Legal Guide to Real Estate Investment and Property Rights in Dubai

Investing in real estate in Dubai attracts thousands of international investors with the promise of high returns and a stable environment. However, behind the apparent simplicity lies a specific legal framework and risks that often remain hidden. How should you navigate the rights of foreigners, the escrow system, and what are the risks of dealing with an unregistered developer? We present a practical guide from our Prague-based legal team who handle these matters daily.

Quick Summary

• Property Rights for Foreigners: Foreign buyers can own real estate in full (freehold) only in specifically designated zones in the Czech Republic and abroad. In other areas, ownership is possible with restrictions (leasehold, usufruct). The chosen zone determines your legal position, disposal rights, and inheritance options. Our team specializing in Real Estate Law can help you navigate these complex ownership structures.
• Escrow Protection and Regulation: All payments for off-plan projects must be deposited into escrow accounts approved by the RERA regulator. The developer only has access to funds based on construction progress verified by an independent inspector – without this, your investment lacks protection.
• Risks and Mistakes: An unverified developer, signing a reservation agreement without a legal review, misunderstanding the payment schedule, or neglecting registration with the DLD (Dubai Land Department) can lead to the loss of invested funds. Our Prague-based attorneys at ARROWS handle these situations and can help you prevent them. For those managing international portfolios, we also offer International Law expertise to ensure cross-border compliance.
• Long-term Strategy: Without understanding tax consequences (especially for legal entities), service charges, and financing conditions for non-residents, the return on investment can significantly decrease. Investor rights in the event of project delays are crucial for capital protection. Foreign investors should also consider the broader context of Cross-Border Construction Law and Building Due Diligence in the Czech Republic: What Foreign Investors Should Know when diversifying their real estate holdings.

Legal Environment for Foreign Investors: From Freedom of Ownership to Restrictions

When you first begin looking into purchasing property in Dubai, you may be surprised by the openness of local legislation toward foreigners. Unlike many countries, you do not need to be a resident to own property there. A legal breakthrough occurred with the 2002 decree and subsequently Law No. 7 of 2006 on Real Estate Registration in Dubai, which codified the right of foreigners to buy, sell, and lease property. However, the reality is more complex and requires knowledge of local nuances.

It is important to understand that property rights in Dubai are not uniform, and the law distinguishes between several types of ownership. The most sought-after is freehold ownership – where you purchase the property and a co-ownership share of the land without time limits. You have full control, can modify the property, rent it out, sell it, or leave it to heirs.

This type of ownership is available in Dubai only in certain, precisely defined zones (so-called designated areas). If you buy an apartment in Downtown Dubai, Dubai Marina, or Palm Jumeirah, you will have full ownership freedom in these freehold areas.

However, if you wish to invest outside these zones, the leasehold ownership model comes into play. In this case, you are not buying the land, but only the right to use the property for the period specified in the contract – usually 99 years. Upon expiration of the term, the rights to the property revert to the original owner (freeholder).

Although 99 years seems like a long time, the market value of the property decreases significantly as the end of the term approaches. Furthermore, banks tend to be very cautious about financing properties with a shorter remaining lease term, which complicates future sales.

The third model is usufruct – the right to use and enjoy the fruits of a property without owning its substance. The usufruct holder uses the property but cannot change or destroy it, and their rights are heavily tied to the consent of the landowner. In Dubai, for residential properties for foreigners, you will most often encounter the freehold or leasehold model.

Our attorneys in Prague at ARROWS regularly analyze which type of ownership is suitable for a specific investor with regard to their investment horizon and inheritance plans. It is about creating a property law strategy that allows you to sell or refinance the property in the future without issues. If you are managing your assets through a corporate entity, you may find our checklist on Holding Structures and Beneficial Ownership in the Czech Republic: Compliance Checklist particularly useful.

MicroFAQ: Ownership Rights and Their Consequences

1. Can I buy freehold in any zone of Dubai?
No. Freehold is only available in government-designated zones. Check the current list with the Dubai Land Department (DLD) or have the location verified by a la Investors often combine property acquisitions with broader tax planning, such as understanding Trust Funds and Taxes: When Is a Payment to a Beneficiary Tax-Exempt, and When Is It Taxed as Other Income? to optimize their returns.wyer. Buying outside a freehold zone may mean that as a foreigner, you cannot acquire the property into personal ownership.

2. Is a 99-year leasehold worse than freehold?
From the perspective of long-term value retention and inheritance, yes. Objectively, it depends on your strategy. If you plan to sell in 10–15 years, a leasehold may be economically attractive due to the lower entry price. If you want to hold the asset long-term (30+ years) and pass it to heirs, freehold is the only secure choice.

3. What is the difference between leasehold and usufruct?
Usufruct provides narrower rights (the right to use and take benefits), while leasehold in the Dubai context functions closer to ownership, albeit with a time limit. For the average investor, leasehold is a more understandable form of long-term lease.

Regulatory Architecture: RERA, DLD, and Key Laws

Dubai possesses one of the strictest regulatory architectures for real estate in the Middle East, which is a direct result of lessons learned from the 2008 crisis. Today, the market is overseen by the Real Estate Regulatory Agency (RERA), which is the regulatory arm of the Dubai Land Department (DLD).

RERA has the authority to register developers, approve projects, oversee escrow accounts, and regulate relationships between developers and buyers. If a project is not registered with RERA, it is a major red flag. The basic legal framework is primarily formed by Law No. 8 of 2007 concerning Escrow Accounts.

Every developer selling property in the construction phase (off-plan) must open an escrow account into which buyers send all payments. The developer does not have free access to this money – funds are released only after proving construction progress via a certified engineer.

Law No. 13 of 2008 regulates the interim real estate register (so-called Oqood) and prohibits the sale of properties that are not properly registered. In practice, this means that every off-plan unit must be entered into this interim register for the contract to be valid and enforceable.

Executive Council Resolution No. 6 of 2010 further tightens the rules, requiring developers to own the land or have clear disposal rights and obtain necessary permits before starting sales. Each of the aforementioned regulations was a response to specific market issues.

Our Czech legal team at ARROWS applies these regulations daily, and a proper legal analysis of project registration can mean the difference between a safe investment and a loss. If you are unsure about the status of a project, contact our specialists at office@arws.cz.

How the Escrow System Works and Why It Is Your Protection

An escrow account (trust account) is a key security feature. When purchasing a property under construction, you do not send money to the developer's operating account, but to a special project bank account approved by RERA.

The developer cannot withdraw funds from this account at will. Funds are released in phases, only based on certification from an independent project consultant that a specific stage of construction has been completed (e.g., foundations, structural shell, facade).

According to Law No. 8 of 2007 and related regulations, a developer must meet strict criteria to launch sales. In the event that a developer goes bankrupt, the money in the escrow account does not fall into the general bankruptcy estate to satisfy all the developer's creditors, but is primarily intended for the completion of the project or the refund of buyers under RERA supervision.

In practice, it works like this: you sign a contract, pay a deposit (usually 10–20%) into the escrow account, and the developer proceeds with construction. As construction progresses, RERA authorizes the release of part of the funds to cover construction costs.

MicroFAQ: Escrow Accounts and Fund Protection

1. What role does the 5% retention play after completion?
After project completion, 5% of the total project value remains in the escrow account for one year following handover. This money serves as a guarantee for the repair of any defects that appear during the so-called Defect Liability Period.

2. What happens to the escrow if the project is delayed?
The money remains in the account. However, escrow does not protect against the time delay of the construction itself, only against the misappropriation of funds. To receive compensation for delays, it is necessary to have a high-quality Sales and Purchase Agreement (SPA).

3. Can I send money somewhere other than the escrow?
For off-plan projects, never send money to any account other than the one officially maintained as the project's escrow account. Always verify the account number in the DLD/RERA registry.

Escrow and Financial Fund Protection

Risks and Sanctions	How ARROWS (office@arws.cz) Assists
Non-existent or fake escrow account: The developer requests payment to their operating account or an offshore account. In case of problems, the money is practically unrecoverable.	Escrow verification in the RERA registry: Our Prague-based law firm will ensure verification of whether the account is truly registered as an escrow for the given project.
Insufficient project backing: The developer started sales without meeting conditions (e.g., does not have 20% construction completed or a bank guarantee). This increases the risk of the project being halted.	Project status analysis: We assess whether the developer is authorized to sell and what stage the project is in, both physically and legally.
Blocked funds during a dispute: If a project stops, the refund process through RERA can be administratively demanding and lengthy.	Legal representation with RERA: Our Czech legal team will represent you in negotiations with regulators and courts regarding the release of funds or the appointment of a new developer.

Freehold vs. Leasehold: A Strategic Choice with Long-term Consequences

The choice between freehold and leasehold is not just a matter of price, but a fundamental decision regarding the liquidity of your investment. Freehold zones (e.g., Dubai Marina, Palm Jumeirah, Business Bay, JVC) allow for permanent ownership.

Banks prefer these properties for financing, and they sell most easily on the secondary market as their value is not limited by time. Leasehold properties are generally cheaper (often by 20–40%), but their value decreases over time as the remaining lease term shortens.

Problems arise during resale because if less than 70–80 years remain, banks may tighten conditions for providing a mortgage to a future buyer. For commercial properties or specific projects, leasehold may make sense, but for residential family housing or long-term investment, freehold is the standard.

Our attorneys in Prague can help you evaluate whether the discount on a leasehold property outweighs the future risks associated with resale and financing. Contact us at office@arws.cz.

MicroFAQ: Long-term Impacts of Ownership Choice

1. When does leasehold become a problem?
A noticeable decline in interest and value can occur when the remaining term approaches the threshold that banks consider risky for providing long-term mortgages (often below 30–50 years, but the impact is noticeable even earlier).

2. Can I extend the leasehold after it expires?
Theoretically, this is possible through an agreement with the landowner, but usually for an additional fee (premium). It is not an automatic right and conditions may be unfavorable.

3. Does it make sense to buy leasehold as an investment?
Yes, if you are targeting a high rental yield in the short to medium term and account for the fact that capital appreciation (price growth) will be lower than with freehold.

Project Registration and RERA Verification: Essential Steps Before Investing

Buying property without verifying RERA registration is a gamble. Every project intended for sale (especially off-plan) must be registered. For registration, the developer must provide proof of land ownership, building permits, and approved plans.

In addition, it is necessary to submit an escrow account agreement and an approved template of the Sales and Purchase Agreement (SPA). You can verify the registration status in the Dubai REST app or on the DLD website. The safest approach is to have legal due diligence performed, where a lawyer verifies not only the existence of registration but also any encumbrances on the land or the developer's history.

If a project is not registered, it cannot be legally sold, a valid Oqood contract cannot be concluded, and your money is not protected by the escrow system.

MicroFAQ: Registration and Verification Procedure

1. What does it mean if a project has a "No Objection Certificate" (NOC)?
When selling a completed property (resale), the NOC is a document issued by the developer confirming that the seller has no debts to the developer (e.g., service charges) and the developer agrees to the transfer to the new owner. Without an NOC, the transfer cannot be processed at the DLD.

2. How long does the Oqood contract registration take?
For off-plan projects, the contract should be registered in the provisional register (Oqood) as soon as possible after signing, usually within a few weeks. The registration fee (4% of the price) is paid at this stage.

Contractual relations: the purchase agreement and its essential elements

The Sales and Purchase Agreement (SPA) is a key document. Although standardized requirements exist, the specific wording can vary and the devil is in the details.

The SPA must include property identification, a precise payment plan linked to construction milestones, and the completion date. Furthermore, it must include provisions on contractual penalties and conditions for withdrawal from the contract, as well as specifications for completion standards and equipment.

Typical risks in an SPA include vague definitions of "force majeure" allowing the developer to delay completion without penalty. Often, clauses regarding compensation for delays are missing, or there is an option for the developer to change the unit area by more than 5% without adjusting the price.

Our attorneys in Prague at ARROWS law firm review SPAs to ensure the buyer's rights are protected to the maximum extent, and we negotiate adjustments to terms when necessary. Contact: office@arws.cz.

Contractual relations and the purchase agreement

Risks and Sanctions	How ARROWS assists (office@arws.cz)
Unclear handover date: The SPA only provides an estimate without a binding deadline.	SPA Revision: We ensure the insertion of a clear "Anticipated Completion Date" and sanctions for non-compliance.
Missing compensation: Absence of contractual penalties (liquidated damages) in case of delay.	Insertion of protective clauses: We will insist on establishing compensation (standardly late interest or a discount) if deadlines are exceeded.
Unilateral advantages: The contract exempts the developer from liability for defects or project changes.	Balancing of rights: We will modify the contract to comply with legal consumer protection standards and a fair arrangement of rights.

Financing and mortgages: the reality of access for international buyers

Obtaining a mortgage for foreigners (non-residents) in Dubai is possible, but conditions are stricter than for residents of the United Arab Emirates. For residents (expats living in the UAE), banks typically finance up to 80% of the property value for the first property valued up to AED 5 million.

For international investors (non-residents), the maximum mortgage amount usually ranges around 50–60% of the property value. This means you must have approximately 40–50% of the purchase price plus fees ready from your own resources.

An important factor is the Debt Burden Ratio (DBR), where the installments of all your loans (including the new Dubai one) should not exceed 50% of your monthly income according to UAE Central Bank regulations.

Interest rates in Dubai are linked to EIBOR and for non-residents usually range from 4.5% to 6% p.a. depending on the fixation. Banks also require mandatory property insurance and often life insurance covering the loan amount.

Fees associated with a mortgage include a loan arrangement fee (approx. 1%), mortgage registration with the DLD (0.25% + administrative fee), and a property valuation fee.

Our Prague-based attorneys at ARROWS law firm can recommend proven mortgage brokers and assist with the legal aspects of loan documentation. Contact us at office@arws.cz.

Taxation and tax consequences: what you must know about property taxes

Dubai is known for its favorable tax environment, but "tax-free" does not mean "fee-free." Individuals currently do not pay rental income tax or capital gains tax upon the sale of property in the UAE.

However, since June 2023, a federal corporate income tax of 9% has been introduced for profits exceeding AED 375,000. If you own property through a company (which can be advantageous for inheritance proceedings), it is necessary to analyze the impact of this tax.

The sale of residential properties (first sale within 3 years of completion) is exempt from VAT (0%), as is subsequent sale and residential leasing. A 5% VAT applies to commercial properties.

A key cost is the DLD fee of 4% of the purchase price and regular Service Charges for maintenance. These are calculated per square foot and significantly affect the net rental yield (ROI), so always verify their amount.

Our Czech legal team at ARROWS law firm will help you set up an asset holding structure that is tax and fee-efficient, especially if you are considering purchasing multiple units.

MicroFAQ: taxes and local fees

1. Do I have to pay rental income tax in the Czech Republic?
As a Czech tax resident, you are subject to taxation on worldwide income in the Czech Republic. The double taxation treaty between the Czech Republic and the UAE determines the method for how taxes are credited or exempted. It is necessary to consult with a tax advisor.

2. What are the total purchase costs?
Expect approximately 6–7% above the purchase price (4% DLD, 2% agent commission, administrative fees, registration).

Investor protection: rights during project delays and what to do if something goes wrong

Project delay is the most common issue with off-plan investments. Your rights primarily stem from the wording of the SPA, where you should look for clauses regarding the "Anticipated Completion Date" and "Liquidated Damages."

The law allows investors to withdraw from the contract in case of a gross breach of the developer's obligations or a fundamental change to the project. The developer may claim an extension of the deadline due to "force majeure," but this reason must be justified and confirmed by the authorities.

If the delay is not justifiable, you are entitled to compensation according to the contract. In extreme cases, the project can be cancelled, which is decided by a special committee for the liquidation of cancelled real estate projects in Dubai.

Our attorneys in Prague from the ARROWS law firm represent clients in disputes with developers, whether through out-of-court settlements or before RERA and Dubai courts. Contact: office@arws.cz.

Unverified and Problematic Developers: Red Flags and How to Avoid Them

The first warning sign is a situation where the developer does not have project registration. Never sign a contract for a project that has not been assigned a RERA registration number and an escrow account number.

The second signal is pressure to pay outside the escrow account. Any request to send money (even "just" a reservation fee) to a private account, abroad, or in cash without a proper receipt is high-risk.

The third risk involves unrealistic promises of guaranteed returns, which are often marketing ploys with artificially inflated property prices. Always read the guarantee terms and verify who provides it and what assets back it.

We strongly warn against signing a contract that is only in Arabic or lacks a high-quality translation. The standard is a bilingual contract (English-Arabic) or English; if you do not understand the content, do not sign.

Our Prague-based attorneys at ARROWS perform developer and project due diligence, where we verify the history, financial health, and legal status of the project before you send the first dirham.

The Purchase Process: Steps from Property Selection to Title Registration

The first phase is selection and reservation, which usually takes up to two weeks. This includes signing a reservation form and paying a deposit (usually 10% for off-plan; for resale, often 10% in the form of a check held by the agent).

In the second phase, the Sales and Purchase Agreement (SPA) is signed with the developer, or a Memorandum of Understanding (Form F) in the case of a resale. For resale properties, the third phase involves obtaining a No Objection Certificate (NOC), which confirms the seller has no outstanding debts to the developer.

The fourth phase is the actual transfer of ownership at the Registration Trustee office. Here, the buyer hands over manager's checks for the purchase price, the office processes the transfer, collects the 4% fee, and issues a new Title Deed.

Our Czech legal team at ARROWS will guide you through the entire process, handle communication with authorities, and oversee the secure transfer of funds. Write to us at office@arws.cz.

International Aspects and Compliance: AML, Foreign Exchange Flows, and Tax Consequences

In recent years, the United Arab Emirates has significantly tightened Anti-Money Laundering (AML) regulations.

When purchasing, you must expect a Know Your Customer (KYC) process, where both the developer and the bank will require a passport, proof of address, and proof of the source of funds. If you cannot transparently document the origin of the money, the transaction may be rejected or reported. Bank transfers from the EU to the UAE are monitored, and banks require documentation of the purpose of payment.

Conclusion

Investing in Dubai real estate offers interesting potential but requires respecting local regulations. The key to security is verifying project registration and the escrow account, not underestimating the legal review of contracts, and understanding the differences between types of ownership.

Our attorneys in Prague from the ARROWS law firm are ready to be your partner and protector in this process. Contact us at office@arws.cz.

FAQ – Most Frequent Legal Questions Regarding Safe Property Purchase in Dubai

1. Can I buy property without being a UAE resident?
Yes. In freehold zones, foreigners can acquire property without needing a residency visa. Conversely, owning property above a certain value (e.g., 750,000 AED) may entitle you to an investor visa (Golden Visa for investments of 2 million AED).

2. What is the difference between off-plan and completed property?
Off-plan is a purchase "off the blueprints" during construction – lower price, installment plan, but risk of delays. Completed property is a finished unit – immediate rental/usage income, higher price, necessity to pay the full amount (or mortgage) immediately.

3. If the project is delayed, what are my rights?
This depends on the SPA. Standardly, you are entitled to a contractual penalty after the grace period expires. In extreme cases, you can request contract termination, but this is a legally complex process that our Prague-based ARROWS law firm can assist you with.

4. What happens if the developer goes bankrupt?
If the escrow system is functioning, the funds should be protected to complete the project by another developer or returned to investors according to the instructions of RERA and the liquidation commission.

5. What fees are paid during the purchase?
Standardly: 4% DLD fee, 2% (+ VAT) real estate agency commission, and registration fees (approx. 4,000 – 5,000 AED).

6. Do I have to buy through a lawyer?
The law does not mandate it, but given the size of the investment and the risks, it is highly recommended. A lawyer ensures due diligence and the protection of your interests in the contract. Contact our Czech legal team at office@arws.cz.

Disclaimer: The information contained in this article is for general informative purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact the ARROWS law firm in Prague directly (office@arws.cz). We bear no responsibility for any damages or complications arising from the independent use of information from this article without our prior individual legal consultation and professional assessment. Every case requires a tailored solution; therefore, do not hesitate to contact us.

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