Implications of Circular 13 Issued by Dubai Land Department

Under the Radar

“Real estate investing, even on a very small scale remains a tried and true means of building an individual’s cash flow and wealth”

- Robert Kiyosaki

It is not strange to find Dubai to be investors’ favorite choice when it comes to real estate investment. Earning the name as one of the fastest developing cities in the world with limitless skyscrapers and real-estate projects announced every day, you unmistakably want to join the crowd and invest in some real estate project. However, Dubai’s real estate companies are becoming more and more ambitious these days since they came out with a new trend. “Buy the house of your dreams outside Dubai”—this phrase is usually located near a picture of Eden’s garden and, supposedly, the house of your dreams facing sunrise! All of this sounds tempting, and I would personally love to buy a house on top of a mountain with the perfect sunrise like from the movie ‘UP’. But why would I invest in some foreign country for the house of my dreams if I am unable to place my trust in a local real-estate company to build this house right here in Dubai? Can anyone even trust such an advertisement? As outrageous as it may be: Yes! Yes, you can!

The vision of Dubai is to create a stable city for local and foreign investors equally. To accomplish this goal, the Dubai Land Department (the Land Department) had recently issued Circular 13 of 2016 (the Circular), which has imposed serious restrictions to real estate brokers who want to advertise any property outside Dubai—even if it is on the internet. Real estate agents are not permitted to post any details of a foreign property online without being verified and approved by the Land Department. This means your house in Eden’s garden does exist!

According to the Circular 13, any real-estate company must obtain authorization from the Land Department to market properties—whether it is inside or outside the UAE. A real estate company must provide a list of documentation such as the property title deed, the marketing agreement between the broker in Dubai and property owner outside, details of the property, and whether the property is ready for purchase. Real estate brokers who intend to market foreign properties must obtain a letter from the owner of the foreign property stating the ways and terms of ownership for the likes of investors in Dubai. Further, and most importantly, the broker is not allowed to take any amount from the investor—the money is handed only to the owner of the property directly. Even the sale and purchase contract should be signed by the owner, purchaser, and broker stating the terms and conditions of the deal. When the investor and the property owner seals the deal, only then is the broker is entitled to his fees. Circular 13 has mentioned these requirements, and all real estate agents in Dubai are aware of such restrictions. Any violation by the brokers may subject him to heavy fines by the Land Department and, of course, to a Court claim by the investor.

Therefore, the Dubai Land Department has evidently restricted the agents to facilitate the process of purchasing the property and providing all the required information related to the real estate. Other than that, investors deal with the owner of the property directly which is an accomplishment for the Land Department and a huge step towards creating transparency and a safe environment for investors.

Why would anyone even think of buying property inside Dubai if you can get a better, cheaper deal outside? It is important to note that, even though it is safe to trust an advertisement of a foreign property in Dubai, the Circular is only protecting the investors from any false advertisements, wrong information, and fraud deals with agents listed among the Land Department. This does not mean that the Circular applies to the owners of property outside Dubai. The Circular will not protect you outside of the UAE where no one can predict what will happen. We know that, even here in Dubai, dealing with the property owners directly did not spare investors the hassle in courts or arbitration centers. From delay in the handover to vanishing from the construction site, what will prevent uncertain circumstances from happening outside Dubai? Investors cross their fingers when investing outside the region due to their lack of knowledge in the judicial system and policies of the foreign country. You can knock on that real estate door and leave no stone unturned. Knowing what is going to happen and outlining a roadmap even if you have received the worst out of your real-estate deal is better than having no roadmaps at all. Ergo, the best way to invest safely in any country—even in Dubai—is to involve your real-estate lawyer.