For many people, buying their first home or investment property in Dubai can be daunting as the process is very different from that in other countries. Certainly, a lot of ex-pats in Europe, Australia, the USA, (and numerous other countries) will be used to engaging a conveyancer, property lawyer, or notary to undertake the legal aspects of the transaction, but many here choose not to do so.
Property transactions in Dubai are primarily handled by real estate brokers, who should be trained and registered/regulated by the Dubai Real Estate Regulatory Agency (RERA). Brokers deal with the pre-sale negotiations and the contracts between buyer/broker, seller/ broker and between the seller and buyer. These are commonly known as Form B, Form A and Form F, respectively. All of these are standard digital forms but permit extra information to be input by the brokers on the Dubai REST App (Real Estate Self Transaction) digital platform which is managed and controlled by Dubai Land Department (DLD).
Once Form A and Form B have been completed by the respective brokers for a property transaction, that information along with the information held for the property itself in the DLD records (including registered tenancy contracts for the property), will form the basis for the Form F. The seller’s broker will also add some extra information in relation to the deposit cheque provided and any additional conditions requested and agreed by the parties. It is this part of the process which many buyers prefer to engage the services of a conveyancer or real estate lawyer in Dubai to deal with, who has experience and knowledge of contract drafting in this specific area. Failure to provide for any possible issues which may arise in the transaction is often the cause of disputes, so careful consideration needs to be given as to what to include in the Form F’s additional conditions section.
Some considerations for the additional conditions in Form F are as follows:
- It is standard practice for a 10% (of sale price) deposit cheque to be given by the buyer and handed over to the broker (usually the seller’s broker, but occasionally the buyer’s broker will hold it on trust/in escrow for the parties) at the same time that the Form F is signed. This is a current-dated, personal cheque drawn on the buyer’s bank account in the UAE, made payable to the seller(s). Buyers should not hand over the deposit cheque until the Form F is ready to be signed. Some sellers/brokers may insist on receiving the cheque first, but it is advisable to refuse to do so until they have agreed terms with the seller (including the Form F additional conditions). Even if there isa provision in the additional conditions for the deposit cheque to be handed over to the seller if the buyer pulls out of the purchase or fails to complete the purchase, there should be a further condition stating that it will not be handed over to the seller without mutual agreement of the parties or by order of a competent court.
- Is there a tenant in the property? Tenants has security of tenure under the landlord and tenant laws in Dubai. In other words, if the property is sold, the new owner becomes the new landlord. Is the tenant voluntarily going to vacate prior to the completion of the transfer of the property or will a notice to vacate have to be served? This can be served by the current owners for reason of sale, or by the new owner after transfer for reasons of wanting to occupy the property themselves (or their first kin will) if they do not have an alternative similar or suitable property available. This should be 12 months’ notice, sent by notary public or by registered mail. Notary public is definitely the best way to deal with this aspect. This is a common problem and needs to be suitably dealt with in the additional conditions section. Copies of the Ejari tenancy contract and certificate, legal notice served and rent cheques should have been seen by the buyer’s broker prior to the Form F being signed so that he/she can check everything is in order and once Form F is signed they should be sent to the buyer. On the day of transfer, any rent to be passed over to the buyer should be dealt with and any original copies of these documents and post-dated rent cheques are handed to the buyer. These factors above should be included in the additional conditions.
- Does the buyer require a mortgage? Once pre-approval is given for a mortgage there will need to be a valuation completed by the mortgagee (bank) amongst other requirements, before a final mortgage offer is made to the mortgagor (borrower/buyer). To ensure that the buyer isn’t at risk of failing to complete the purchase, there should be two or three conditions precedent in the additional conditions of the Form F (depending on the buyer’s circumstances):
- The valuation of the property at not less than the purchase price. Sometimes brokers/sellers will insist that there is a tolerance of 5-10% under the purchase price but that can mean that the buyer has to proceed even if the property comes in at less that the purchase price which may cause financial stress or difficulty to them as they have to make up that shortfall in cash themselves if they are putting down the minimum deposit with the bank;
- The mortgagee makes a final mortgage offer which enables the buyer to complete the purchase under the terms of the Form F.
- The buyer is not served with employment termination notice during the period before the Form F longstop date.
It should also be stated in the additional conditions that, if any of these conditions precedent are not met (or if c applies), the Form F will be deemed to be null and void without the requirement for further notice, and without penalty as between either party and/or the parties and their brokers, unless agreed otherwise in writing. The deposit cheque shall also be returned to the buyer by the broker.
- The seller warrants and confirms that all additional works, extensions and improvements to the property have the relevant and necessary authority/developer approvals, permits and NOCs should be included. The existence of these should be requested by the buyer’s broker prior to the Form F being signed and received and sent to the buyer after it is signed.
These are just some of the main considerations to be included in the additional conditions.
The Dubai property market is thriving and expanding rapidly, and property transactions happen at a very quick pace. Many real estate brokers are excellent in both knowledge of the market and in the way they treat their clients, but there have also been numerous clients requiring assistance in resolving disputes because proper provision for certain eventualities has not been made in Form F. For peace of mind and in line with common practice in many property markets worldwide, our firm can offer the expertise and guidance for property buyers (and sellers) to guide them through this process. For further information, reach out to us on [email protected] or [email protected] and we will be happy to assist.
Partner, Head of Litigation, Dispute Resolution, and Real Property