New Decree on Musataha Right in Dubai

His Highness Sheikh Mohammed bin Rashid Al Maktoum has issued Decree No (23) of 2022 regulating the grant of Musataha Right over commercial lands in the Emirate of Dubai (“the “Decree”). The Decree defines a Musataha Right as a right in rem granted by the Owner to the Musateh (being the owner of the Musataha right) to exploit commercial land. The Civil Code regulates the Musataha right in general under Articles 1353  to 1360 (inclusive). The Decree is related to commercial and industrial land owned by the Government of Dubai or companies wholly or partially owned by the Government of Dubai.

The Decree confirms the rules of the Civil Code about Musataha Right but adds new and special rules as follows:

• The Dubai Land Department (DLD) will issue the requirements and rules for exploiting commercial and industrial land.
• The DLD will issue a standard contract for the grant of a Musataha right.
• The DLD will (a) identify the land, (b) liaise with other government departments and (c) obtain the Ruler’s approval on the land the subject of the Decree.
• The DLD has been granted wide authorities in relation to the implementation of the Decree such as supervising and monitoring projects and land and inspecting the projects to be constructed on the commercial and industrial land.
• The Musataha agreement must be registered with the DLD in the real estate register or otherwise it will be void.
• The term of the Musataha right should not be more than 35 years but it can be extended up to a total period of 50 years (subject to the Owner’s consent).
• The term of the Musataha shall commence from the date of its registration in the real estate register at the DLD.
• The owner of the Musataha must complete the construction on the land within a maximum period of five years from the date of the registration of the Musataha agreement with the DLD. The failure to complete the construction within the statutory timeframe set out by the Decree may result in an obligation to pay a fine or in some instances the termination of the Musataha Agreement.
• The Musataha right can be mortgaged and off-plan sale is possible during the term of the Musataha right.
• The ownership of the structures on the land will be transferred to the Owner of the land (i.e., the Government of Dubai) upon the end of the Musataha term unless the contracting parties agree otherwise.
• If the owner of the Musataha right is a company then no sale of shares in that company is allowed prior to obtaining the prior consent of the DLD.

We are of the view that the Decree will encourage real estate investment over government land as it sets clear rules for investors and governmental authorities to follow. We will be closely monitoring the implementation of the Decree which may require, among other matters, a change in the existing lease agreements framework currently adopted by the governmental authorities in the Emirate of Dubai and convert such leases to Musataha agreements.

If you would like to know more about the new decree and its implications for you, please contact our team via email:  property2@tamimi.com