The rapid decline in house prices has exposed weaknesses in the framework of property law, say lawyers who are calling for a single code to better protect investors and lenders. Legislation has been introduced across different emirates in recent years, some of which has been aimed at curbing the excesses of developers who contributed to a speculative off-plan property bubble.
Varied legal frameworks in different emirates are causing confusion in the market, a report from the law firm Habib al Mulla says. "For property in Dubai, one properly structured real estate code should suffice, rather than creating a multitude of regulations aimed at regulating future activities," the report says. The firm would also like to see property regulations conform with the Civil Code, which sets out a general legal framework for contracts, including property agreements.
The Dubai mortgage law introduced last year may conflict with federal laws because it allows the mortgaging of leasehold property, says David Nunn, a partner at the law firm Simmons and Simmons. "That is impossible under the federal law since only 'real' property can be mortgaged and leases are not real property," said Mr Nunn. Dubai was the first emirate to open its property market to foreigners in 2002, although there was scant regulation in place at the time. The emirate passed a property law in 2006 and was the first to establish a regulatory body, the Real Estate Regulatory Agency in 2007. Other laws followed, forcing developers to register their projects, open escrow accounts for each of them and register off-plan properties and home loans.
Neighbouring emirates came up with their own plans. The Ajman Real Estate Regulatory Agency, created in January, made effective the escrow accounts decree, which requires developers to use buyers' money only to build the project for which the money is paid. Ras al Khaimah introduced escrow regulations last July and granted regulatory powers in the emirate to the Ras al Khaimah Investment Authority.
Mr Nunn recommended that all those issues be comprehensively addressed at the federal level to attract more international business to the UAE. "There is a great difficulty having several emirates with their own separate claimed jurisdictions in relation to property," he said. "When you are an external investor coming into the country, you really will need to employ an awful lot of lawyers. And this is only a small country."
@Email:ngillet@thenational.ae
