New property ownership rules unclear, say lawyers

It is still not known whether more owners will need to pay transfer fees, according to industry insiders.

New property ownership rules are unclear, say lawyers. Rules for Jafza, shown here, are just one area where there is confusion.

DUBAI // New guidelines that allow authorities to keep a closer track on property ownership in the emirate are in need of clarification, say industry insiders.

Since the start of this year the Land Department has barred investors from purchasing property through offshore companies, except those registered in the Jebel Ali Free Zone (Jafza).

Previously, many investors would set up offshore companies in tax havens such as the British Virgin Islands to buy property in the emirate, thereby shielding their assets from local inheritance laws and tax collectors in their home country.

Purchasing through these offshore companies also allowed owners to buy and sell property without paying a transfer fee to Dubai's Land Department. Instead of selling the property, the owner would simply transfer ownership of the shares of the company.

The new guidelines, which require owners to maintain a company in Jafza, ensure authorities have a point of contact in Dubai.

They also require owners to notify the Land Department when property switches hands through a change in share ownership.

However, it is not clear whether owners will now have to pay fees to the Land Department when they sell property or transfer shares.

Alexis Waller, a property specialist and a partner at Clyde & Co law firm, which has sought clarification from the Land Department on the issue, said: "They've said these rules are going to be supplemented, and it looks like they will charge a fee. But how much would it be and what percentage of shareholding would trigger that? That's still not known."

According to Ms Waller, the Land Department recently said it would accept property registrations by companies from any free zone in Dubai, not only Jafza.

The Land Department did not respond to requests for comment.

It was also unclear whether there were loopholes in the new guidelines.

Under the new rule, property buyers can still put their Jafza registered company under the ownership of a foreign offshore company, and that entity can still be held by representatives, or "nominees", of the actual owners.

"I think they were concerned initially that they were not able to identify the ultimate owner of the property. But if that was the concern, I don't think the new rules would actually resolve that issue," said Shaukat Murad, the chief executive of Alpha Management, which deals in offshore companies, trusts and free zones.

"I could still be holding the shares for you or for someone else in a nominee capacity."