July 18

Legal aspects to keep in mind when dealing with any commercial space - buying and selling of commercial real estate in UAE

Writer Saleh Ahmed Alobeidli

Blog Details

The process of real estate purchase could be intriguing or daunting depending on whether you are a buyer or a seller. Either way, real estate in the United Arab Emirates (UAE) has always been a very interesting topic whether it's the new laws in this area, the fluctuating prices, or the various trends. If you are in the real estate space, it is simply important to know and understand every little detail starting with the legal aspects.

Given the level of interest in real estate in UAE, the legislation has been ever-evolving to suit the developmental needs of the economy, with the Emirate of Dubai being at the forefront of legislative developments and the capital Abu Dhabi the following suit, although with cautious optimism. The other northern Emirates like Ras Al Khaimah and Umm Al Quwain also optimistically released legislation surrounding real estate however in all cases, the only Emirate that pro-actively has promoted commercial real estate has been the Emirate of Dubai.

So holistically, what are the legal aspects of buying and selling real estate in UAE that one needs to be wary of?

1. Know the Law

Remember the UAE is comprised of 7 Emirates and each Emirate has issued its own laws and regulations relating to real estate and also have separate regulatory bodies dealing in real estate. Also, not every Emirate offers ‘freehold’ property so it is important to understand the difference in the laws affecting residential, commercial and retail property and the community regulations in a particular development you maybe considered as a buyer or are already invested into as a seller.


2. Ensure authority

More often than not, if you are a buyer, you will be dealing with a representative of the actual owner of seller, therefore it is important to establish that the person representing the owner actually has the authority to do. Do not be shy to ask for identification documents and a clear title deed to affirm you are dealing with a property that is clear from encumbrances and with persons who have authority. If you are a seller ensure that the buyer’s representative (if one) has legalized power of attorney to represent that purchase and that any monies to be received are only received through the bank and not through cash to ensure compliance with the laws.


3. Agreements and Identification

It is advisable to record the transaction in an agreement at the relevant regulatory authority dealing with real estate in the Emirate and comply with the relevant regulation. As a commercial property, you may be required to measure up or comply with other regulatory requirements relating to the specific development as imposed by the developer or community manager. Ask for these documents and ensure compliance on record at all times.


4. Dealing with licensed brokers only

If you are a seller, deal with a broker that is properly licensed in the Emirate that your property is located in. A licensed broker will also have the knowledge to target the right buyers for your property and assist you with correct disclosures and transfer processes. With respect to VAT, do not try to avoid paying tax on payments to brokers. Ensure that you receive a valid tax invoice on your purchase or issue one with your sale, and remember if you are a business, you will claim back the VAT anyway.


5. Understand the commercial terms well

Learn all community charges, emergency numbers, and approved service providers in advance especially if it's a commercial property. In cases of purchasing shell and core, be mindful to deal with licensed contractors who use licensed sub-contractors and who have had experience in dealing with that respective development before. Prior experience in a specific development can go a long way with fit-out contractors especially since they can provide you with.

It is undeniable that the growing interest in real estate in the UAE and the increasing investment opportunities have led the Emirates in UAE to release additional laws and fortify existing laws which is a huge development leap.  If you are a buyer or seller of real estate, weigh the pros and cons well and especially understand all legal aspects before taking the real estate plunge as a real estate deal done wrong can prove to be a white elephant. If you are a seller, on the other hand, full disclosure, dealing with licensed brokers and understanding market trends are your best allies.