Abu Dhabi Property Law

While Dubai has earned a reputation as a global leader in property development and sales over the past several years, the recent expansion of the Abu Dhabi property market has not gone unnoticed to both local and foreign investors and purchasers alike. Although Abu Dhabi has not opened up its real estate field to the same extent as its sister emirate, it has passed legislation in the past few years which permits freehold ownership for foreigners and GCC nationals like (albeit in limited form), and suggests further liberalization in the future. Indeed, many industry analysts and insiders believe that Abu Dhabi will enjoy a building and development expansion- and related foreign investment – which may rival even that of Dubai in the years to come.

The Evolution of Property Ownership in Abu Dhabi

As is true for all the Emirates, title in Abu Dhabi ultimately emanates from the Ruler.
Previously, various arms of the government of Abu Dhabi financed all development of both residential and commercial property in the capital. With recent legislation and amendments in the policy, development and construction is now slowly shifting into the hands of private sector players.

The two cornerstone pieces of property legislation in Abu Dhabi are: Law No. 3 for the year 2005, on the Regulation and Registration of Real property in the Emirate of Abu Dhabi (the ‘Registration Law’); and Law No. 19 for the year of 2005, on Property Ownership in the Emirate of Abu Dhabi (the ‘Ownership Law’).

The Registration Law

The Registration Law establishes the Land Registers within the Municipalities of Abu Dhabi and Al Ain and stipulates that any disposition of real estate shall be null and void unless first registered with the concerned Land Register. Additionally, the Registration Law frees previous restriction on UAE nationals and permits them to dispose of residential, commercial, investment or agricultural land granted to them by the Government of Abu Dhabi- provided that a minimum of five years has passed from the date of the grant.

The Ownership Law

The Ownership Law extends property ownership to both GCC nationals and other foreigners- albeit in ‘Investment Areas’ (akin to the ‘Designated Freehold Areas’ in Dubai). Ownership in all other areas of Abu Dhabi is still restricted to UAE nationals. Some Investment Areas include Al Raha Beach, Reem Island, and Saadiyat Island.

The Ownership Law permits GCC nationals to own both land and buildings within these Investment Areas on a freehold basis. Other foreigners are permitted to own buildings and/or floors within buildings in the Investment Areas on a freehold basis, but have no freehold ownership rights to the underlying land. Instead, foreigners can enjoy 99-years leases of already built-up land, (known as usufruct leases), and 50-year development leases (known as musatahah leases), which allow lessees to built and enjoy undeveloped land. Under the Ownership Law, both usufruct and musatahah leases may be renewed for like periods of time upon agreement between the parties.

Landlord Tenant Law in Abu Dhabi

In November of 2006, Abu Dhabi issued Law No. 20 for 2006, On the Regulation of Landlord-Tenant Relationships (the ‘Tenancy Law’). The Tenancy Law addresses tenancies outside of the Investment Areas, and covers residential, industrial, and commercial leases. In contradistinction to Dubai, the Tenancy Law for a default three year tenancy period for new leases. In other words, if a landlord and tenant execute a lease in Abu Dhabi which states that the tenancy is a year, by operation of law, a landlord will not be able to institute eviction proceedings against the tenant until the third anniversary of the start of the tenancy. However, for each ensuing year which follows, the landlord is permitted to increase the rent by up to 5%.

Additionally, the Crown Prince of Abu Dhabi issued Decrees Nos. 42 and 43 to create the Tenancy Disputes Settlement Committee (‘Tenancy Committee’) and the Tenancy Appeals Committee, respectively (the ‘Tenancy Decrees’). Insiders have stated that the Tenancy Committee, being a new entity, is still formulating policies and procedures regarding tenancy disputes. Still, conventional wisdom would indicate that the Tenancy Committee will develop a body of rules and regulations to ensure the overall rights and interest of tenants in the near future.

Issues For Future Consideration

Contrary to Dubai, Abu Dhabi does not currently have in place any legislation regulating real estate brokers and agents, off plan properties, offshore developers, or the issuance of strata title. If Abu Dhabi is to develop in a similar fashion to Dubai, and attract the same level of high-profile investment, it seems clear that the emirates will need to address these issues sooner or later.

Still, most observers cannot help but admire the strides that Abu Dhabi has made to date and believe that this serves as a strong indication that its real estate legislation will soon catch up to its construction and development ambition.