Due diligence when buying Dubai property

In Western property markets lawyers make a good business out of a process called 'conveyancing', a rather clumsy term for ensuring that the legal title on a property is correctly transferred in a sale. This process takes a little time and effort, but at least the buyer knows that he will actually own what is sold.

Problems have arisen in Dubai where buyers and sellers choose to ignore establishing such a basic fact. Now in Dubai in order to ensure title, the only recourse is back to the developer who sold it in the first place, as there is as yet no independent register of freehold titles available for inspection.

Nakheel's notice

Nakheel recently published a public notice reminding buyers of this necessity, and pointed to the contractual obligation of sellers to clear changes of ownership with them.

It is remarkable that people are prepared to hand over large amounts of money without involving the original developer, although some may think this is a way to save money on a transfer fee. However, if they are not the registered owner of the property with the developer, are they the new owner?

If there is a dispute then the alleged buyers will have to take their case to court in Dubai, which can be a long process and the ruling of such a court can be by no means guaranteed to go in their favor.

This problem would of course be solved by the publication of a comprehensive Dubai Property Law, which is expected very soon. Then presumably the property of foreigners and expatriates will be registered at the very efficient Dubai Lands and Properties Department.

In the meantime the rule of thumb is that every property transaction must pass through the hands of the original developer or there is a real risk that a). the transaction is later void, or b). fraud could be taking place with the same property being sold to multiple parties.

Fraud or worse

There is also the possibility that the original buyer of a building later gets into financial trouble and then sells ownership of the building to another party who may not recognize the 'sales' of apartments that have allegedly taken place in that building.

Thus involving the original developer in any re-sale transaction is an absolute must to safeguard a transaction. Who knows it may not be long before lawyers get involved in all re-sale transactions in Dubai which would probably be to the benefit of both parties in the long-run.