03 Oct DIFC based entities allowed to own properties registered with the Dubai Land Department
The MoU between DLD and DIFC:
The Dubai Land Department (DLD) and the Dubai International Financial Centre (DIFC) authority entered into a Memorandum Of Understanding (MOU) on 4th May 2017, to allow specific DIFC companies and other establishments to own land, real estate plots or properties outside of DIFC but within the Emirate of Dubai.
Who is authorized to own real estate under this MOU?
- Real Estate Investment Trust (RETI);
- Special Purpose Vehicles owned by Real Estate Funds;
- Real Estate Funds with a license to undertake commercial properties;
- Special Purpose Vehicles, if not owned by Real Estate Funds cannot take advantage of this MOU.
What are the requirements and procedures under this MOU?
The MOU has prescribed a certain set of regulations to be followed by the DIFC establishments:
- The DIFC establishment must first apply for No Objection Certificate (NOC) from DIFC Registrar of Companies (ROC).
- The companies verification process is in into two categories:
- For Private Limited Companies:
The ROC shall issue the NOC after the verification of the submitted notarized and corporate document of the DIFC company. The verification shall continue up until the identification of the individual shareholders, the good standing and then it is allowed to own real estate.
- For Public Limited Companies:
If the company is listed or regulated, the ROC might not require the legalization and the notarization of the corporate document.
- For Private Limited Companies:
- Once the NOC is issued, the registrar will set aside a separate register for the DIFC establishment which enables the ROC to track any future transfer or issue of shares which will reflect in the DLD’s records resulting in a fee payment.
- The DIFC establishment shall then submit the NOC to the DLD along with the signed letter agreeing to inform the DLD about the outlook or issue of shares in owning the real estate and required fee payment thereon. This is Acknowledgement and Undertaking.
- When all the required documents are submitted, and the necessary procedures are duly completed, the DIFC establishment will make a payment of 4% transfer/registration fees. The DLD will then register the real estate under the DIFC establishment name and will issue the Title deed.
Procedure for issuance or transfer of shares:
The DIFC establishment has to seek approval from the DLD through an NOC. The NOC submitted by the DIFC establishment with proper corporate documents necessary and a formal letter in English and Arabic to DLD requesting a DLD NOC. Upon verification of the documents submitted by the DIFC establishment through ROC with a payment of 4% fee on the value of the shares issued or transferred.
The DLD will then issue a DLD NOC to the ROC for registering the transaction in the DIFC establishment’s records. This payment of 4% fee is exempt from certain cases:
- Example 1:
When the DIFC establishment or Real Estate Funds or Special Purpose Vehicle owned by Real Estate Fund issues new shares to existing shareholders, no DLD NOC or DLD fees are required, but the DIFC establishment has to inform the DLD through ROC.
If the above-said establishments are issuing new shares to new shareholders. A notification fee of AED 10,000 has to be paid to the ROC who will collect it on DLD’S behalf and inform DLD on the shares issued and the identity of the shareholders.
- Example 2:
When the DIFC establishment transfer involves the same shareholder, the same percentage, then a special fee of 0.125% of the value of the real estate owned by the establishment shall apply. This is also known as the “gifting” procedure of the DLD.
- Example 3:
There are no DLD fees or DLD NOC applicable if there the issue or transfer of shares by REIT’s which are regulated by the Dubai Financial Services Authority or listed in the Nasdaq Dubai. REIT’s not listed in Nasdaq Dubai is liable to pay full DLD fees.
The transfer of shares indirectly to corporate shareholders in foreign jurisdiction also requires the payment of fees to DLD and must be reported to ROC. If the DIFC establishment fails to comply with the DLD and ROC requirements shall be penalized with a fine as well as the suspension of the commercial license.
These procedural changes after the MOU will allow the foundations and trusts incorporated under DIFC to own the real estate in Dubai. This major reform will also open similar avenues in Abu Dhabi and it will also make the procedures less expensive for both the parties involved.