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  • Writer's pictureAkram Cheik - Lawyer

Real estate scams in Dubai: what to check before buying

The real estate sector is a constantly evolving economic field in Dubai, it has experienced one of the most exponential growth over the last 5 years. In particular, with on the one hand the increase in the number of expatriates and on the other hand the economic development of the country. Thus, the real estate market has become a crucial issue in the Emirates.

In addition, another factor linked to the news is propelling this economy with regard to the war in Ukraine which has accelerated the phenomenon with mass investments by the Russian oligarchs, who are partly responsible for the inflation of the prices of real estate both for purchase and rental.

However, the economic stakes generated by this market can also lead to abuse and scams. Although the United Arab Emirates is a country known for security, you should be careful with the many scams in the real estate sector in Dubai.

Therefore, it is therefore crucial to know how to avoid traps and scams before buying a property in Dubai. This requires a good understanding of the applicable laws in the real estate field in Dubai, as well as careful verification of all information before finalizing a real estate transaction.

It is worth looking at the various scams and key things to check before making a real estate purchase in Dubai, (I) as well as the important laws that protect buyers from scams and abuse in the real estate industry. (II)

I – The preliminary elements to know before investing in Dubai

A – Scams and other offenses related to real estate investments in Dubai

Some of the most common scams in Dubai's real estate sector include fraud through fraudulent real estate contracts, sale of non-existent properties by bogus sellers, breach of sales agreements, use of false documents and falsification of signatures.

In the case of fraudulent real estate contracts, fraudsters can use contracts that appear legitimate but contain hidden clauses that disadvantage the buyer. For example, a contract may appear to indicate that the buyer owns the property, but in reality it may just be a rental agreement or a contract with restrictive terms that have not been clearly communicated.

Fake sellers are another common scam, where fraudsters pretend to be the rightful owners of a property that they have no right to sell. They may also pretend to be legitimate real estate agents to deceive potential buyers. In some cases, fraudsters even go so far as to create fake documents and signatures to support their scam.

Finally, failure to honor sales agreements is another common form of real estate scam in Dubai. Fraudsters may promise specific terms and conditions in a sales contract, but fail to honor those promises once the money has been paid. For example, they may promise renovations or improvements to the property that are never done.

B – Elements to check before buying real estate in Dubai

Several important points require due diligence before making an investment.

Indeed, it is relevant to check beforehand the reputation and solvency of the promoter on the Emirati market and whether the latter has already been involved in major legal disputes. In addition, the location of the property is one of the most determining elements of the value of a property and its profitability in the rental market.

In Dubai as elsewhere, the location must be attractive, with good infrastructure, amenities and services nearby to be attractive. As such, many agents are not lacking in imagination to make believe in the future attractiveness of the area, so it is advisable to be diligent about future development plans in the neighborhood where the property is located. It is important to check whether there are any construction or development projects which could affect the value or quality of the property in the future.

For people wanting to invest in the purchase of land, it will be necessary to check whether the property has all the necessary authorizations and permits for construction and operation. This ensures that the property is legal and complies with local regulations.

Finally, most purchases in Dubai are done "off-plan" or in French "on plan", the conditions of payment and recovery of the property are to be checked with the greatest care. The conditions vary according to each real estate developer, it is therefore necessary to fully understand all the terms and to ensure that you can ensure compliance with the payment conditions.

II – The protective elements against real estate scams in Dubai

A – Relevant texts to know about real estate law

First, the Dubai Land Law, known as the Land Law No. 7 of 2006, regulates the ownership and sale of real estate in Dubai. It defines the requirements for the acquisition of real estate, the rights and obligations of owners, and the procedures for the registration and management of real estate.

Secondly, the Real Estate Development Act, better known as the Real Estate Development Act No. 8 of 2007, regulates the activities of real estate developers in Dubai. It establishes the rules and procedures for the construction, sale and promotion of real estate, and defines the obligations of real estate developers in terms of compliance, quality and guarantees.

The Dubai Real Estate Trusts Act also known as the Dubai Real Estate Trusts Act No. 580 of 2020, establishes the rules and procedures for the establishment and management of real estate trusts in Dubai. It also regulates the rights and obligations of owners and beneficiaries of real estate trusts.

Real Estate Tenancy Act also known as the Real Estate Tenancy Act No. 26 of 2007, regulates the rights and obligations of landlords and tenants of real estate in Dubai. It establishes the rules and procedures for the rental, renewal and termination of rental contracts.

Lastly, the Condominium Property Act also known as the Condominium Property Act No. 27 of 2007, establishes the rules and procedures for condominium ownership in Dubai. It defines the rights and obligations of owners of condominium properties, including management rules, condominium fees and repairs and maintenance.

B – Notions to know: SPA and OQOOD

The most important concept is undoubtedly the SPA which is the acronym of "Sales and Purchase Agreement", which can be translated into French by "Contrat de vente et d'achat". This legal document is a contract between the seller and the buyer of real estate and establishes the terms and conditions of the sale.

Thus, the SPA is generally used to finalize the sale of a property, after the buyer has reserved the property and made a deposit. The SPA details the terms of the sale, such as the purchase price, payment terms, ownership transfer dates, warranties, and late payment penalties.

Furthermore, the SPA is a legally binding document and should be carefully reviewed before signing. Buyers must ensure that they understand all terms and conditions of the SPA and that they are able to meet the commitments they make by signing the contract.

In Dubai, SPA is often used in Off-Plan real estate transactions, where properties are still under development or construction. In these cases, the SPA is often supplemented by an Off-Plan Sales Contract which details the characteristics of the property and the delivery times.

The second concept to know is that of Oqood, which corresponds to an electronic system for managing real estate contracts set up by the Dubai government. The name Oqood means "contract" in Arabic.

Thus, the Oqood system was launched in 2011 to regulate real estate transactions in the Emirate of Dubai. It helps track and verify real estate transactions at every stage, from booking the property to finalizing the deal.

Hence, when a buyer purchases a property in Dubai, the property developer must register the sales contract with the Dubai Land Department through the Oqood system. The contract is then verified and validated by the government before being approved and registered.

Therefore, the Oqood system offers several advantages for buyers and property developers. It helps to ensure the transparency and security of real estate transactions, to avoid fraud and errors, and to provide an efficient tracking system for real estate transactions.

Finally, it is important to note that registering the sales contract with the Oqood system is a crucial step in finalizing the real estate transaction in Dubai. Without this step, the transaction will not be considered legal and cannot be finalized.

Akram Cheik, Lawyer

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Morshed Alam
Morshed Alam
Nov 29, 2023

Informative writing. How should contact with Mr Akram?

Akram Cheik - Lawyer
Akram Cheik - Lawyer
Nov 29, 2023
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