Companies Buying Real Estate in Dubai
The type of company that can purchase property in Dubai is dependent on where the property is located, the nationality of the owner of company and the structure of the company. The restrictions on purchase of property by foreign companies has been heightened to keep in mind the anti-money laundering legislation.
Article 4 of Law No. 7 of 2006 (the "Law") concerning Real Property Registration in the Emirate of Dubai enables non UAE nationals to purchase property in certain areas as determined by the Ruler.
Regulation No. 3 of 2006 (the "Regulation") determining Areas for Ownership by Non-UAE Nationals of Real Property in the Emirate of Dubai, provides a list of 23 designated free hold areas approved for purchase of non UAE nationals ("Designated Areas"). Subsequent regulations have included further Designated Areas.
The wording of Article 4 stipulates that a foreigner is a non UAE national or non GCC national. However, 'non UAE national' has not been defined in the Law or Regulation. The ambiguity in the Law has resulted in the interpretation of 'non UAE national' to include individuals and companies.
From our recent enquiries with the legal department of the Dubai Land Department ("DLD") and our practical experience we have found at present the following types of companies can purchase property in Dubai in the Designated Areas:
- Companies incorporated onshore in Dubai (e.g. private joint stock companies or limited liability companies) regardless of the nationality of the shareholders;
- Public joint stock companies that are listed on the Dubai Financial Market;
- Free zone companies incorporated in Dubai regardless of the nationality of the shareholders (provided that required documents are submitted) but DIFC companies require a special approval from the DLD; and
- Jebel Ali Free Zone off shore companies regardless of the nationality of the shareholders.
It is important to note that the DLD's current policy regarding purchase of property by a company is not formally published and is subject to change from time to time.
Prior to 2011 the ambiguity in the Law was interpreted loosely to include purchase of property by foreign offshore companies incorporated outside of Dubai, including British Virgin Islands and Cayman Islands.
In 2011 the DLD prohibited registration in the name of foreign off shore companies, due to misuse of foreign off shore companies for criminal activities, such as money laundering.
The UAE legislation in regard to anti money laundering is Federal Law No.4 of 2002, concerning criminalizing of money laundering amended by Federal Law No.9 of 2014 ("the new AML Law"). Cabinet Resolution No. 38 of 2014, states the new AML Law is applicable to all financial institutions and other regulated institutions such as those licensed and controlled by entities other than the Central Bank or Securities and Commodities Authority including non-financial activities and professions including real estate brokers. The Cabinet Resolution sanctions Control Authorities to enforce compliance with the new AML Law. The DLD would qualify as a Control Authority in this regard for the regulation and compliance by real estate brokers and supervision of real estate transactions.
Article 2 of the new AML Law provides 'whoever commits any of the following acts, despite being fully aware that such funds are derived from an offence or a misdemeanor, shall be deemed as a perpetrator of money laundering: if he converts transfers, deposits, saves, invests, exchanges or manages any proceeds, with intent to conceal or disguise the illicit origin thereof…'
In regard to real estate the meaning of 'funds' in the new AML Law refers not only to money but any assets including non-moveable property. It is notable that activities carried out in respect to assets include 'investing'.
Prior to buying property in Dubai it is important that the buyer seeks advice from Dubai lawyers to ensure that the required due diligence has been conducted in regard to any restrictions imposed on a buyer and the necessary requirements to clear funds. Buyers should be aware of the risk of losing deposit monies if they sign a Memorandum of Understanding or Sale and Purchase Agreement without conducting due diligence and later discover the restrictions mentioned in this Article.
If you require future assistance on the matter, please do not hesitate to contact us at United Advocates.