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Dubai, given its position as a global tourist destination, has long been well placed to benefit from and accommodate timeshare schemes and projects, as seen in other parts of the world. A timeshare law to regulate the industry in Dubai has been mooted and considered for some time. This has now come to fruition with the publication of Law No. 14 of 2020 on the Timeshare System in Dubai (the ‘Dubai Timeshare Law’) in the Official Gazette on 10 December 2020. In this article, we take a look at some of its key concepts and terms.
Although there is a wide array of different types of scheme, timeshare broadly involves property in hotels or resorts with either: (i) multiple purchasers buying use rights over a specific unit (‘Timeshare Contract’); or (2) purchasers acquiring points which can then be exchanged for rights of use in a selection of properties of a certain type which may be located in a number of different countries (‘Points Contract’).
Timeshare differs from fractional ownership in that, in addition to periodic usage rights, investors additionally acquire an undivided share in the legal ownership of the property. Both timeshare and fractional ownership offer a more economical alternative to outright second home ownership.
It was announced last year that the Dubai Land Department is piloting a new scheme whereby investors can now obtain a title deed evidencing a fractional ownership interest in units located in certain hotel projects. It is therefore likely that specific laws and regulations relating to fractional ownership in Dubai will be released in the future.
The Dubai Timeshare Law does not deal with fractional ownership; it deals purely with timeshare and draws a distinction between Timeshare Contracts and Points Contracts. Its stated objectives are to:
It applies to owners, developers and real estate managers that own, manage or sell/market/advertise timeshare property. It applies to all freezone and investment areas in Dubai, including the DIFC. The law comes into force on 10 June 2021 and affected entities have six months to implement and ensure compliance with the law (i.e. 10 December 2021, subject to extension by the Department of Tourism and Commerce Marketing (‘DTCM’)).
DTCM is the relevant licensing and regulatory authority. It is responsible for issuing mandatory licences to relevant entities to practise the activity of selling timeshare products. The relevant properties themselves also need to be approved by DTCM to ensure compliance with technical requirements and standards as determined by DTCM.
DTCM’s role also includes:
Despite (unlike fractional ownership) such timeshare rights not giving purchasers any rights of ownership in the underlying real estate asset, the Dubai Timeshare Law provides for a concept of “deeded timeshare” usage rights, as seen in other parts of the world. For those timeshare units located in any part of Dubai, other than DIFC (which are registrable at the DIFC Registrar of Real Properties), such rights are registrable at the DLD.
In this regard, the law only refers to Timeshare Contracts, suggesting that those acquiring rights under a Points Contract (which may include the right to use non-specific units in Dubai) would not be able to register such rights with the relevant land registry.
The law underscores this concept of “deeded timeshare” by providing that a timeshare owner under a Timeshare Contract may sell such right to third parties and pass it on to heirs upon death, as with traditional real estate assets. However, any such transfer is void if the right has not been registered.
The law specifies a number of obligations applicable to developers and owners selling Timeshare Contracts or Points Contracts involving property in Dubai, which include:
The law stipulates various terms and conditions that must be included in a Timeshare Contract or Points Contract. These are:
Any contract that does not contain such mandatory elements is considered void. The law also states that any provisions in the contract which infringe the purchaser’s rights pursuant to the law shall also be void.
In addition to the withdrawal right in the 10-day withdrawal/“cooling off” period, the law specifies the following circumstances where a purchaser has the right to terminate the contract on written notice within the period of one year from the date of its execution:
The law provides that a purchaser may give at least 45 days’ notice to postpone an allocated period of use to a later time under a Timeshare Contract (up to a maximum of two years in the future) provided such notice period is adhered to and the purchaser is not in breach of any financial obligations.
In addition, a purchaser may assign a period of use under a Timeshare Contract to a third party provided that the owner/developer/manager is notified in advance. If there is any damage caused to the unit by such third party, the purchaser and the third party will be jointly liable.
As mentioned above, a purchaser may assign its timeshare right to a third party by giving prior notice to the developer/owner/manager and such right may be passed down to heirs upon death. All such transfers must be notified to the DLD or DIFC (as applicable) and registered.
The Dubai Courts and DIFC Courts have jurisdiction regarding all disputes relating to timeshare contracts, depending upon the location of the relevant timeshare property.
DTCM has the authority to take various punitive measures against those violating the law, including:
DTCM also has the authority to judicially enforce such breaches and also has rights of inspection regarding the relevant timeshare properties and the records of the relevant developer/owner/manager.
The Dubai Timeshare Law is a welcome and long overdue piece of legislation for Dubai which will hopefully serve to boost the Dubai tourism and real estate sectors during these difficult times.