Room for improvement

Taylor Wessing’s Mark Fraser on realty

After the shock of the property collapse in late 2008, has Dubai’s real estate market learned any lessons? The benefit of hindsight is a great thing but what is changing and is there scope for improvement? Taylor Wessing partner, Mark Fraser, examines the systems and practices in place in Dubai to see how they score.


My old headmaster was the doyen of the withering look, the shake of the head and the jaundiced assessment that there was “room for improvement” in our work. So indelibly etched in my mind are these words that I wonder how he would view real estate practices in Dubai.

In the heady days prior to the collapse of the market in late 2008, it was perhaps understandable that the quick gains to be had would generate a laissez-faire, gung – ho attitude to the acquisition of property. Now that the party is over, and with the benefit of hindsight, is there a case for overhauling or regulating more clearly some of the more questionable practices and systems?

For a kick-off, the unique feature of the Dubai market, whereby a purchaser has to settle the outstanding balance on the seller’s mortgage before a sale completes, is ripe for change. Why should there be a period during which the seller has transferred funds but does not have title to the property? In the United Kingdom, the solicitors for the seller and purchaser interact whereby the purchaser’s funds are remitted to the seller’s solicitor and the loan/mortgage is discharged at the same time as the title documents are exchanged. Hardly rocket science but the practice has, in-built, a satisfactory level of protection for the purchaser when making such a significant investment. As part and parcel of Dubai’s development, is it too much to expect such a practice to evolve here?

Then we have all the fuss over service charges and additional charges which came back to prominence when Nakheel and the shoreline occupiers locked horns somewhat publicly on the access to the beach and its facilities. Unfortunately, much of the confusion results from poor documentation. If the Sale and Purchase Agreement (SPA) has been drafted properly the position should be clear but often the SPA is deficient in this regard. We really need to reach the position where no property in Dubai is rented out without the landlord proving payment of service charges. However, that will require cooperation and coordination of tenants, landlords, developers and agents but the appetite for such cooperation has been somewhat lacking.

Finally, there is the old chestnut of Dubai’s Strata Law which, although it came into force on April 1 2008 with specific directions being issued in 2010, has not been rolled out successfully into the projects in Dubai. Enacted to establish the subdivision requirements for buildings with a multiple ownership and to provide machinery to govern management, the Strata Law is well-intentioned but there has to be proper implementation for the system to work. The Strata Law would also benefit from simplification as implementation may be being hindered by complexity. As a result there is still much uncertainty about how the strata regime will be implemented.

On reflection, I can just picture my headmaster’s assessment of current practices and systems in the Dubai, Room for improvement indeed!


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