The DIFC have recently closed (on 2 August 2024) a consultation in respect of proposed changes to the DIFC Real Property Law (DIFC Law No. 10/2018 (the "Law") and the DIFC Real Property Regulations 2020.
Whilst the final form of the amendments are awaited, the headline proposals are as follows:
- The introduction of a mortgage registration fee;
- Changes to the registration deadline for Off-Plan Sales;
- The termination rights for a Buyer in respect of a Developer's failure to provide a Disclosure Statement in a timely manner; and
- An increase to the time period in which Leases must be registered.
Mortgage Registration Fees
The DIFC have proposed to introduce a mortgage registration fee of 0.25% (of the mortgage amount), to mirror that which currently applies to the registration of mortgages on onshore property at the Dubai Land Department ("DLD"). Furthermore, DIFC propose to introduce a separate fee of $100 that will apply to both conventional and Islamic mortgages, as a lodgement fee. At present, DIFC have not suggested that there will be a time limit within which the mortgage must be registered.
Registration of Off-Plan Sales
At present, any Off-Plan Sales Agreement (or a reservation agreement or similarly purposed document) where a sum of more than AED5,000 is received by the Developer must be registered with the Registrar of Real Property ("RORP") to the Off Plan Register, within 30 days of being entered into. The proposed change from DIFC increases this period to 60 days.
Buyer's termination rights
With respect to Off Plan sales in the DIFC, Developers are required to issue Buyers with a Disclosure Statement prior to the parties entering into an Off Plan Sale Agreement. The Disclosure Statement itself contains a host of important information pertaining to the service charges, community amenities and additional information relating to the specification of the unit in question. Given the importance of this information, the present position under the Law is that a Buyer can terminate the Off Plan Sale Agreement if, prior to Handover, a Disclosure Statement has not been served by the Developer. Though an important contractual mechanism for Buyers, it was widely considered in the market that the current 'open-ended' termination right was in some cases, misused, with Buyers exercising the termination right in cases where, failing to receive the Disclosure Statement, was not necessarily the primary motivation behind the Buyers exercising this termination right. As such, the proposal by DIFC, is for Buyers to have a period of 60 days from the point at which the Disclosure Statement is served by the Developer, to review the Disclosure Statement, followed by an additional 20 day period (commencing on expiry of the initial 60 day period) in which the Buyer shall be permitted to terminate the Off Plan Sales Agreement if in the Buyer's view, the Disclosure Statement, does not properly and accurately represent the Off Plan Development.
Lease registration period
At present, Article 49(1) of the Law requires a Lease to be registered within 20 days of the Lease being entered into. The proposal from DIFC is to increase this period to 30 days.
In our view the proposed amendments, if introduced, will solidify the existing regulatory position within the DIFC, and will instil further investor confidence in respect of Off Plan Sales. Moreover, the increased flexibility in respect of the registration of Off Plan Sales and Leases, will undoubtedly be welcomed by end-users, investors and brokers alike, who from a practical perspective, will benefit from the extension of time envisaged by the proposed amendments.
The consultation period closed on 2 August 2024, and we hereby await further communication from the DIFC in respect of the results of the consultation, and the proposed next steps.
