respect of off-plan sales additional due diligence in relation to the developer, construction progress and his ability to complete the project should be undertaken. It is also important to have a construction linked payment plan rather than having the liability to make payment on specific dates to the seller.

It is also very important to accurately determine if the property you intend to purchase has existing finance, and from which lender as the seller’s existing mortgage has to be cancelled before the property can be transferred into your name. It is also advisable to have professional assistance with the due diligence and purchasing process, though this is not a formal requirement in Abu Dhabi.