Abu Dhabi's new property law (Law No. 3 of 2015 concerning the Regulation of the Real Estate Sector in Abu Dhabi) is now in effect.  Many aspects of the new law will not surprise.  It restates and consolidates many principles from the UAE Civil Code and local laws.  Many of the "new" requirements also share similarities with the regime in neighbouring Dubai.  Nonetheless, the new law will bring about major changes in practice. 

We outline below some key features of the new law and practical considerations.

Key features:

• Comprehensive registration of property interests (including leases, ownership rights, off-plan purchases and mortgages) to protect the rights of investors, owners, developers and funders.
• Comprehensive registration of projects, developers and other service providers (including brokers, surveyors and valuers) with serious consequences for default:
  • developers may be fined up to AED 2,000,000;
  • other service providers may be imprisoned up to six months and/or fined up to AED 200,000.
• Protective measures for off-plan projects (including escrow accounts) to enhance project governance and the protections afforded to investors and funders during the development stage.
• Minimum self-funding requirement for developers sets a barrier to entry, whilst the requirement to deposit plot mortgage proceeds in the project escrow account ring-fences such funds.
• Provisions to assist funders with mortgage enforcement, including an expedited enforcement process and power for the court to control revenue from secured properties.
• Provisions on multi-owner projects (known as "strata") to facilitate division of project areas and the rights/obligations of interested parties as well as the registration of property interests.
• Powers for Abu Dhabi Municipality to cancel licences and take action on failing projects, including project cancellation and distribution of escrow account funds. 
• Investors have the right to cancel their purchase contract for material breach of contract by the developer.

Practical considerations:

• Developers and other service providers (including brokers, surveyors and valuers) must register with Abu Dhabi Municipality within 90 days of the law coming into force.
• Existing off-plan projects must comply with the new law (establishment of escrow accounts etc) within 12 months.
• Existing off-plan projects beyond the 70 per cent milestone are exempt from the escrow account requirement (but must prove their completion status to Abu Dhabi Municipality).
• For existing property interests not registered with Abu Dhabi Municipality:
  • action must be taken to identify the steps necessary to register those interests and who is responsible for taking them;
  • unregistered interests mean unpaid registration fees.  Action must be taken to identify those responsible for payment.  This can raise issues where payments have already been made to the developer for registration on its own register.
• For existing security packages with unregistered security over a registrable property interest, the property interest and a mortgage should be registered with Abu Dhabi Municipality.
• New security packages should include a mortgage registered with Abu Dhabi Municipality.  This will require first registration of the property interest (if not already registered).
• Financiers wishing to act as escrow account holders must register with Abu Dhabi Municipality and only use escrow agreements complying with its requirements and the new law.
• Executive regulations covering numerous topics under the new Law have already been produced.  These must be consulted in addition to the new Law to ensure proper compliance.

Should you have any queries on the new Law or require assistance with real estate matters then please do not hesitate to contact us.