The Dubai Land Department (DLD) and the Dubai International Financial Centre (DIFC) entered into a Memorandum of Understanding (MOU) on May 4th 2017, allowing DIFC registered entities to purchase properties and register their properties with the DLD.
The MOU stipulates certain “eligible entities” in the DIFC which can own property in Dubai. This covers companies, partnerships, foundations, real estate investment trusts and other real estate funds. DIFC trusts that are not regulated as a fund and DIFC special purpose companies are excluded however. The DIFC had issued a short handbook for entities purchasing property and registering title with the DLD.
In previous years, the DLD was reluctant to accept any DIFC trusts or real estate funds for the purposes of owning property directly. The DLD would typically assess and verify the beneficial ownerships of properties. Property ownership through a JAFZA offshore company was the most widely used vehicle for corporates. Therefore, these essential changes will welcome further investments in real estate properties through funds established in the DIFC. The DLD has already started registering DIFC funds as property owners.
DIFC registered entities intending on purchasing property and registering their real estate title with the DLD must first apply to the DIFC Registrar of Companies (ROC). The ROC will carry out the due diligence process, and issue a no-objection certificate (NOC) to the DLD. The ROC will verify the beneficial ownership of the DIFC registered entities, and issue all the verification documents to the DLD. Another implication of the MOU is that no attestation or legalization of the documents will be required.
DIFC registered entities owning a Dubai property will be validated on a separate registrar, and any transfer of interests or new shares issued for the said entities will first require a no-objection certificate from the DLD. With regards to DIFC funds; where a fund admits new investors, a flat notification fee will be payable to the DLD (currently at 10,000 AED). The DLD transfer rate of 4% will apply for any transfer of interest in any of the DIFC entities. The ROC further regulates the DIFC entities and monitors indirect ownership changes. DIFC entities registered on the separate registrar will be required to sign an undertaking imposing on them a duty to inform the ROC of any direct or indirect transfer of interests. The same DLD fees and rules will be applicable for indirect transfer of interests.
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Author: Sarra AlSamarrai.