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With effect from their publication on 14 June 2015, the Property Regulations and the Strata Regulations govern property matters within ADGM. This month we will report on the Property Regulations and next month we will provide an update on the Strata Regulations.
ADGM occupies the whole of Al Maryah Island and has been designated the financial centre of Abu Dhabi. ADGM is a financial free zone and an investment area for property ownership by foreigners. Within ADGM, foreign investors have a wider choice of legal structures to choose from if they wish to invest in property than in most other areas of Abu Dhabi.
The Property Regulations introduce many concepts that are new to the UAE but which will be familiar to those used to dealing with property matters in common law jurisdictions. ADGM will establish its own courts that will hear any matters arising from the Property Regulations and the Strata Regulations (“ADGM Court”).
The following property interests are recognised by ADGM:
UAE or GCC nationals or entities wholly-owned by UAE or GCC nationals can own freehold title to land and floors or units within buildings located in ADGM. Foreign, non-GCC, nationals and entities with any degree of non-UAE or non-GCC ownership may not own freehold title to land in ADGM (as is also the case in the remainder of Abu Dhabi) but may own floors or units within buildings. ADGM recognises the concepts of life interests and future or reversionary interests. Joint ownership is allowed by way of either joint tenancies or tenancies in common. Joint tenancy means that each co-owner has equal rights to the whole property and that on the death of one co-owner his share automatically passes to the other co-owners. Tenancy in common means the co-owners can own different shares in the property and can pass on their shares in the property as they wish in their Wills.
Leasehold interests and sub-lease interests of up to 99 years are allowed and leases may include a right to renew. Occupational interests created by licences are treated as personal contractual arrangements that do not create real estate rights. It is not clear from the Property Regulations what the maximum term will be for an occupational interest before it will be regarded as a real estate right.
ADGM introduces the concept of strata title for multi-occupied developments, which provides for developers to establish owners associations to run common parts of developments. We will provide further detail on the Strata Regulations next month.
The Property Regulations contain provisions dealing specifically with the creation, registration and enforcement of mortgages of property within ADGM.
The Property Regulations provide for non-possessory rights of use, entry and benefit.
The Property Regulations allow the creation of both positive and negative covenants.
Statutory charges that impose restrictions on the use of, or dealings with, property in ADGM are permitted under the Property Regulations. The Property Regulations do not define what is meant by a statutory charge, however it is likely to mean a form of security relating to an obligation to a government authority.
ADGM will apply the following general principles regarding property:
The Registrar will create folios for each registerable area of real estate in ADGM. These folios may relate to whole plots or may be created for subdivided, approved strata title interests within plots. Transfers of part only of registered folios are not allowed.
A person or an authority can apply to register the benefit of a statutory charge over any property. The Registrar will then give notice of the statutory charge to all those with a registered interest in the property. A potential purchaser or mortgagee of a property will also be made aware of the existence of a registered statutory charge if it carries out an official search of the Real Property Register. Registration does not give any greater effect to the statutory charge than it would have without registration.
The Property Regulations are significantly different to the property laws that apply elsewhere in Abu Dhabi. ADGM is positioning itself as a major financial centre in the UAE, and implementing comprehensive real property regulations is likely to bolster investor confidence and encourage activity in the real estate sector in ADGM.