Abu Dhabi: no freehold for non-GCC nationals

The Abu Dhabi Executive Council has already designated several sites in the UAE capital, which are being developed by Sorouh Real Estate and Aldar Properties, as investment zones where these rights are applicable.

Now the law clarifying and confirming the expected position is in place with the issuing of Law No.2 of 2007. On the leasing of property to non-GCC nationals the law states: 'This shall be done by virtue of long-term contract of 99 years or by virtue of long-term surface leasing contract of 50 years renewable for same period by mutual consent of the two sides.'

Importantly the law provides: 'Those with the right to benefit from the property or the surface for a period of over 10 years, without the permission of the landlord, may do as they wish with it, including to mortgage it, but the owner can not mortgage it without the permission of the lessee or the surface.'

By-laws coming

By-laws stipulating the conditions, rules and period for these contract agreements will be issued in due course along with a decree defining the investment areas.

This new law will no doubt be welcomed as a clarification of the first Abu Dhabi Property Law of 2005. There is nothing new or unexpected about it.

However, non-nationals could feel that they are getting an inferior property title in Abu Dhabi than in neighboring Dubai where clarification over the property law for multiple occupancy buildings is also keenly awaited.

Freehold Dubai

The Dubai system offers freehold to owners of all nationalities, but in the case of high-rise and multiple occupancy buildings exactly what that means in terms of legal title has yet to be fully defined. The provision of common services and maintenance of the whole building will likely compromise the absolute independence of freehold owners.

However, non-national freehold villa owners in Dubai will have an argument to a superior title over those holding long-term leases on villas in Abu Dhabi. But whether this will make much difference in practice to buying patterns is uncertain.

Certainly a city like London has a thriving and highly valued real estate market despite having most of its central properties for sale on leasehold terms only. For most people a clear and unambiguous title is enough, be it leasehold or freehold, although given a choice they will choose freehold to avoid having a landlord.