Overview

• A new decree has been introduced in the Emirate of Dubai to foster the development of commercial and industrial land that is owned by government entities (including companies owned, in whole or in part, by the government).
• The new decree is aimed at commercial and industrial enterprises that wish to procure a lease and develop land for their operational requirements. Examples of such developments may include malls, offices, utilities facilities, factories, warehouses and logistics hubs.
• The new decree sets out a bespoke regime for the grant and registration of musataha interests over such lands. A musataha interest is a right to develop the land and occupy it for a specified period (similar to a development lease).

Key points

• DLD role: The Dubai Land Department (DLD) has an expanded remit including (non-exhaustive):
  • developing a specified form of musataha agreement;
  • monitoring compliance by the musateh/tenant with its musataha agreement; and
  • establishing a register for musataha agreements granted pursuant to the new decree.
• Compliance: Failure to register the musataha agreement or acting in a way contrary to the new decree may render that agreement or act legally ineffective.
• Term: The maximum initial term is 35 years. This can be extended (by agreement) up to a maximum term of 50 years.
• Renewal: If the musateh/tenant wishes to renew, it must submit its application at least two years before the term expiry date (unless the parties agree otherwise).
• Registration: The registration fees are payable by the musateh/tenant (100%). The specified rate for musataha is 1% of the contract value.
• Alienation: Prior to obtaining the building completion certificate, the musateh/tenant cannot dispose of its interest. The only exception is granting a mortgage.
• Change of control: The landowner and DLD must pre-approve any disposal of shares (i.e. sale, transfer or mortgage) in the musateh/tenant (for corporate entities).
• Ownership: Ownership of any buildings/facilities passes to the landowner at the end of the term (unless the parties agree otherwise).

Future practice

• The specified form of musataha agreement will be proposed by government entities for the grant of musataha interests over their commercial and industrial lands in the Emirate of Dubai.
• This approach has similarities with the practice in the Emirate of Abu Dhabi, where a specified form of musataha agreement has been used by certain government entities for some time.