Waiver of Registration Fees for Real Estate Transfers Between Relatives
Real Estate & Construction and Hotels & Leisure
UAE Civil Code further clarifies that the owner of private property has the freedom to dispose of his property in any way he deems fit.
Law Update: Issue 359 - Real Estate & Construction and Hotels & Leisure
David BowmanSenior Counsel,Real Estate
Dr. Ahmed AlawbthaniSenior Associate,Real Estate
Article 21 of the Constitution of the United Arab Emirates (“UAE”) of 1971 states that ‘private property shall be protected’ and ‘conditions relating thereto shall be prescribed by law’. On the basis of this provision together with Article 1133 of the Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE (as amended) (the “UAE Civil Code”), the legal system of the UAE, similarly to other civil law and mixed jurisdictions, recognises the three fundamental rights derived from ownership, namely, usus (the right to use), fructus (the right to enjoy) and abusus (the right to dispose).
In relation to the latter, the UAE Civil Code further clarifies that the owner of private property (including real estate) has the freedom to dispose of his property in any way he deems fit, provided that his act is not excessively detrimental to others or is in violation of a law or regulation.
The methods of disposal of property mainly include by way of either:
sale, defined as the exchange of non-monetary property for monetary property under Article 489 of the UAE Civil Code; or
gift, defined as the conveyance, to another person and without consideration, of property or a financial right, during the lifetime of the donor under Article 614 of the UAE Civil Code.
Other common methods for the disposal of property include assignments and inheritance.
The Federal legislator was satisfied with broadly defining and setting out the general provisions regarding real estate and the contractual relationship between the parties. However, the local legislators were granted the freedom to regulate the issues of ownership real estate such as registration procedures, requirements, fees as well as determining the investment zones for each of their respective Emirates.
In the Emirate of Abu Dhabi, matters of real estate ownership, transfer and registration of sales and gifts of real estate property are mainly governed by Abu Dhabi Law No. 3 of 2005 Regarding the Registration of Property (the “Property Registration Law”) together with its implementing regulations, Cabinet Resolution No. 51 of 2008 (the “Regulation”).
i. Declaration of Gift by a Competent Court
In relation to the requirements for registering transfers by way of gift, these are set out in Article 22 of the Regulation and include the submission of a declaration of the gift or revocation thereof issued by a competent court attached to a letter addressed to the administration’.
ii. Registration Fees
Further, Article 22-5 of the Regulation clarifies that ‘with the exception of a gift between ascendants, descendants and spouses, a gift is treated as a sale with regard to fees.
According to the table of fees attached to Resolution No. 49 of 2018 of the Chairman of the Executive Council of the Emirate of Abu Dhabi regarding fees for municipal services in the Emirate of Abu Dhabi, the fees payable in connection with gifts between ascendants, descendants, spouses, and relatives up to the second degree and legal persons wholly owned by them are as follows:
Commercial Property: AED 10,000
Investment Property: AED 5,000
Agricultural Property: AED 3,000
Residential Property: AED 3.000
If the transfer is not between ascendants, descendants, spouses, and relatives up to the second degree and legal persons wholly owned by them, it is treated as sale in respect of the fees. This means that the registration fee for the transfer of ownership is either 2% of the value of the property or the sale value, whichever is higher.
The same fees also apply to assignments of property by virtue of Article 19 of the Regulation according to which “the provisions of sale registration shall be applicable to assignment in respect of registration and fees”.
From what has been mentioned above, it becomes clear to that the transfer of property ownership between the parties may take different forms. The difficulty in transferring property between relatives up to the second degree by way of gift is that this must be effectuated by a court order. Obtaining such court order inevitably requires time due to the correspondence that takes place between the competent departments.
In order to address this difficulty and through its initiative to facilitate procedures related to transactions in the real estate sector, the Emirate of Abu Dhabi (represented by the Department of Municipalities and Transport) has issued Circular No. 1 of 2022 regarding the exemption of assignment actions without compensation between relatives from the provisions of Article 19 of the Executive Regulations of Law No. 3 of 2005 regarding the regulation of real estate registration in the Emirate of Abu Dhabi (the “Circular”)
The Circular implements an alternative procedure for transferring property between relatives up to the second degree. This procedure may be initiated through the real estate registrar without having recourse to the usual procedures relating to gifts within the competent courts nor having to incur the fees relating to the sale of property. The main condition of the Circular’s application is that the transfer of ownership is in the form of an assignment (as opposed to a gift).
In terms of fees incurred, the application for a transfer to be governed by the Circular is free of charge. If the transfer is considered to fall within the scope of the Circular, the registration fees for the transfer of ownership will be those applicable to gifts between ascendants, descendants, spouses, and relatives up to the second degree and legal persons wholly owned by them (as indicated above) instead of the fees applicable to transfers by way of sale as an exception to Article 19 of the Regulation.
The Circular considerably facilitates the transfer of real estate property between relatives in the Emirate of Abu Dhabi. By reducing the fees payable for assignments of real estate property between relatives without the condition to obtain a court order, it is expected that issuance of the Circular will give rise to a new trend for Abu Dhabi families to transfer property by way of assignment instead of opting to gift it.
For further information, please contact David Bowman or Dr, Ahmed Alawbthani.
Published in June 2023
