Change of Title Deed Ownership and Gifts of Property in Dubai
We have had a number of enquiries over the last few months with regards to Gifts transfers and specifically in relation to whether such transfers can take place between siblings and whether it is possible to carry out multiple Gift transfers on the same property. There is still a great deal of uncertainty on this point. Even after several visits to different DLD registration trustees offices, we too received contrasting answers to this question. Some suggested that it was possible whilst others refuted this claim. Here we hope to satisfy this argument once and for all…
It is true that that DLD do not consider siblings as first degree relatives for the purpose of carrying out a Gift transfer on a property (and therefore benefiting from lower transfer fees). In an attempt to circumvent this, many investors instead carried out “double Gifts” by first transferring the property as a Gift from one sibling to the parent (Gift 1) and then carrying out a subsequent Gift to the other sibling (Gift 2). This was possible previously however a recent degree from DLD now prevents multiple Gift transfers being carried out on one property.
As is often the case in Dubai, this is not always true across the board however. Exceptions can apply. The DLD will allow “double Gifts” in some circumstances (however please note that this would still not be applicable to siblings). An example of a situation where a “double Gift” may be allowed would be in relation to company transfers of ownership and/or shareholding.
As an example, it is possible to complete a Gift transfer from one individual to another (provided they satisfy the first degree relative criteria at DLD) and then do a secondary Gift to a JAFZA offshore company (provided the property owner and company shareholder are the same with the same percentage of ownership/shareholding). This is the information we received only last week having met with one of the legal advisors from the DLD head office in Deira. Approval must be obtained in the form of a No Objection Certificate from DLD but in theory it is possible to carry this out. As a business, we do get many requests form investors for such activities for the obvious reasons of taxation and inheritance. This will come as good news to many investors in the Dubai property market.
So, to summarise our recent findings on this topic, we can state that:
- It is not possible to carry out Gift transfers between siblings at DLD – only parent/child or husband/wife relationship qualify.
- It is not possible to carry out multiple Gift transfers on the one property in order to avoid the above rule (you can no longer transfer a property as a Gift from one sibling to the parent and then do a subsequent Gift to the other sibling).
BUT the exception is in relation to Gifts between individuals and companies. There are strict criteria to meet and you will need DLD approval but there are situations where “double Gifts” are possible.
We hope this information helps you in some way and we would of course be happy to provide some further advice if and when it is needed. For anything further, please just get in touch at firstname.lastname@example.org.
Did you know that it is possible to transfer some or all of your Dubai property rights without paying the normal transfer fees at Dubai Land Department? Do you know how to change details of ownership such as adding or removing a name from a Title Deed? What about if you wish to gift some or all of your property shares to a relative with no exchange of funds taking place? Here are the answers to all of those difficult questions…
Change of Ownership
From a legal perspective, adding or removing a name from a Title Deed is considered as a transfer of ownership and so the normal procedures and costs would apply at both the Developer’s office and Dubai Land Department. If however the parties are relatives, there are some important distinctions. This process is considered a “Gift” for the purposes of the transfer at the Dubai Land Department. An increasing number of owners seem to be carrying this out over the last few years. The process itself is a relatively straight forward one (if you know what you are doing) but one that many clients and indeed brokers in Dubai are either unfamiliar or inexperienced with.
What is a Gift Transfer?
The “Hiba” process (Arabic for “Gift”) enables first degree relatives to transfer all or part of their property rights by means of a donation, grant or gift at the Dubai Land Department.
Who is Eligible?
The Dubai Land Department specifies that a Gift transfer can only take place between first degree relatives – parent/children and husband/wife relationship only. An attested and translated marriage certificate (for gifting to husband/wife) or birth certificates (for gifting to children) must be obtained from the country of issue. All parties must be present on the mayor suitably represented by a duly appointed Power of Attorney.
Reasons for Gifting a Property?
Most owners tend to do so for inheritance purposes. In Dubai, this has never been a straightforward subject given the inclusion of Sharia Law. For non-Muslims in particular, this can cause financial and emotional difficulties for families as well as dispute and even legal cases regarding rights to ownership. As such, ask much the same as holding property in a JAFZA offshore company in an attempt to avoid complex inheritance procedures – particularly the potential application of Sharia Law – many owners choose to add their spouse or children to the Title in the hope that it will simplify succession issues if something was to happen to one of the parties. The aim is to remove the legal uncertainty and ambiguity seen in the old UAE laws and Sharia Law.
Whilst the recent DIFC Wills & Probate Registry has introduced some important changes for non-Muslims with property assets in Dubai, it is of course still untested. It is also more expensive so many owners choose to Gift their property rights now rather than creating a will or leaving it to the courts to decide.
Other reasons for this change of ownership can include the removal of one of the parties following a marriage separation or divorce settlement or perhaps one party wishes to buy the other out rather than selling the property to someone else.
I have even heard of cases where landlords are attempting to use this process to avoid laws surrounding edition notices – they issue a notice to vacate to their tenant for the purposes of selling and then simply Gift the property in an attempt to fulfil the notice requirement. At the very least, this does seem to be quite bad form on the part of the landlord and a clear attempt to get around the system. It is not clear however whether RERA, Dubai Land Department or the relatively newly established Rental Disputes Centre would uphold that the notice has been correctly satisfied but it is anticipated that this would not be accepted by the regulatory authorities. (If you hear otherwise, please let me know).
Procedures and Costs
So you have decided that you want to transfer some or all of your property ownership to your relative. How do you go about this?
In order to complete the process, there are a few steps involved. Firstly, a Title Deed is required on the property. A Gift at DLD cannot be carried out on an off plan unit. An Affection Plan (an official site plan) and Valuation Certificate must also be obtained from the DLD. The Valuation Certificate determines how much the property is worth to allow the DLD to calculate the appropriate transfer fees. The Valuation Certificate for an apartment or villa costs AED 4,020 and takes 7-10 working days to process.
No Objection Certificate
As with any property sale/purchase in Dubai, a No Objection Certificate (NOC) is also required from the Developer to show that the Developer has no objection to the transfer of ownership taking place – there are no outstanding payments or debts due on the property. NOC fees vary in cost (from AED 500 to AED 5,000) and take 3-10 working days to process, depending on Developer. All parties will need to be present at this stage as with the final transfer at the Dubai Land Department. Again a Power of Attorney can be used and is highly recommended.
Perhaps the most important point to note in all of this is in relation to the transfer fees at the Dubai Land Department. As you may be aware if you have any prior experience in the Dubai property market, the current fees for the sale/purchase of a property in Dubai are 4% of the purchase price (plus AED 580 admin fee). For a Gift process however, the transfer fees are significantly lower – only 0.125% of the property valuation plus AED 590 (minimum of AED 2,590). As with sales/purchases, there are also registration trustee fees of AED 2,000 or AED 4,000, depending on whether they valuation is below or above AED two million.
For example, if the property is valued at AED 1 million, the transfer fees to DLD for the Gift process will be AED 2,590 (minimum). The equivalent transfer fees for a sale/purchase would be AED 40,580.
Final Transfer of Title
The whole process takes 2-3 weeks to complete. All parties would need to attend in person order to complete the Gift transfer, meaning they would either need to make an extended visit to Dubai or frequent visits back and forth to do the needful. The use of an experienced Power of Attorney is therefore highly recommended. It will save considerable time, money and inconvenience.
At Your POA, we can take care of everything from start to finish so that neither party are required to attend. We can represent both the person giving and the person receiving the Gift. We can represent clients from anywhere worldwide so that they can sit back and relax in the knowledge that their transfer of ownership is being taken care of both quickly and professionally. We will handle all the necessary steps to ensure the safe transfer of Title and to obtain the new Title Deed in the required name(s).
If you need any further advice or assistance with this process, please get in touch. We would be happy to help!
2017 Gifting Update
Siblings are not considered first degree relatives for the purposes of a Gift transfer. Until recently, this could be circumvented by one sibling transferring ownership to their parent as a Gift and that parent then subsequently gifting this on to the other sibling. The DLD have however brought in a new Directive (as of November 2016) which prohibits more than one Gift transfer taking place on any particular property.
A Gift transfer can also not take place on an off plan property. In order to transfer ownership in this instance, the process and fees would be the same as a normal transfer on Oqood or the Delayed Sale document. If however, the property has not been pre-registered with the DLD (and appropriate 4% registration fees paid), you may able to carry out an internal assignment or name-change directly with the Developer. It is unlikely in today’s market as all contracts are generally registered on signing the Sales & Purchase Agreement but may be worth asking the question depending on your specific circumstances.
Gift transfers on mortgages are less common but are possible. In such cases the Title documents are held by the particular bank so they would either need to be paid off in full or you would need their co-operation to carry out the transfer of ownership. The costs are also higher with there being further fees to pay, including mortgage release fees to DLD (AED 1590), mortgage re-registration at DLD (0.25% of mortgage amount) & further trustee fees (AED 4000 as it is considered a separate transaction).
Gift transfers for companies are more complicated. Full legally attested and translated company documents must be presented and DLD approval is required. Quite significant to note is the requirement that the property owner(s) must be the same as the shareholder(s) of the company with the same percentage of shares/ownership in order to carry this out as a Gift transfer.
Finally, let’s say you wish to transfer a share of your property to a friend or colleague? This will of course not be treated as a Gift (given that you are not first degree relatives) but you can still benefit from some reduction in fees. You will only pay the transfer fees based on the percentage of share being transferred. All of the other normal requirements will apply.
[NB the author of the above article is an LLB Bachelor of Laws graduate from the UK and is the Managing Partner of Your POA – Dubai (www.yourpoadubai.com). Your POA specialise in representing national and international clients as Power of Attorney in Dubai for a wide range of property related matters; from Property Handovers from Developers and Title Deed Registrations to Sales/Purchases and Gifts. If you need a Power of Attorney or have questions on any property related matters in Dubai, please email email@example.com or call Philip on +971 52 832 7420]