Property Ownership through Corporate Vehicles

The companies which are allowed to own real estate in Dubai are as follows:

• Mainland companies based in Dubai
• Free zone entities (FZEs) or free zone companies (FZCOs) based in Dubai
• Abu Dhabi Global Markets (ADGM) entities
• Jebel Ali Free Zone Authority (JAFZA) offshore companies
• Dubai International Financial Centre (DIFC) entities

Options for Foreign Entities to Purchase Property in Dubai

Foreign companies cannot directly purchase property in Dubai. They can however purchase property through a locally incorporated entity. The easiest method is by virtue of one of the following:

• JAFZA offshore company
• ADGM entity
• DIFC entity

JAFZA Offshore Company

JAFZA offshores are the most established and well-known corporate vehicles for real estate ownership. Incorporating a JAFZA offshore company is relatively straightforward and inexpensive. JAFZA offshore companies are not allowed to conduct any business within the UAE as per the JAFZA Offshore Companies Regulations 2018 (“Regulations”) and they are mostly used as vehicles to own shares and/or assets.

The recently amended Regulations now permit the offshore company to apply for one UAE visa, which allows investors the flexibility of entering the UAE without restrictions. Establishing company bank accounts through this corporate vehicle has also proven to be less strenuous than through any other type of offshore company.

ADGM Companies

On November 7^th 2018, the Dubai Land Department (DLD) had signed a Memorandum of Understanding (MOU) with the ADGM, the international financial center in Abu Dhabi. The MOU stipulates that any entity within the ADGM may now own property in Dubai through the Dubai Land Department, within the framework, legal controls and registration procedures of the DLD. The easiest method of property ownership, specifically for foreign entities or foreign individuals is through ADGM SPVs.

The ADGM SPVs serve a similar function to those of the JAFZA offshores. SPVs may serve as a special purpose for professional investors, or investment institutions for securitizing assets or investing in real property.  Similar to the DIFC, ADGM also has their own courts which are governed by common law.

Although the MOU currently does not make any distinction between the various types of entities established within the ADGM, due to its recent implementation, we are aware that the DLD is currently not yet accepting any registration of properties for foundations incorporated within the ADGM.

DIFC Entities

On May 4^th 2017, the DLD and the DIFC entered into a MOU allowing DIFC registered entities to purchase properties and to register their properties with the DLD. The eligible entities as per the MOU 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.

In contrast to the ADGM, DIFC foundations are currently accepted as entities which can own properties. The DIFC has recently enacted DIFC Law No. 3 of 2018 (“Foundations Law”) which governs key aspects of foundations. Foundations are legal entities which can hold assets on its own name and on behalf of its beneficiaries. The foundation does not have any shareholders and is generally used for private wealth management, succession planning, charitable institutions and financial planning amongst other reasons.

Any DIFC entity intending on purchasing property must first apply to the DIFC Registrar of Companies (ROC), which will carry out the due diligence procedure and issue a no-objection certificate (NOC) to the DLD. The DIFC ROC will validate the beneficial ownership of the DIFC registered entities and issue the documents to the DLD. Attestation of the documents will not be required.

Required Documents for Companies to Purchase Property

The documents required to purchase and register a Dubai property for most companies remain the same:

• Incorporation certificate
• Incumbency certificate
• Good standing certificate
• Memorandum and articles of association of the company
• ID documents of the shareholders
• NOC from the DLD and relevant free zone authority
• Power of attorney for the relevant individual who will be signing the conveyancing documents
• Board resolution approving the purchase of the property, if required

The above documents however would be subject to change depending on the relevant entity and free zone involved. If there are corporate shareholders involved, then the DLD may require all the corporate documents until the ultimate beneficial owner has been established.

Change in Ownership of the Company

Any transfer of shares in any of the above companies which own property will require the prior approval of the DLD, through a NOC, and the relevant 4% transfer fees being paid on the amount of shares being transferred. The free zone authority will not finalize the share transfer procedure unless the NOC is obtained from the DLD.

If a property is being transferred from an individual to an entity incorporated by the same individual, then such a transfer may be considered as a “gift” transfer, where the applicable DLD transfer fees would be 0.125% of the purchase price, as opposed to 4%.

For DIFC incorporated entities, the DIFC ROC will monitor the indirect ownership changes, and DIFC entities will be required to sign an undertaking imposing a duty to inform the DIFC ROC of any direct or indirect transfer of interests.

Companies established in other Emirates

Currently there are no regulations for companies incorporated in other emirates to purchase property in Dubai. Companies situated in other emirates must establish a presence in Dubai, or obtain the approval of the Dubai Land Department before purchasing any property in Dubai.

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Author: Sarra AlSamarrai.