Real Estate 2018 Comparisons

Last Updated January 04, 2019

Contributed By DLA Piper Middle East LLP

Law and Practice


DLA Piper Middle East LLP has a market-leading real estate offering: an international multi-disciplinary team of lawyers that can serve client needs globally across the real estate sector. It has over 500 real estate lawyers operating in more than 40 countries around the world and is able to serve clients in key real estate markets, with strongly established teams in Europe, Asia Pacific, the Middle East, Africa and the Americas. DLA Piper works with clients through all stages of the real estate life cycle, including planning, acquiring, finding, developing, leasing, completing, trading and divesting. Working through this cycle, the team offers the following services: financing, acquisitions and disposals, asset management, construction, cross-border investment, development, fund formation, joint ventures, leasing, litigation, planning, zoning and environmental issues, public-private partnerships, REITs, restructuring and tax. Lawyers work alongside investors, lenders, developers and managers on every aspect of their real estate activities. They advise on matters ranging from fund formation and establishing investment platforms for clients moving into new markets for the first time to cross-border portfolio acquisitions and restructuring loan facilities secured on assets in multiple jurisdictions.

The United Arab Emirates ("UAE") Civil Code Law No. 5 of 1985 ("UAE Civil Code") is the law which regulates civil transactions and contains certain provisions which relate to real estate. The UAE Constitution provides that private property shall be protected. Laws relating to real estate ownership are enacted by each Emirate within the UAE (Dubai, Abu Dhabi, Sharjah, Fujairah, Umm Al Quwain, Ras Al Khaimah and Ajman). Only Fujairah has not issued its own real estate laws. 

Within the Emirates there are also certain "free zones" which are authorised to issue their own laws and regulations. For example, Dubai International Financial Centre ("DIFC") and the Abu Dhabi Global Market ("ADGM") have real estate laws which differ to the remainder of Dubai and Abu Dhabi, respectively.

For the purposes of this guide, we focus on Abu Dhabi and Dubai, which are the main commercial hubs in the UAE and which attract the most foreign investment into real estate.

There is increasing appetite to establish real estate funds in Dubai using DIFC as the jurisdiction for formation and in Abu Dhabi using Abu Dhabi Global Markets. -This has been encouraged by a memorandum of understanding entered into between the Dubai Land Department ("DLD"), which is responsible for real estate registration (amongst other things) in Dubai and the DIFC whereby DIFC-listed funds are not required to pay transfer fees to the DLD which would otherwise arise as a result of shares in the real estate-owning company changing.

Build-to-suit arrangements continue to be a popular way for large corporates to satisfy their specific real estate requirements. 

One of the most significant ongoing development projects in Dubai relates to Expo 2020. This includes an extension to the Dubai Metro Red Line.

There is no formal requirement in the UAE to make public any proposals for reform. 

In the UAE, there are five main types of property interests that can be held: absolute ownership (freehold), usufruct interest, musataha interest, leasehold interest and granted land.

UAE nationals and UAE-incorporated companies wholly owned by them are unrestricted in the interests that they may hold throughout the UAE.

Absolute Ownership (Freehold)

In Dubai, nationals of Gulf Co-operation Countries ("GCC"), UAE-incorporated companies wholly owned by them and UAE-listed and public joint stock companies may have absolute ownership of real estate throughout the Emirate. The GCC consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. All other nationalities are only permitted to own real estate in areas designated by the Ruler of Dubai as locations where foreign ownership of real estate is permitted.

In Abu Dhabi, nationals of other GCC Countries (and companies wholly owned by them) may only be granted absolute ownership in one of the designated "investment areas". Other nationalities cannot have absolute ownership of land anywhere within Abu Dhabi. 

Usufruct and Musataha Interests

Distinguishing a lease from a usufruct or musataha can be difficult and the substance of the document will determine its nature rather than its form. Relevant authorities are likely to treat longer term arrangements with rights to development or sublet as real rights (to which foreign ownership restrictions can apply) rather than leases.

A usufruct interest is a right in rem in favour of the grantee to use and exploit the property of another, provided the property remains in its original condition. A musataha interest is a type of usufruct which confers upon the grantee the right to build upon the land of another. 

In Dubai, both usufructs and musatahas can be held by GCC nationals and UAE-incorporated companies wholly owned by them throughout the Emirate, but by non-GCC nationals in designated areas only. 

In Abu Dhabi both usufruct and musataha rights may only be held by UAE nationals and UAE-incorporated companies wholly owned by them (without restriction) throughout the Emirate and by non-UAE nationals in designated investment areas.

In all cases, usufructs are restricted to a maximum term of 99 years and musatahas to a maximum of 50 years (renewable once).

Leasehold Interests

Generally, leasehold interests in the UAE are treated as personal rights between two parties and not real rights. An exception to this is leases of 25 years or more in Abu Dhabi, which are considered real rights and can be registered as such.

Granted Land

Land may also be "granted" by the Rulers of each Emirate to Emirati citizens or companies owned by Emiratis. The grant of such land can be revoked by the Ruler at any time and is subject to obligations to develop and restrictions on its use and disposal.

The following federal laws are relevant:

  • The UAE Civil Code (as amended);
  • Federal Law No. 18 of 1993 on Commercial Transactions.

Each Emirate has its own laws and regulations governing the transfer of title.

In Abu Dhabi, the relevant laws relating to the transfer of title include:

  • Law No. 3 of 2005, Concerning the regulation of Property Registration in the Emirate of Abu Dhabi, together with the Department of Municipal Affairs Chairman's Decision No. 52/1 of 2008 on the issue of an Executive Regulation regarding the Organisation of Real Estate Registration in the Emirate of Abu Dhabi;
  • Law No. 19 of 2005, Re-organising Real Property in Abu Dhabi (as amended by Law No. 2 of 2007, amending certain provisions concerning real estate ownership);
  • Law No. 3 of 2015, Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi.

In Dubai, the relevant laws relating to the transfer of title include:

  • Dubai Law No. 7 of 2013, Concerning the Land Department
  • Dubai Executive Council Decision No. 30 of 2013, Approving Fees of the Land Department;
  • Dubai Decree No. 4 of 2010, Regulating the Grant of Title to Allotted Industrial and Commercial Land in the Emirate of Dubai;
  • Dubai Law No. 13 of 2008, Regulating the Interim Property Register in the Emirate of Dubai, as amended by Dubai Law No. 9 of 2009;
  • Dubai Law No. 27 of 2007, Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai;
  • Dubai Law No. 7 of 2006, Concerning Real Property Registration in the Emirate of Dubai.

The laws do not treat different assets classes differently. 

Registration of Transfers

Systems of land registration exist for each of the Emirates forming the UAE, with Dubai and Abu Dhabi having the most developed systems.

All transfers of land in Dubai and Abu Dhabi must be registered. In Dubai this is done in person at one of the trustee offices of the DLD. In Abu Dhabi, this is done at the Abu Dhabi Municipality ("ADM"). The DIFC and ADGM have their own system of land registration and maintain their own registers. 

Certain other free zones in Dubai maintain their own register of real estate interests but this does not negate the requirement to register land transactions in those free zones at the DLD.

In order to register a transfer, all parties to the transaction (ie, the buyer, seller and mortgagee, etc) are required to attend the relevant land registration department in person to sign the transfer documentation in the presence of a departmental representative and exchange cheques as payment of the purchase price and registration fees. Each land registration department will specify the supporting documentation that is required to effect the transfer. This may in many cases involve no-objection letters from the master developer or relevant utility and service providers as evidence that there is no outstanding fees recorded against the property.

If a party is unable to attend the land registration department in person, the party may appoint a representative by using a power of attorney duly prepared and executed in accordance with UAE law.

Of-Plan Sales Contracts

For contracts for the sale of real estate which is in the course of being developed (ie, an off-plan unit), the laws and regulations in Dubai and Abu Dhabi require such contracts to be registered on an interim register; in Dubai, this is called the "oqood" registration. 

Upon completion of the unit, the interim registration is cancelled and full registration occurs. The interim registration is an administrative measure only as it does not create any legal ownership (since the unit does not, at such time, exist).

Public Search of Register

Whilst all transfers are required to be recorded on the real estate register in accordance with law, the register is not publicly searchable. A title certificate for a property may only be obtained by application by the owner of the property or someone with a power of attorney from such owner.

Title Insurance

It is not common for title insurance to be obtained.

As is the case with most jurisdictions, it is recommended that a buyer carry out a detailed due diligence of the real estate interest to be acquired prior to entering into a binding agreement or making any payment. In the UAE, the due diligence process can often be difficult due to the lack of information made publicly available.

Most information and documentation relating to the ownership or particulars of a property (ie, title certificates, affection plan which contain zoning information, etc) may only be obtained from the relevant governmental departments upon application by (or with the consent or authorisation of) the owner of the property. Some information relating to utility arrangements, community charges, leases or other contracts affecting the land can only be obtained from the owner of the land.

As a result, the due diligence carried out by a buyer's lawyer will typically be reliant upon materials (such as title certificates and searches) provided by the seller's lawyer and upon the seller's response to follow-up enquiries made by the buyer.

UAE law implies limited warranties in the sale and purchase of real estate (see 2.5 Typical Representations and Warranties, below), therefore it is important that buyers carry out as much due diligence as is possible before entering into any agreement to acquire a property interest or making any payment.

The representations and warranties to be contained in a sale and purchase agreement are subject to agreement by the parties and may vary from contract to contract.

Dubai and Abu Dhabi laws remain largely silent on the representations and warranties that are implied in the sale of property, with the exception of the sale of off-plan units. Under both Dubai and Abu Dhabi law, a developer selling a unit off-plan is required to repair any structural defects in a unit for ten years from the date the completion certificate is issued by the municipality, and is liable for latent defects for a period of one year from the date the completion certificate is issued by the municipality. 

Further, the seller of off-plan units in Dubai must (prior to entering into a sale and purchase contract) issue a disclosure statement to a prospective purchaser which sets out various information in relation to the unit including the materials to be used in the finishings, utilities to be provided, etc. There are directions which provide that the seller warrants such information is correct for two years following transfer of the unit to the purchaser, but the status of the directions and whether they are binding is unclear. There are equivalent provisions affecting off-plan sales in the regulations of Abu Dhabi Law No. 3 of 2015.

If a seller makes a misrepresentation, then the buyer's primary remedies will be as specified under the sale and purchase agreement (ie, typically termination of the contract and damages for breach of contract). However, depending on the nature of the misrepresentation, there may be a claim of unjust enrichment or fraud. 

When considering acquiring real estate an investor should pay particular attention to the planning, zoning, construction, environmental and health and safety laws that may apply to the property and obtain assurances that all requisite approvals have been obtained from prior to the building having been constructed.

Non-UAE nationals should carefully consider whether the property is in an area in which the buyer is legally permitted to hold the interest that they plan to buy.

Environmental laws are comprised in the UAE of federal and Emirate level laws. The federal laws primarily aim to control all forms of major pollution and will apply to the principal polluter (developer, industrial organisation, etc). There is a possibility that environmental liabilities can pass with land, particularly in the case where the breach of environmental laws continues after the purchase by the buyer. Any liabilities will depend on complaints raised to or investigated by the Federal Environment Agency or any other local authority that has been created to specifically legislate or monitor the particular environmental protection sought. In Abu Dhabi the main authority to investigate environmental issues is the Environment Agency, Abu Dhabi; in Dubai it is the Environment Department of Dubai Municipality.

The Abu Dhabi Department of Urban Planning and Municipalities ("DPM") and the Dubai Municipality ("DM") are responsible for the zoning of land in their respective Emirates. The DPM and DM both issue affection plans in respect of plots of land which state the zoning for such land and some details regarding the size of the building permitted to be built on such land.

A developer will be required to obtain the consent of the relevant governmental departments and utility and service providers in order to subdivide and develop the land and obtain the requisite building permits. Each of the statutory utility providers, telecoms providers and district cooling companies have their own standard form agreements which a developer will be required to negotiate in order to obtain utilities, etc, to service the site.

Expropriation of land is possible in both Abu Dhabi and Dubai. The UAE Constitution and UAE Civil Code, however, restrict the right of a public authority to expropriate land unless such expropriation is for a public benefit and compensation will be paid to the party being disadvantaged by such expropriation.

There is no formal statutory process, although typically for large scale expropriations a committee will be formed to co-ordinate dealings with affected parties and determine compensation.

Asset Deals

In Abu Dhabi the seller and buyer are required to pay registration fees of 2% of the purchase price/returns under the contract which, in the case of off-plan sales, is subject to a cap of AED2 million per transaction.

In Dubai the seller and buyer are required to pay registration fees of 4% of the purchase price, which is split equally between the parties unless otherwise agreed. In practise, it is common for the buyer to pay the full 4% transfer fee.


If the buyer is granting a mortgage over the property, then the mortgage must also be registered and a registration fee applies.

In Dubai, the mortgage registration fee is 0.25% of the mortgaged amount, up to a maximum of AED1.5 million. In Abu Dhabi  the relevant fee is 0.001% of the mortgaged amount, up to a maximum of AED2 million for off-plan units and AED1 million for all other assets.

Share Deals

Nominal fees will be payable to the relevant company regulator to register the transfer of shares in a company.

In Dubai, the DLD require changes in shareholding of real estate-owning companies to be informed to them and a proportionate transfer fee will be applied. Failure to inform the DLD can result in a fine.


From 1 January 2018 VAT is applied to the sale of real estate assets at the following rates:

  • sale of commercial property – 5% standard rates;
  • first sale of new residential property – 0% (zero rated);
  • subsequent sale of existing residential property – exempt (no VAT);
  • sale of bare land – exempt (no VAT).

The sale of an investment property may be exempt from VAT provided it is classified as a "transfer of a going concern".

Other Fees

Other fees which may be applicable at the time of registration include (but are not limited to) the fees of real estate professionals (ie, agents, surveyors, etc), lawyers' fees, master developer fees for issuing a "no objection certificate", and utility connection fees.

See 2.1 Categories of Property Rights, above.

Financing Acquisition/Development of Real Estate Through Loans from Licensed Banks

It is quite common for the acquisition (or development) of real estate in the UAE to be financed by way of the borrower obtaining a loan, often with a mortgage as security for repayment. The duration and conditions of such a loan will differ depending on the borrower, the nature of the underlying real estate asset(s), and the loan-to-value ratio, etc.

A loan can either be provided on a bilateral basis (a single lender providing the entire facility) or syndicated or club basis (multiple lenders, each providing parts of the overall facility). Syndicated facilities by their nature involve more parties (such as agents which fulfil certain roles for the finance parties), and are often highly structured with more complex documentation. For the larger financings, these will typically be done on a syndicated basis.

A loan can either be secured, unsecured or guaranteed. Typically, in the context of acquisition or development of real estate, the creditor providing the financing would require a mortgage over the underlying real estate. In this respect, it is important to note that only banks licensed by the UAE Central Bank are eligible to be mortgagees of record for real estate in the UAE. In addition, it is important to note that there may be subtle procedural differences in how mortgages are taken as between the different Emirates and the various free zones in the UAE.

Islamic Finance Structures

Apart from obtaining conventional loans (as described above), another popular way of financing the acquisition of real estate in the UAE is through Islamic financing. Islamic banking and finance transactions are based on Islamic principles and jurisprudence, together referred to as Shari’a or Islamic law, which is derived from a number of sources, including the Qu'ran. Islamic finance structures and techniques have developed in accordance with Shari’aprinciples and these principles must be adhered to when deciding whether a proposed financing structure or product is Islamically acceptable. One of the key principles is that the payment and receipt of interest (riba) is prohibited under Islamic law – any obligation to pay interest is considered to be void.

However, Islamic principles do not prohibit a financier in an Islamic finance transaction from making a profit, rental or other return on its asset or investment. To that end, a number of contemporary structuring techniques (or Islamic contracts) have developed which allow Islamic bankers to structure transactions and products in a way that complies with Islamic principles while also replicating the economics of conventional loans and products. The way an Islamic real estate financing is structured will often depend on the nature of the real estate itself – whether it is a real estate development or a completed property, the type of restrictions in relation to ownership as well as registration and other costs involved.

Completed and existing real estate property can sometimes be financed through sale and leaseback arrangements (ijara) where the company (ie, the borrower) sells the real estate to the Islamic financier and subsequently leases it back from the Islamic financier in exchange for paying rental. The essential features of a conventional loan (such as the applicable margin on each repayment amount) are reflected in the leaseback arrangements. However, this kind of arrangement may attract registration and other costs which can make a leasing/ijara structure economically unviable.

By contrast, commodity murabaha (also known as tawaruq) financing structures rely upon underlying commodities trades in order to create debt-based obligations, akin to those you would see on a conventional loan. This particular structure does not involve any additional transfers in respect of the underlying real estate asset, and it can also be structured on a bilateral or syndicated/club basis in the same way that you would see for a conventional loan. These kind of commodity murabaha structures can also be secured using a mortgage over the underlying real estate, as well as other security (discussed later in this guide).

It also is worth nothing that a number of other Islamic financing structures exist – such as wakala, istisna'a, mudaraba and musharaka – but are less frequently used for the acquisition of real estate assets.

Other Financing Structures

We also note that there is a general trend towards establishment of real estate funds/real estate investment trusts (REITs) whereby stakeholders inject capital into a fund where the principal objective is to invest in strategic real estate in the UAE (and/or the wider GCC area) and to grow a real estate portfolio for the fund's investors. Whilst the UAE is not traditionally recognised as a funds jurisdiction – in the way that, for instance, the Cayman Islands or Luxembourg may be – the development of offshore jurisdictions such as the DIFC and the ADGM with evolving legislation aimed towards the development of a funds market has made these financial free zones a more attractive jurisdiction for the establishment of such real estate funds. Typically, the funds would structure the acquisition of real estate (whether conventional or Islamic) in a way that maximises the benefits for investors, including the use of leverage. These kind of fund structures may be more attractive for the purposes of the acquisitions of large real estate portfolios or companies holding real estate.

Another alternative is to access the debt capital markets, either through bonds or sukuk (also known as Islamic bonds). There are a number of UAE-based issuers (or obligors) who are real estate developers that have issued into the debt capital markets in this way, although the majority of those deals have been for general corporate purposes and general growth plans, as opposed to the funding of specific acquisitions.

Real Estate

Security over real estate and real estate interests (such as usufruct or musataha) can be taken by way of mortgage that is registered at the relevant land department. Some of the Emirates (and free zones) have specific laws dealing with mortgages but, in the absence of legislation, mortgages are generally governed by the UAE Civil Code. Although the practises of the relevant registrars may differ (and the practise at a particular registrar might evolve as well), generally speaking mortgages over real estate may only be granted in favour of a bank which is licensed by the UAE Central Bank. A mortgage also needs to be translated into Arabic and notarised prior to its registration, which can add time and cost to a real estate transaction.

The purchaser of an off-plan unit in the Emirate of Abu Dhabi may finance the acquisition of the unit by obtaining a mortgage over its interest registered in the Interim Register (the register established by the DMA for the registration of all off-plan sales), provided that the mortgage monies are paid directly into the project escrow account which the developer is obliged to establish for the particular development. In Dubai (under similar rules), mortgages can be noted on the "oqood" interim registration for off-plan property but this does not create a legal mortgage as the property does not exist at such time. It only becomes a legal mortgage when the unit is completed and the registration is completed at the Dubai Land Department.

The UAE Central Bank has issued detailed regulations on mortgage lending which defines the eligibility of various categories of borrowers based on a loan-to-value ratio (LTV). The primary aim of those regulations is to ensure that banks, finance companies and other financial institutions providing mortgage loans do so in accordance with best practises and have control frameworks in place. The regulations also apply to banks and institutions providing Shari'a-compliant loans for the purchase of properties. The UAE Central Bank is keen to regulate borrowing in the market by reducing the level of leverage currently available to borrowers and increasing equity in real estate investments.

Moveable Property

In relation to moveable property, security is generally taken by way of a possessory pledge and it is a fundamental element of this security that the beneficiary of the security can demonstrate either possession or control of the secured property. Historically, the view has been taken that it is generally not possible to take security over future property or an asset which is not certain at the date of creation, which has meant that taking a security assignment over future contracts or over an onshore bank account with a fluctuating balance has been problematic. However, the UAE issued Federal Law No. 20 of 2016 on Mortgaging Moveable Properties as Surety for Debts (the "New Mortgage Law"). The New Mortgage Law provides that a wide variety of assets (such as accounts, trade payables and equipment including future property) can be secured without demonstrating possession – provided that the security is registered. The register is not yet set up, however. It is hoped that the implementation of the New Mortgage Law will enable additional security over accounts and receivables to be taken with a greater level of certainty in the context of real estate financing transactions.

There is currently no concept of a floating charge or "all asset" security in the UAE, which is often seen in other jurisdictions. The New Mortgage Law does not currently cater for this, although it is hoped that this may be clarified in due course once the executive regulations for the new law are published.

Security Over Shares

Where a special purpose company (SPC) has been established for the purposes of a real estate investment or development, it may be possible for the financiers to take security over the shares of that SPC. As a general rule, it is possible to take security over the shares in a company, including onshore LLCs. However, there are restrictions on which entities can own real estate (as discussed elsewhere in this guide) and it should also be noted that the process for share pledges can differ depending on where exactly a company is registered. Accordingly, the process for taking security over pledges of shares should be checked on a case-by-case basis. Furthermore, the general practise is that this kind of security may only be granted in favour of a bank licensed to carry out business in the UAE and a share pledge will typically be subject to notarisation requirements prior to its registration.


Guarantees are common in the UAE and it is not unusual to see corporate and/or personal guarantees given in relation to a real estate financing. These kind of guarantees are specifically codified in the UAE Civil Code. It is also worth noting that a separate set of rules apply to bank guarantees (which often take the form of a bond) under the UAE Commercial Code.

This area is governed by the rules and regulations prepared by the UAE Central Bank. Under these regulations, a party wishing to hold security must be a bank, company or financial institution that is licensed by the UAE Central Bank to provide property finance. A limited number of international banks hold such a licence. Foreign (unlicensed) lenders will often appoint a locally licensed security agent to act on their behalf in relation to security over real estate assets.

There are currently no restrictions on repayments being made to a foreign lender under a security document or loan agreement, other than in relation to the following areas:

  • UAE Central Bank restrictions or measures which are designed to counteract money laundering and/or the funding of terrorist activities; and
  • transactions involving Israeli parties or currency, in accordance with the Law on the Boycott of Israel.

However, the Central Bank of the UAE has the right to impose additional restrictions from time to time.

In the UAE, the following fees are payable in relation to granting and enforcing security:

  • a bank property valuation fee;
  • notarial fees for documents which must be notarised prior to granting/taking the mortgage;
  • a real property mortgage registration fee payable to the applicable land registry;
  • notarial fees to give notice of default (applicable to Dubai);
  • a publication fee in relation to the auction pursuant to which the secured asset may be sold;
  • a public auction fee if a secured asset is sold by public auction;
  • court fees as prescribed by the relevant court, for enforcement of a security interest.

Under the UAE Companies Law it is not possible for a joint-stock company (JSC) target, or any of its subsidiaries, to provide any financial aid (such as loans, security and guarantees) that will assist a purchaser in acquiring its shares. However, limited liability companies are exempt from such restrictions under a Ministerial Resolution of 2016. In any event, as a matter of good practice, all companies would be advised to demonstrate that there is a corporate benefit to the company granting any security.

Abu Dhabi

There are certain procedures set out in the UAE Civil Code and the Civil Procedures Law, as well as the Abu Dhabi Real Estate Law No. 3 of 2015, that must be followed before a lender is able to enforce its security over real estate. The UAE courts generally allow a debtor every opportunity to pay any outstanding debts before allowing the real estate to be sold.

The first step is to ensure that the lender's rights are registered at the relevant authority in order to enforce its legal rights.

The lender must send a written notification to the debtor and any guarantor by registered mail demanding full and final settlement of the outstanding debt within a period of no more than 30 days from the date of notification.

If the debtor or its guarantor has not settled the outstanding debt or has not reached an agreement with the lender within the time period set out in the written notification, the magistrate of summary justice shall issue, at the request of the lender, a decision to sell the mortgaged property in public auction. The debtor may request postponement of the sale of the property by auction. The court may postpone the sale of the property for a period of up to 60 days if the court is of the opinion that the mortgagor may be able to settle the debt within this period, or the sale of the property would cause serious damage to the mortgagor.

Once the attachment order is granted by the court, the execution bailiff will proceed to endorse the court decision on the property register at the land registry department in Abu Dhabi.

The execution bailiff will have seven days from the attachment to serve the debtor and the person in possession of the real estate with a copy of the application for attachment, and the endorsed copy to show that the attachment order has been registered. The debtor will have one month from the date of the notice to pay the outstanding debt due, failing which the real estate will be sold by auction.

The debtor can, however, exercise its right to defer the sale by auction in two circumstances:

  • if the income from the real estate over a period of three years will be sufficient to pay the debt, interest, fees and costs, the execution judge may authorise the lender, under the court's supervision, to collect the revenues from the real estate until payment is made in full; or
  • if the revenues from the real estate over a period of three years will not be sufficient to pay the debt, interest, fees and expenses, and the debtor has other sufficient income in addition to the income from the real estate to pay the debt in instalments during such period, and it appears to the execution judge that the sale of the real estate would cause great loss to the debtor, he may decide to defer the sale and to make the debt payable in instalments over a period not exceeding the period he refers to – if the debtor fails to pay any of the instalments, the execution judge must, on the application of the lender, continue with the procedures for the sale of the real estate.

If the period of one month expires, without the debtor having paid the debt or without having made an application to defer the sale, the execution judge must specify the place and date of the sale and the period during which the auction is to be conducted.

Before announcing the sale of the real estate, one or more experts will be appointed to assess the value of the asset within 30 days. Thereafter, the court office must notify the debtor and any other person in possession of the real estate of the place, day and period during which the auction will be conducted and announce the sale no later than 30 days before the date of the auction. The court office must also publicise the time, place and date of the sale in two daily newspapers circulating in Abu Dhabi, and a copy of the notice must also be attached in a conspicuous place on the property and on the court's notice board.

If the real estate is insufficient to satisfy the debt, the mortgagee may have recourse against the mortgagor's other assets as an ordinary creditor. The mortgagee must follow the statutory procedure, and if the mortgage document attempts to circumvent this procedure then those provisions would be held to be void.


A lender is entitled to satisfy the debt from the mortgaged property when the debt falls due, provided that the mortgage has been registered at the DLD. Failure to register a mortgage renders it void, pursuant to Law No. 14 of 2008 Concerning Mortgages in the Emirate of Dubai (the "Mortgage Law").

If the value of the property is insufficient to satisfy the debt, the lender may have recourse to the borrower's other assets as an ordinary creditor, but it must look to enforce its rights against the property first. The lender must follow the legal procedure and if the mortgage document attempts to circumvent this procedure then those provisions are void.

The Mortgage Law sets out the enforcement procedure for mortgages. Upon a default in payment by the borrower, the lender must give 30 days' notice through a notary public before commencing execution proceedings.

If the payment is not made within such 30-day period, an execution judge shall, upon the request of the lender, order an attachment against the mortgaged property, enabling it to be sold at public auction in accordance with the DLD's auction rules.

The execution judge may decide to postpone the sale by public auction for up to 60 days (a postponement which can be made only once) if he finds that the borrower will be able to repay the debt during this time or the sale would cause the borrower "substantial damage". It is not clear exactly what would constitute substantial damage in this context.

If a security interest is required to be registered, then the date of registration determines its ranking in both Dubai and Abu Dhabi. If it is not registrable, then it will rank in order of the date of creation (noting, however, that the laws relating to priority are largely untested in the UAE). If two or more applications to register a mortgage against the same property are made at the same time, then the mortgages are registered together and rank equally in the distribution of auction proceeds.

A lender may assign the ranking of its mortgage to another creditor having a security interest in the same property. This is typically done contractually through intercreditor or subordination agreements that are entered into between creditors. However, in Dubai the consent of the relevant borrower is required if a lender wants to assign its rights (rather than its ranking) to another lender. The borrower’s consent to an assignment of rights from one lender to another is not a requirement of Abu Dhabi law.

A  lender would not be liable under environmental laws. In the UEA, environmental laws are not particularly detailed but the relevant authorities are likely to pursue the party responsible for causing the environmental harm, which may or may not be the mortgagor. If there are any remedial costs associated with rectifying the damage, the law provides that the lender may "take whatever legal action is necessary to protect its rights and recover the costs from the mortgagor". In addition, the mortgage will typically contain indemnities in favour of the lender in the case of pollution or other acts which are harmful to the environment caused by mortgagor.

The relevant provisions concerning the lender's security interests in the event a borrower becomes insolvent are contained in Federal Decree Law No. 9 of 2016 (the "Bankruptcy Law"). We note that the Bankruptcy Law came into effect on 29 December 2016, but (to our knowledge) remains relatively untested before the UAE courts and, accordingly, there remains uncertainty as to the correct application of that new law (or its supplementary regulations, which are yet to be published).

The Bankruptcy Law provides that a declaration of insolvency will not result in the dissolution of contracts which are binding on both parties unless the services are "personal" in nature.

If a borrower declares insolvency, the lender's security interests will not be extinguished to the extent that such security is not challengeable on an antecedent transaction.

It is possible to challenge certain types of "preferential" contracts which are entered into during the requisite period, this being the date from when the court deems cessation of payments to have occurred, with such date not being more than two years prior to the declaration of bankruptcy; it is generally understood that such a challenge is a lot more difficult where a transaction is a genuine commercial transaction between the parties on arms-length terms which forms a defence to an application to reverse a transaction. However, consent of the court will be required prior to commencing any action to enforce such security.

It should also be noted that any documents submitted to the government authorities or the courts in the UAE should be in Arabic. Accordingly, in the event of a dispute, the transaction documentation should be translated into Arabic prior to their submission to the competent courts. As a matter of practise, it would be rare to translate the documents into Arabic at the time of signing unless notarisation or registration is required (which specially requires Arabic translations).

The obligations of a UAE company are subject to limitations arising from bankruptcy, liquidation, composition and all other laws and general principles affecting the rights of creditors generally. It is not possible to confirm a UAE company's solvency because there is no practical or effective way of determining whether a petition for bankruptcy, liquidation, composition or other similar insolvency event has been filed in the UAE.

Abu Dhabi

In Abu Dhabi, the planning powers are vested in the DPM.

Major developments are subject to a review process, established by the DPM, which itself forms part of a longer-term strategy for Abu Dhabi's urban development. The DPM has established a streamlined process to review development proposals, depending on the nature of the development.

Step 1: the information meeting – the DPM will hold an initial meeting as soon as a development site has been acquired, where the DPM will explain plans and policies that will determine site development potential and outline the upcoming development review. It also helps set the parameters for supportable development and alerts the applicant to the documents/agencies that should be consulted.

Step 2: preliminary development options – the applicant will then prepare site analysis (including elements such as transportation, habitat, climate and infrastructure) to prepare preliminary development options for the site. Two options for general land use and site layout must be provided. The DPM shall review this to check compliance with the Emirate's urban planning policies (eg, Capital 2030, land uses, densities and Estidama, an environmental concept/plan). The applicant and the DPM select the preferred option and work together to prepare a complete concept review application.

Step 3: the conceptual plan – this application covers all of the systems-level components of a development consent. It will include site and massing plans, a comprehensive approach to open space and community facilities. The DPM and up to 20 other review agencies evaluate the plan to check it complies with other plans and polices and agree on the seven key elements of the plan which include: land use; density; building form; site layout/design; services; strategies; and phasing.

Step 4: the detailed plan – applicants with small and medium sized projects shall prepare and submit detailed site and building plans for review. This step also confirms that any conditions of approval have been met. For large projects, this stage of the process is aimed at helping applicants translate conceptual masterplans into detailed regulations and guidelines. For small and medium sized projects, once these steps have been satisfactorily carried out this is the end of the planning review process and they can move on to apply for municipal building permits from the relevant municipality. Additional developer and DPM/municipal review shall be required for large projects to ensure compliance with DPM-approved regulations and guidelines before they can apply for building permits.


Currently in the Emirate of Dubai there is no published legislation in relation to the process and procedures of obtaining planning and zoning permission. As the process is not clearly stated in legislation, much of the process is based on practise and custom. Set out below is the general process that applies across Dubai.

An owner or developer obtains an "affection plan" from Dubai Municipality. The affection plan is a high level general site plan that is issued with basic information containing the plot number, the land use classification and any other particular zoning requirements that are required by Dubai Municipality.

The plan will state the height allowance, the usage, any setback requirements and whether parking must be included. The affection plan will also state what permissions from the particular government authorities or third parties will need to be obtained prior to approval. There are no general rules regarding the requisite authorisations as each affection plan is issued on a plot-by-plot basis. Depending on the location of the plot, there may be additional approvals that will need to be obtained including approvals from Dubai Electricity and Water Authority, Civil Defence, Etisalat, the master developer (if applicable), the Environmental Department of Dubai Municipality and any other authorities or agencies that are listed on the affection plan.

Abu Dhabi

To assist in regulating the design, appearance and method of construction of new buildings, the Abu Dhabi Municipality has adopted the International Codes of the International Code Council which include:

  • International Building Code;
  • International Fire Code;
  • International Plumbing Code;
  • International Energy Conservation Code;
  • International Mechanical Code;
  • International Fuel Gas Code;
  • International Private Sewage Disposal Code.

In addition, the Abu Dhabi Environmental Health & Safety Management System (AD EHSMS) has also been adopted. This system requires nominated entities to create an Environmental Health & Safety Management System to comply with the AD EHSMS. 

Any development must also comply with the statutory requirements of other government agencies, such as the Department of Transport, Abu Dhabi Police, Abu Dhabi Education Council and Abu Dhabi Waste Management Control, amongst others.


Dubai Administrative Resolution No. 125 of 2001 concerning the adoption of Building Regulations and Standards provides the public law control both for the technical aspects of the detailed design, as well as the restrictions for aesthetic and heritage areas.

Numerous technical guidelines and circulars issued by Dubai Municipality also regulate the detailed design. These need to be examined on a case-by-case basis to ensure that the detailed design is compliant with the relevant regulations for the area where the building is being constructed.

In Abu Dhabi, the DPM is the main body responsible for regulating the development and designated use of land. In Dubai, the main authority responsible for regulating the development and designated use of land is DM.

The municipalities are responsible for issuing the affection plans which outline the planning and zoning designated for each parcel of land.

Abu Dhabi

In Abu Dhabi, the DPM has established a streamlined process to review development proposals, depending on the nature of the development. (See 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning above for the relevant steps.) There is no formal objection process to challenge a planning decision made by the DPM or municipalities. Generally, there are no formal consultation processes involving third parties.


Before any refurbishment works can be carried out, a building permit needs to be obtained from DM if the nature of the works necessitate this. This is done by submitting the proposed drawings to DM.

In both Dubai and Abu Dhabi, if the property being refurbished is within a master community, then the master developer will have its own procedures for approval which must also be followed.

There is no right or formal process to appeal a decision of a relevant authority in either Abu Dhabi or Dubai.

In Abu Dhabi, the decision of a governmental authority may be reviewed by the Ruler of the Crown Prince's Office by direct application; in Dubai, it is possible to apply to the Ruler's Court. In both cases, the power to intervene in such decision is entirely discretionary

Non-binding Memoranda of Understanding are common between master developers and statutory utility suppliers. Binding agreements are common with providers of district cooling services, which are sometimes project-financed. Formal agreements with local authorities are rare.

DPM (Abu Dhabi) or DM (Dubai) can order a contractor to stop work and, in extreme cases, demolish unapproved structures. This is likely to be established during an inspection prior to the grant of a completion certificate.

A building completion certificate will not be issued if the building permit has not been complied with.The building completion certificate is required in order for occupation of the building to be allowed.

Various types of corporate vehicles are capable of holding real estate assets in the UAE, including limited liability companies, public joint stock companies and private joint stock companies.

If the holding company of a real estate asset has foreign shareholders, then the company may only hold the real estate asset within a designated investment area.

Limited Liability Company (LLC)

This is a company in which the shareholders are limited in their liability to the amount of their contribution to the share capital. In general terms, an LLC must have between two and 50 shareholders and UAE nationals must own at least 51% of the shares. Despite this requirement, a GCC individual or company owned by GCC nationals is permitted to own 100% of the shares without the need for a second shareholder.

JAFZA Offshore Companies

In Dubai, it is possible for real estate to be owned by a JAFZA offshore company (regulated by the Jebel Ali Free Zone Authority in Dubai). Such a company can be fully owned by non-GCC nationals or companies owned by them, and therefore it is common for real estate in designated areas in Dubai to be held by a JAFZA offshore company. The minimum number of shareholders in a JAFZA offshore company is one.

Public Joint Stock Company (PJSC)

This is a company whose capital is divided into negotiable shares of equal value; the minimum share capital for a PJSC is AED30 million. The nominal value of each share cannot be less than AED1 and cannot exceed AED100. Shareholders have limited liability to the value of their shares. UAE nationals must own at least 51% of the shares in the PJSC and the founding members must subscribe for between 30% and 70% of the issued share capital. A PJSC must have at least five founder members.

Private Joint Stock Company (Private JSC)

A private JSC is similar to a PJSC but with certain differences, including:

  • the minimum share capital is AED5 million;
  • the shares cannot be offered publicly; and
  • only two founder members are required.

The UAE Companies Law No. 2 of 2015, as amended, ("Companies Law")provides that, unless specifically stated, all requirements that apply to a PJSC apply to a private JSC as well, other than the points noted above.

Limited liability company (LLC) – the Companies Law does not prescribe a minimum capital amount for an LLC, but the share capital must be adequate. This can be decided by the shareholders and there is no published guidance in this regard. In practice, a notary public currently accepts a minimum share capital of AED100,000 divided into equal shares, with a minimum value of AED1,000.  Share capital must be paid up in full. 

JAFZA offshore companies – the minimum share capital for a JAFZA offshore company is AED1,000; shares must have a minimum value of AED1 each.

Public joint stock company (PJSC) – the minimum share capital requirement is AED10 million for a general company and this amount increases in the case of banks and insurance companies. Given the substantial capital requirement, and the fairly restrictive rules of establishment and management, it is often not a suitable corporate vehicle for overseas investors wishing to establish a vehicle for investment purposes.

Private joint stock company (private JSC) – the minimum share capital required is AED5 million.

Limited Liability Company (LLC)

An LLC must appoint a general manager to manage the company. The general manager can be of any nationality but, in practise, rejection of a proposed general manager does occur without reason from time to time. It must also appoint a UAE-certified financial auditor before the end of its first year of business, and the company accounts must be certified by such auditor each fiscal year. A general assembly (shareholders' meeting) must also be held each year for all shareholders. 

JAFZA Offshore Companies

It is necessary for a JAFZA offshore company to appoint a registered agent to whom notices are served. It must also have at least two directors, a general manager and a company secretary at all times and such individuals need not be resident in the UAE.

Public Joint Stock Company (PJSC)

There are greater corporate governance requirements with a PJSC compared to an LLC. Since a PJSC is required to be listed it has to comply with the governance requirements of the relevant stock exchange. These include various disclosure requirements to be met and the publication of accounts and other statements. Emirates Securities and Commodities Authority (ESCA) has also issued a corporate governance code, adherence to which is mandatory for PJSCs. Additionally, if new shares are offered, the existing shareholders have a pre-emption right before they are offered to the public unless such new shares are being issued to "strategic investors" (in which case, the issue falls outside of the pre-emption requirements). 

Private Joint Stock Company (Private JSC)

A private JSC must have a board of directors consisting of between three and 12 directors and each director's term is no more than three years (subject to re-election). From the directors, there must be a chairman and such chairman must usually be a UAE national. The corporate governance requirements for a private JSC are less strict than a PJSC. Since private JSCs are not listed entities they are not bound by the same disclosure requirements as PJSCs, unless the private JSC voluntarily chooses to adhere to the corporate governance code which is mandatory for PJSCs.

The annual compliance costs for an entity investing in real estate are commensurate with the needs of each individual company and therefore will vary.

In the UAE, a lease is deemed a personal right rather than an interest in land. Non-UAE nationals (and companies owned in whole or part by non-UAE nationals) may only be granted long leases within one of the investment areas in Abu Dhabi or one of the designated areas in Dubai.

Alternative rights of occupancy that do create rights in property are usufructuary and musataha rights. These are subject to the same geographical foreign ownership restrictions as leases.

Abu Dhabi law does not provide a clear distinction between a lease (a personal right) and a usufruct (a right in rem). The law does state that long leases (being those with a term of 25 years or more) are property rights, however, it does not clearly define the characteristics of leases with terms shorter than this. In practice, ADM have deemed leases for a term of more than four years granted in favour of a non-UAE national (or a company owned in whole or part by a non-UAE national) in relation to land outside an investment zone and which contain rights to sublet to be usufructuary rights (and therefore not capable of being granted to a non-UAE national outside an investment zone).

In Dubai a long lease is one with a term of ten years or more and these require registration at the DLD. For leases of less than ten years, registration is still required but at a nominal cost at the Real Estate Regulatory Agency ("RERA") on its "ejari" system. The ejari registration is required in order to open a utilities account, telecommunications account, etc, for the property.

The form of lease is not mandated by law, but certain key provisions must be included (eg, parties, property description, rent and term).

Rent in the UAE may be freely negotiated between the parties to the lease. 

In Abu Dhabi, Abu Dhabi Executive Council Resolution No. 14 of 2016 on Lease Agreements of Premises prohibits rental increases greater than 5% per annum.

In Dubai, Decree No. 43 of 2013 concerning the percentages of maximum property rent provides for the average market rent to be set according to the Rent Index for the Emirate of Dubai as approved by RERA. The percentage of the maximum increase in real estate rents in Dubai is determined on renewal according to the current annual rent amount compared with the average rent for a similar property. Whilst these restrictions apply to both residential and commercial property, in practise, for commercial property, alternative terms (such as fixed increases) agreed are likely to be respected.

The terms of a lease may be freely negotiated between the parties provided that the contents of the lease agreement do not contravene law.

Both the Abu Dhabi and Dubai landlord and tenant laws include provisions in relation to the repair and maintenance, termination and term of leases where the lease agreement remains silent on such topics although in practice most contracts will contain express terms on those matters.

Rent is commonly calculated on a per square metre/foot basis, or by reference to the turnover of the tenant's business (if retail premises).

The rent payable under a lease must specified in the lease agreement and is generally subject to fixed or index-linked increases at regular intervals.

Market rent review provisions are also included in some leases. However, these clauses are not as used as frequently as they are in more developed real estate markets as reliable comparable transactions can be difficult to establish due to the lack of publicly available market data. Please note the restrictions on rent review set out in 6.3 Regulation of Rents or Lease Terms, above.

Revised rents may be determined by applying a fixed or index-linked percentage increase, or by determining the open market rent. Please note the restrictions on rent review set out in 6.3 Regulation of Rents or Lease Terms, above. ¬

VAT applies to rent payable for a commercial property at the standard rate of 5%.

A tenant's liability for upfront costs should be set out in the lease agreement.

The parties to a lease commonly agree that the tenant will be responsible for paying the registration fees associated with registration of the lease at the relevant land department or RERA (as applicable). Tenants are also generally responsible for the cost of opening an account for utilities and telecommunications and paying for meters and connections in new properties. 

A tenant may also be responsible for payment of a service charge if such charges are levied contractually or, in the case of long leases, in accordance with the jointly owned property laws and specified in the master community declaration.

A tenant may also be liable for the fees of any agent involved in the transaction.

A commercial lease agreement may impose an obligation on the tenant to pay a service charge to the landlord to be used for the maintenance and repair of the common property. Residential leases are more likely to provide for an all-inclusive rent.

If the lease agreement is silent on the issue of maintenance and repair of the common property, then the landlord will usually be responsible.

Usually a premises occupied by a tenant will be individually metered. In such cases, the tenant will usually purchase services such as electricity or water directly from suppliers.

Where the tenant is liable to pay a service charge for the maintenance, repair and use of the common areas or shared facilities, the tenant will need to pay such service charge directly to the landlord.

The arrangements surrounding payment of such fees are usually stipulated in the lease agreement.

A landlord will typically pay for building insurance (where the building is occupied by more than one tenant) and a tenant will pay for its own contents insurance. A landlord operating a service charge will then recover the costs of the building insurance through the service charge.

Under UAE law, there is automatic rent cesser (ie, suspension) following damage or destruction of the property.

Leases normally specify the permitted use. If the lease is silent on this issue, the use should be consistent with zoning authorised for such property and the licensed activities of the tenant company.

Both Abu Dhabi and Dubai law requires the tenant to obtain the consent of the landlord to all proposed works. The terms of a lease may also set out what kinds of works the tenant is permitted to carry out, when the landlord's consent should be sought for such works and whether any types of works (eg, structural) are absolutely prohibited.

Certain works require the consent of government authorities such as the relevant municipality. In order to obtain such consents, these government authorities will require evidence of the landlord's consent to such works.

Abu Dhabi

Residential – there are specific rules relating to residential leases, such as maximum numbers of lessees who are permitted to occupy a single dwelling, which vary depending on whether the property is a villa or an apartment, and the number of rooms in the dwelling. Two months' notice for renewal or termination is required for residential leases.

Commercial – commercial leases have similar rules to those which are applicable to residential leases, with minor exceptions such as the absence of rules concerning the maximum number of individuals who can occupy the leased premises. Three months' notice for renewal or termination is required for commercial leases.

Offices – the number of villas that can be used as offices is restricted. Evidence that the villa can be used for office purposes should be obtained (in the form of a certificate from the Abu Dhabi Municipality). If this cannot be produced, the Abu Dhabi Municipality could take enforcement action during the term (and a rent refund might not be available). Three months' notice for renewal or termination is required for office leases.

Hotels – leases of hotels are not common; to the extent such leases exist, there are no specific provisions which apply to them.

Furnished apartments – these also do not fall within the ambit of landlord and tenant legislation and regulations specific to furnished apartments are awaited. In the meantime, there is limited guidance as to the required specifications/amenities for furnished apartments, being that:

  • furnished apartments are those comprising (as a minimum) a living room encompassing a sleeping area, dining area (where food can be prepared) and a bathroom (studio), it may consist of one or two more separate rooms;
  • a building to be used as furnished apartments must have a reception office for the lessees;
  • furnished apartments cannot be rented out for less than two days (with the exception of Al Ain areas or other remote areas so designated from time to time);
  • no services are to be provided;
  • the building may have a laundry and a restaurant on the ground floor.

Falling outside the landlord and tenant legislation may allow the parties more flexibility in terms of avoiding the security of tenure features of the legislation generally governing residential lettings.


The same laws currently apply to residential, industrial, office and retail leases. The exception to this is accommodation provided by an employer to an employee.

If a tenant ceases to pay rent, court proceedings are often taken to terminate the lease and for the landlord to be awarded damages. Please note that the insolvency law applies only to commercial companies – if a tenant is insolvent and is not a commercial company then the regular laws of landlord and tenant would apply, which would be the remedies for failure to pay rent. There are no provisions specific to insolvency in the landlord and tenant laws.

Under the insolvency law, the debtor has to first apply to the courts for a preventive composition, in which case it is the debtor's duty to inform the courts within 30 days of doing so of all and any creditors' rights against the debtor, or bankruptcy, in which case any ordinary creditors of ordinary debt under AED100,000 can apply to the court to open proceedings, as long as the creditor has warned the debtor to settle in writing and this has not been done within 30 days of the written notice to settle.

The parties to a lease agreement are able to agree the form of security to be provided by a tenant. Typically, a landlord may ask for a security deposit, bank guarantee and/or parent company guarantee.

Although it is common for a landlord to take a security deposit from a tenant, the Dubai and Abu Dhabi landlord and tenant laws do not provide detailed provisions on how such deposits must be held, when they can be utilised and when they must be returned. It is important, therefore, to ensure that a lease contains detailed provisions on dealing with the security deposit. Some provisions relating to the concept of a bailment under the Civil Code apply to security deposits. As a result, the wording in a lease should be clear that a tenant consents to the landlord investing such monies and retaining the interest – otherwise, Article 973 of the UAE Civil Code provides that the holder of the bailment should return the "profits and fruits of the thing bailed to the bailor". The UAE Civil Code also provides that monies must be held for safekeeping and the landlord would need to take reasonable care of the funds.

Under both Abu Dhabi and Dubai law, if a lease term expires and the tenant remains in the property with the landlord's knowledge and without any objection by the landlord, then the lease shall be (in Abu Dhabi) renewed for a similar term and on the same conditions, or (in Dubai) renewed for a similar term or a period of one year (whichever is less) on the same terms.

A well-managed property will have an owner who agrees the precise arrangements for vacating the property in advance with the tenant. However, if the lease agreement does not specify the terms of renewal then the Abu Dhabi and Dubai landlord and tenant laws set out a standard position to be implied in the contract. Under the landlord and tenant laws, if a party does not wish to renew or wishes to re-negotiate the terms of the lease, not less than three months' notice is required for commercial property.

In Abu Dhabi, tenants have a statutory right to request the Lease Dispute Resolution Committee to terminate a lease where the landlord hands over the property in such a poor condition that it cannot be used for its intended purpose.

Under the UAE Civil Code, Article 271 allows parties to an agreement to agree to an early termination. In exercising such right, the parties must comply with any notice period set out in their agreement for such termination. 

It is common to see break rights included in longer term leases to provide the tenant with greater flexibility. Landlord break rights are less common and may not be effective in Abu Dhabi unless the landlord can also establish a ground for termination (see 6.19 Forced Eviction below).

Abu Dhabi

Under Article 23 of Abu Dhabi Law No. 20 of 2006 concerning the Letting of Property and Regulation of the Letting Relationship between Lessors and Lessees, the landlord may ask the tenant to vacate the premises only for the following reasons:

  • if the lessee fails to pay the rent due within the periods fixed in Article 11 (a period not exceeding 21 days from the due date agreed in writing if the property is let for residential purposes, unless otherwise agreed, or 30 days from the due date agreed in writing if the premises is let for commercial, industrial or vocational purpose) against a receipt indicating payment, unless otherwise agreed;
  • if the lessee assigns or sublets all or some of the premises, except with the permission or authorisation of the lessor;
  • if the lessee or the sublessee allows more than the generally accepted level of occupancy;
  • if the lessee uses or permits the premises to be used in a manner contrary to the tenancy contract conditions or which impairs the lessor's interest or uses the premises for other purposes than those for which it is let;
  • if the lessee uses or permits the premises to be used in a way that is detrimental to health, or constitutes a disturbance or is contrary to public order or manners;
  • if the lessor wishes to demolish the premises for rebuilding, make an increase in height, additions or alterations (subject to a number of conditions);
  • if the lessor wishes to occupy the premises for his own purposes (provided that he does not own another habitable property within the jurisdiction of the municipality in which the premises are located subject to:
    1. serving the lessee a notice six months prior to the expiration of the tenancy contract; and
    2. the lessor occupying the premises for one uninterrupted year after they are vacated by the lessee. If the lessor fails to reoccupy the premises without acceptable reasons within three months from the vacation date or occupies the premises for less than one year or lets the premises to another lessee, the original lessee can obtain an order allowing him to re-occupy and/or be paid compensation. The Lease Disputes Resolution Committee ("LDRC") may determine the appropriate compensation, provided that it does not exceed one year's rental.

In all cases, the LDRC may give the lessee a suitable respite before he must vacate, provided that it does not exceed six months. There are no guidelines as to how long the process would take.


There are certain circumstances in which a lessee can be required by the lessor to vacate the leased premises prior to the end of the term. These circumstances are set out in Article 25 of Law No. 26 of 2007, as amended, and are as follows:

  • if the lessee fails to pay the rent, in whole or part, within 30 days of the lessor notifying the lessee that payment is due (unless the parties agree otherwise);
  • if the lessee subleases the premises in whole or part without the landlord's written approval – in such a case, the subtenant is also evicted and may seek compensation from the lessee;
  • if the lessee uses the premises for illegal or immoral purposes;
  • if the premises are a commercial shop and the lessee has not occupied it for 30 consecutive days or 90 non-consecutive days in a year (unless the parties agree otherwise);
  • if the lessee makes changes to the premises which endanger the safety of the premises such that it cannot be restored to its original condition, or if the lessee intentionally or due to gross negligence causes damage to the premises or allows others to cause such damage;
  • if the lessee uses the premises for purposes other than those it was leased for or in a way that violates planning, building and land use regulations;
  • if the premises are in danger of collapse (the lessor must provide the lessee with a technical report evidencing this issued by Dubai Municipality or accredited by it);
  • if the lessee fails to observe legal obligations or comply with the lease covenants within 30 days of the lessor notifying the lessee that it is in breach of the same;
  • if development requirements in Dubai require demolition of the premises in accordance with the instructions of government authorities.

In all the above cases, the lessor must notify the lessee through the notary public or by registered mail.

If the lessee disputed the grounds for early termination of the lease, it would be able to lodge a case at the Rent Disputes Settlement Centre, which determines landlord and tenant disputes in Dubai, provided that the lease has been registered in the ejari system operated by the RERA.

Under the UAE Civil Code, property can be appropriated by the government for the public benefit. In such circumstances, "just compensation" must be paid. Whether, and to what extent, the compensation would cover any tenant's interests in the property is dealt with on a case-by-case basis.

The most common pricing structures are:

  • lump sum – a pre-agreed fixed price for the works, subject to adjustment for variations to the scope of works and/or events entitling the contractor to claim loss and expense in accordance with the terms of the contract;
  • measurement or unit price – the parties agree on the amount to be paid per unit of construction so that the work can be quantified and valued on the basis of a bill of quantities.

Payment is usually made against the certification of completed works by an engineer appointed by the employer. The inspection and certification of completed works is typically made on a periodic basis (usually monthly) or a milestone basis (at pre-agreed specific milestones or stages).

The majority of construction contracts for major projects in the UAE are based on the industry standard form contracts published by FIDIC – as such, responsibility for design and construction is allocated contractually in accordance with standard international practise.

The most common procurement structures for construction projects in the UAE are:

  • traditional "construct-only" procurement under which the contractor assumes responsibility for the construction of the works but not the design (with the responsibilities of the parties for design and construction allocated on the basis of the FIDIC Red Book); and
  • design-and-build (D&B) procurement, where the contractor assumes responsibility for both the design and construction of the works (with the responsibilities of the parties for design and construction allocated on the basis of the FIDIC Yellow Book). It is uncommon on UAE D&B projects for the employer to appoint the design team and novate the design consultant appointments to a D&B contractor.

Alternative methods of procurement such as construction management, management contracting, partnering and alliancing remain uncommon in the UAE.

The contractual devices included in the FIDIC forms of contract are typically used to manage risk allocation in the context of a construction project – however, the standard FIDIC Conditions of Contract are often amended by employers to transfer additional risk to the contractor. Whilst the majority of the standard FIDIC provisions are generally viewed as being enforceable under UAE law, the UAE Civil Code provides that an agreement or a contractual provision will be unenforceable if:

  • it conflicts with a mandatory provision of the law; or
  • it is contrary to public order or morals; or
  • it is performed in bad faith; or
  • a right is exercised in an unlawful manner – including where the benefit realised is disproportionate to the harm suffered by others, or where the interests sought to be realised conflict with Islamic Shari'a law).

Relevant mandatory provisions of the Civil Code in the context of construction contracts include:

  • Article 248 – pursuant to which the UAE courts may, upon application by a party, vary unfair contractual provisions or exempt a party from compliance with such provisions;
  • Article 249 – which allows the UAE courts to adjust the effect of a contract if exceptional and unforeseeable circumstances occur which make performance of an obligation "oppressive";
  • Article 296 – which provides that liability for harmful (tortious) acts may not be excluded;
  • Article 383 – which provides that liability for fraud or for wilful or gross mistake may not be excluded;
  • Article 390 – which allows the UAE courts to adjust the award of damages due to a party if the actual loss suffered differs from a contractually pre-agreed amount of damages; and
  • Article 880 to 882 – which provides that liability for structural failure, or defects resulting in partial or total collapse of a structure, or which threaten the stability or safety of a structure within ten years of handover is imposed jointly and severally on the main contractor and lead design consultant (regardless of fault or breach of contract). This "decennial liability" may not be excluded.

Any parts of an agreement which conflict with or are inconsistent with such mandatory provisions will either be rendered automatically void, or will provide the courts with the power to adjust the agreement to ensure consistency with mandatory provisions.

Schedule-related risk is generally managed in accordance with FIDIC principles. Virtually all construction contracts in the UAE require works to be completed by a specified date. Instead of the employer bringing a claim for general damages (compensation) for late completion of the works by the contractor (which may be difficult to quantify), it is standard practise to require the contractor to pay "liquidated damages" ("LDs") for delay.

LDs are damages that are fixed and the quantum is agreed by the parties in advance.A typical LD clause requires the contractor to pay or allow the employer to deduct LDs at a rate per day or week of delay in the completion of the works.

Article 390of the UAE Civil Codeprovides that the parties can pre-agree an amount for damages, including for delay. However, although the liquidated damages rate chosen by the parties may be a strong indicator as to what the actual rate will be:

  • either party may apply to a court or arbitrator to vary the agreed rate of liquidated damages so that the compensation awarded reflects actual loss suffered; and
  • in contrast with common law jurisdictions (such as in England and Wales), there is no express prohibition in UAE law on penalties and no requirement that LDs be a genuine pre-estimate of loss – any attempt to distinguish between "penalty", "liquidated damages" and "compensation" is likely to fail under UAE law as the words are used interchangeably within the Civil Code, in other UAE laws, and as a matter of commercial custom.

Accordingly, the UAE law position as regards LDs is different from the English law position, insofar as the Civil Code allows the liquidated damages regime to be altered by a court having regard to the losses actually suffered by the innocent party. The court's power to vary the agreed level of LDs is discretionary, and the party seeking to have the LDs reassessed must be able to demonstrate that the rate of LDs should be adjusted.

Construction contracts in the UAE typically provide for:

  • an "on-demand" performance bond for 10% of the contract price;
  • an "on-demand" advance payment guarantee securing the employer's advance payments under the contract;
  • retention of 10% from each interim payment as security for the contractor's obligations to remedy defects during the defects notification period (or occasionally a bond in lieu of such retention).

Company guarantees from a contractor's parent or group company in favour of the employer are also fairly common, especially where the contracting entity is a special purpose vehicle.

Contractual payment security mechanisms, whether by way of a payment bond, parent company guarantee from the employer, or escrow and project bank account arrangements are unusual in the UAE, though this is more as a result of commercial custom than any legal restrictions on such forms of security.

Article 879(1) of the Civil Code provides a contractor or consultant with the potential remedy of a statutory lien over property in circumstances where the contractor or consultant's work has produced a beneficial effect on the property but the employer has failed to pay for such work. This entitles the contractor or consultant to retain (and not hand over) the property he has improved, pending payment for such work by the employer. However, this mechanism remains relatively untested and contractors and consultants typically rely on contractual remedies for non-payment.

There are no express requirements to be satisfied under UAE law before a building may be inhabited or used other than the issue of the "completion certificate". However, the law is unclear as to whether this requirement relates to the completion certificate from the relevant authority confirming that construction is complete, or the completion certificate issued by the engineer under the construction contract.

In practise, a building completion certificate from the relevant municipality – following inspections of the works by the relevant authorities and civil defence – is usually stipulated as a contractual requirement before construction works can be used and occupied.

Since 1 January 2018, VAT at the standard rate (5%) applies to the sale of commercial property (whether such property is newly constructed or not). In the case of investment property, if the transaction can be treated as a "transfer as a going concern" then no VAT arises.

At the current time, there are no methods commonly used to mitigate transfer, recordation, stamp or other similar tax liability on acquisitions of large real estate portfolios.

In Dubai, there is a municipality fee payable on the occupation of property and this is calculated as 5% of the annual rent, or 0.05% of the value of the property (in the case of ownership). Value is generally treated as the amount for which the current occupier bought the property.

At present, there is no income tax applicable on rental income and no capital gains tax.

In the UEA, there are no tax benefits from owning real estate.

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DLA Piper Middle East LLP has a market-leading real estate offering: an international multi-disciplinary team of lawyers that can serve client needs globally across the real estate sector. It has over 500 real estate lawyers operating in more than 40 countries around the world and is able to serve clients in key real estate markets, with strongly established teams in Europe, Asia Pacific, the Middle East, Africa and the Americas. DLA Piper works with clients through all stages of the real estate life cycle, including planning, acquiring, finding, developing, leasing, completing, trading and divesting. Working through this cycle, the team offers the following services: financing, acquisitions and disposals, asset management, construction, cross-border investment, development, fund formation, joint ventures, leasing, litigation, planning, zoning and environmental issues, public-private partnerships, REITs, restructuring and tax. Lawyers work alongside investors, lenders, developers and managers on every aspect of their real estate activities. They advise on matters ranging from fund formation and establishing investment platforms for clients moving into new markets for the first time to cross-border portfolio acquisitions and restructuring loan facilities secured on assets in multiple jurisdictions.


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