1. Investing in UAE property: mistakes to avoid

Real estate has become a profitable investment opportunity that equally invites investors with small and large capital.

In order to take most advantages and good profits, investors must avoid real estate investment mistakes. If you take care of such common and unavoidable mistakes, you will be able to make successful business investment with good returns in any potential real estate market. If you as an investor don’t consider protecting yourself making such mistakes, you wouldn’t be able to save your potential profits and even you can suffer the loss of your capital you have invested. It is not possible to avoid mistakes at all, people are tend to make mistakes any time in any field, but the key to success is to limit your mistakes as small as you can and you should always try to learn from the mistakes.

Do not believe that everything is correct and all documents are correct. Many investors failed to understand, or sometimes even read their contracts. Reservation forms were signed without firm contracts in place and buyers were pushed into signing on dotted lines ‘in case they missed out due to the extremely high demand’. As a result, lawyers have been presented with the near impossible task of recovering a client’s money when an agreement is clearly in the favour of the developer.

The lesson learnt here is purchasing a property is a multi-faceted process and in order to make a sound investment, all angles must be examined in advance. This includes the choice of property, developer, real estate broker, payment terms and terms and conditions of the underlying contract.

Some simple rules to follow:

2. Dubai real estate contracts

Real Estate investor in Dubai are promised that they have a right to seek cancellation of contracts and claim complete refund, in case of delay in handover of units, and failure to accomplish all promised amenities as per sales contract.

According to the proposed law, an investor has the privileges to cancel contracts and obtain complete refund, in case the developer delays handing over of the units over eight months.

Dubai real estate contracts traditionally favoured the developer or seller’s position, however in today’s market the buyer has more room to negotiate a contract. If the developer proposes a format make sure you read the fine print and insist on changes if necessary to end up with a balanced agreement.

Another provision of the law, says it is mandatory for the developer to ensure they provide all promised common amenities in the contract at the time of handover. Therefore, gym, swimming pools and other promised common amenities in the building will have to be in functional status before officially handing over the key to owners. Failure to do adhere to the above, will enforce cancellation of contract by the investors.

There are no templates or standard contracts in the UAE and you should feel free to negotiate your own terms and to propose your own drafts.

Contracts should detail the design and materials used for the unit and the size including how it was measured and there should be no clause which allows the developer to change these at will.Services to be provided and their fees should also be clearly detailed.

If your unit is in a mixed-used development, i.e. residential, hotel and retail - who owns, who is responsible and who pays for what should be clearly detailed.

It could be a good idea to include a clause stating that the investor has a right to receive a monthly statement of his monies deposited in the Escrow account.

Payment plans must be linked to a construction schedule. You should work towards an agreement where failure by the developer to adhere to the schedule by any wide margin would allow you to cancel the contract or be entitled to compensation.

If your property is being bought with a mortgage you should demand that the developer pay all related construction fees applicable after the original handover date has passed, in case of late delivery to your mortgage provider.

Your contract should include the right to cancel the mortgage negotiating a time frame in which continuing to make payments becomes unreasonable.In other words, the developer would have to take over the mortgage and refund the investor what he has already spent on the mortgage. The contract should make sure no other fees appear out of nowhere on handover other than those specified in the contract upon signing.

A developer’s reaction to your requests could indicate whether buying a particular property is inviting trouble.

It’s also important to establish the real purchase price.Middlemen often cite the price much above the actual purchase price, hoping to pocket the margin, in addition to the commissions.

As today is a buyer’s market, you should ensure that the price you are being offered is the actual market price. This requires some due diligence and possibly going to different real estate agents.

Payment terms are critical – no money should change no hands until all due diligence has been done and the proper documents have been signed.Read the contracts closely and ensure that you understand and are comfortable with every clause.

If you don’t understand something, do not sign off on that clause until you have received clarification.

3. How to deal with developer disputes

It could be not agreeing on the proposed service fees or a more complex case concerning a property on handover not conforming to the specification or being delivered faulty, late or not at all.

Following up on a dispute with a developer is a daunting, but not impossible task. The chance of ‘winning’ a dispute depends on the particulars of a case and which developer you are dealing with.In almost all cases however, you’ll need patience and a willingness to compromise!

With any dispute the first step would be to go through all the documents related to the sales & purchase agreement (SPA) to make sure there are no clauses which counteract your argument and highlight those which support your claim.

You should then try checking with the Land Department and Dubai’s Real Estate Regulatory Agency (RERA) to find out their position on the dispute.Is there any support? If so, try to get a letter from them stating your rights.

It is also worthwhile researching your property / development on the internet to see if there are other buyers in similar situations.Investor groups frequently exchange ideas on forums or you may find articles reporting on key disputes. Your research may give you an indication of a developer's reactions when approached and which path to pursue.

Once you have put your case together it’s time to contact the developer.If possible visit them in person to try to build a positive relationship for working out issues.

Even though you may be furious and feel that your rights have been violated, going in guns blazing is going to get a similar or defensive reaction.Staying cordial could yield more positive results than a head to head.

All communication should be documented in some way, whether by registered letter or e-mail.Seek legal advice if you need to. Not all cases have to go to court and there are arbitration experts who can assist you in negotiating an out-of-court settlement.

4. How to sell a property in the UAE

What do you need to do if you want to sell a property in the UAE?

While you can sell privately, for example by advertising your property in the media

Once you have a selected an agency you will sign an agreement authorising them to list your property. By law, an agent cannot charge fees to both a buyer and a seller in order to avoid conflicts of interest.

If you are selling without an agent you will have to do all the administration yourself including the disconnection & connection of utilities and the land department paperwork regarding the transfer of the property. To protect yourself, you will also need to carry out background checks on the buyer.

As a seller it is customary to ask for a refundable deposit to take the property off the market. If you’re selling privately, this will most probably be in the form of a post-dated cheque which would be returned when the sale has either completed successfully or fallen through for some reason.

Completed properties are undoubtedly easier to sell than those still under development. Villas in popular communities remain desirable and are holding their value relatively well compared to lower cost apartments in areas with an abundance of supply.

Depending on your own situation it could be better to accepta lower offer and for the sale to go through quickly than a higher offer for someone who will take time finding the money.

There is little to differentiate a lot of the housing stock within certain areas of Dubai so make sure you present your property in the best way possible.

An agent working for you should be able to advise what the preferences of buyers are in each area of town and oversee any improvements or repairs that may be agreed upon between the buyer and yourself.

5. How to buy a property in the UAE

As with anywhere in the world, it’s important you understand the local market that you’re buying into. If you’ve been living in the UAE for some time, this may not be too much of an issue but if you’re fairly new to the country, make sure you know everything you can about relative property values, reputed build quality, amenities, service charges etc.

As well as your purchase costs, you should also work out the other costs you will incur during the lifecycle of the home.Establish how much the service fees, including maintenance and cooling charges, are going to be before purchasing.These vary widely from community to community and even tower to tower across the Emirates.

Brokers usually charge around two percent of the purchase price for their services and to avoid conflict of interest can’t charge the seller any fees as well.

Buying a property off-plan involves agreeing on a payment plan linked to a construction schedule (RERA approved) and organising a mortgage if applicable.

Once the property is completed, the buyer must pay a final instalment to the developer.Before this happens the developer should offer a home viewing to establish a formal ‘snagging list’ which the developer must commit to rectifying before handover.

Buyers can also ask to have their mortgage provider carry out an evaluation after snagging, however some developers charge for this ‘privileged access’.

The buyer pays the last instalment directly or via the mortgage provider and the developer then issues a certificate to confirm receipt of full payment.

6. Can I own a home in the UAE if I live abroad?

Anyone can own property in the UAE, whether you live abroad or in the country.If you intend to keep the property for your personal use, it is much easier however to purchase the property while you’re a resident here.

The reason is this: When first connecting a property to electricity and water, the rules stipulate that you should provide the Dubai Water & Electricity Authority (DEWA) with your passport copy which includes a residence visa.

Once connected it is unlikely that you will have to present your residence visa again. In other words, you could come back - even on a visit visa - and make use of the property, as a holiday home for example.

If you want to let the property, you would not need the residence visa as the tenant will connect DEWA with his own visa.It’s worth noting however that in the case of a new property, some developers state that the property must be connected to DEWA in the owner’s name before handover.

If you are living abroad it’s possible to purchase and let property in the UAE by using power of attorney – appointing someone trusted in the country to handle all matters related to buying and leasing the home, including the DEWA connection. In order to do this, your appointed person must carry letters of authority either attested by the Dubai Courts, or notarised by the UAE Embassy wherever you live and then approved by the Department of Foreign Affairs within the UAE.

You also need to consider what you intend to do with the home (rent out, use as a holiday home etc) and who will deal with your affairs. If you are going to let the property, you could handle matters yourself from your home country base and then use someone trusted when you need to deposit cheques etc, or the other option is to employ the services of a real estate agency offering property management. Of course simply flying in and out is also an option.It’s a matter of choice, convenience and trust in the tenant.

If you intend to keep the property as a second, retirement or holiday home then the residence visa issue comes into play.You will also need the visa to connect the internet, TV and a landline if required.