While the overall process of purchasing a property in Dubai is the same, the steps that need to be taken depend on whether the Buyer is a cash or mortgage purchaser, and if the property has a mortgage against it.

Cash Buyer/Mortgage-Free Property

This is considered to be the easiest and fastest type of transaction to close, however, those who have done real estate transactions know that there is no such thing as an “easy deal”.

Once the Buyer decides on a property, Buyer and Seller negotiate the terms and enter into Form F.* Buyer then gives a Deposit Cheque (usually equal to 10% of the purchase price) in name of the Seller, to be held by the Seller’s Broker (or another neutral third party, if no broker is involved). This cheque gets returned to the Buyer at transfer, and is only cashed if Buyer defaults.

Next, a No Objection Certificate (NOC) must be obtained from the Developer. The NOC states that Seller has paid all service and other charges, and that the Developer does not object to the sale. Most developers require that both Seller and Buyer attend to apply for it. The Seller pays any unpaid amounts at that time, and Buyer may be required to arrange for future service charge payments. Each developer has different NOC deposit and fee requirements, as well as processing times and validity expirations, so it’s best to confirm the policy with the Developer before applying for the NOC.

Once the NOC is issued, the parties may transfer the property. Unless both parties are GCC nationals, the Dubai Land Department (DLD) no longer conducts transfers, so it must be done through one of the DLD-accredited Registration Trustee (RT) offices. Both parties, or their legal representatives (POA), must attend. The fee for all RT’s is AED 4,000 for transactions over AED 500,000, and AED 2,000 for under that amount. RT’s fees are payable in cash, by either the Buyer, or split between both parties, as agreed.

The Buyer brings the following Manager’s Cheques:

Amount of the full purchase price, payable to the Seller

Buyer’s share of the 4% transfer fee + DLD registration charges** (Buyer usually pays the entire 4%, although Seller may agree to pay some portion of it), payable to DLD

Broker’s Commission, if any

In any type of transaction, Buyer may also have to refund the Seller for the prorated share of the services charges that were prepaid by the Seller, however, this can be paid by personal cheque or cash (not recommended).

Once all payments are made and ID’s, passports, NOC, original Title Deed and other documents are handed over to and verified by the Trustee, the information is sent to DLD through an online system for approval.

When approved, the Trustee has the parties sign the official transfer documents. Finally, the original Title Deed is issued and given to the Buyer.

* Note about Memorandums of Understanding (MOU): Although still frequently used by brokers and parties in Dubai, as DLD’s official Form F has been required for over two years now, DLD/RERA regards MOU’s as invalid. Therefore, parties should be signing Form F at the time of the agreement (as opposed to completing it at the Registration Trustee’s office at transfer). If additional terms and conditions are needed, the parties should either express them in the “Additional Conditions” section of Form F, or draft an “Addendum to Form F”, rather than a separate MOU.

** DLD fees change frequently. Call DLD or an RT’s office for current fees.

Cash Buyer/Mortgaged Property 

When there is an existing mortgage on the property, the Loan must be settled prior to the transfer to the Buyer. In order to do so, Seller must request a Liability Letter from the Lender (Bank). This letter includes the remaining balance of the Loan, as well as any bank fees and penalties being charged. The Liability Letter generally has a validity period ranging between 7-15 days, depending on each bank. Therefore, it is important to time the request for the letter so that it does not expire prior to the transfer date.

If the Seller cannot afford to pay off the Mortgage, then the Buyer has to do so. Because the Cash Buyer is exposed to the possibility of the Seller selling the property to another person, or changing the terms of the agreement after Buyer settles the Mortgage, it is important to “block” the property. *** Blocking protects the Cash Buyer from the above. Once the Liability Letter is received, the parties should go to the Registration Trustee’s office to block the property.

The parties have to bring the following to the RT:

Signed Form F

Liability Letter

Cheque for Liability Letter amount (payable to Lender by Buyer)

Cheque for 4% transfer fee + registration charges (payable to DLD as agreed)

Cheque for blocking fee (payable to DLD by Buyer)

Cheque for Seller (purchase price minus liability amount – to be held by RT until transfer)

Some brokers also request that the Buyer bring the commission cheque, which is held by the RT until transfer.

Once the property is blocked, the Seller (some banks require the Buyer to attend as well) takes the cheque for the liability amount to the Lender to settle the Mortgage. When it is settled, the Clearance Letter and original Title Deed are given to the Seller.

The NOC may now be applied for. Once it is received, the parties attend the RT to transfer the property, the cheques are disbursed and Buyer gets the Title Deed.

*** Note: Blocking need only be done when a cash buyer pays off a seller’s mortgage. It is not necessary when a buyer is obtaining financing to purchase the property.

Mortgage Buyer/Mortgage-Free Property

When the Buyer is obtaining financing to purchase the property, it is best to get a Pre-Approval Letter to determine the limit the Bank is willing to lend. In order to receive the Pre-Approval, salary certificates, bank statements and other documents are required by the Lender. The Pre-Approval should be received before beginning the property search, so that the Buyer knows the price range, and because potential sellers take offers with pre-approvals more seriously. But like most of the documents in real estate transactions, the Pre-Approval Letter has an expiration date, so time is of the essence to find a property and make an offer.

Once negotiations are complete, the parties enter into Form F and the Buyer gives the 10% deposit, a valuation (appraisal of value) of the property is ordered by the Lender (at Buyer’s expense).

Assuming the Valuation results are positive, the Bank issues the Final Offer Letter (FOL) to the Buyer. The FOL includes all of the terms and conditions of the Loan and Mortgage. The Buyer arranges with the Lender to sign the FOL and issue Security Cheques to the Bank, as required.

The parties then apply for the NOC. Once it is obtained, the Lender schedules the transfer at its preferred RT office.

The Buyer needs to bring the following Manager’s Cheques:

Contribution of at least 25% of the purchase price (as required by Lender and Central Bank regulations), payable to Seller

Mortgage registration fee for 0.25% of the Loan amount + DLD charges, payable to DLD

Buyer’s share of the 4% transfer fee + DLD charges

Broker’s Commission, if any

 At transfer, the Bank brings a cheque payable to the Seller for the remaining balance of the purchase price. The Title Deed is issued in the Buyer’s name, but given to the Buyer’s Lender to hold until the Mortgage is paid. The Mortgage is then registered with DLD.

Mortgage Buyer/Mortgaged Property

Since there are two mortgages (and likely, two banks) in this scenario, and all documents have varying processing times and validity periods, the timing of requests for the Liability Letter, Valuation, FOL and NOC is very important.

Buyer and Seller sign Form F and the deposit is given, then Buyer’s Bank conducts the Valuation of the property. The FOL is then issued.

Next, the Seller requests a Liability Letter from the Lender. Once the Liability Letter is issued, it is sent to the Buyer’s Bank, which settles the Loan/Mortgage with Seller’s Bank.

Once the Mortgage has been settled, and the Clearance Letter and original Title Deed have been received, the parties apply for the NOC. When received, the Buyer’s Lender arranges for the transfer.

At transfer, the existing Seller’s Mortgage is released. The property transfer documents are signed. The Buyer then provides the Manager’s Cheques (as required above), and Buyer’s Bank issues a cheque to the Seller for the remaining balance of the purchase price.

The Buyer’s Mortgage is then registered, and Buyer’s Lender keeps the original Title Deed until Mortgage is settled.

Disclaimer: This blog is intended for informational purposes only, and should not be considered legal advice, nor does it reflect the opinions of any government agency. Majdel Musa will not be held liable for the use, non-use or misapplication of this information, any lost profits, personal or business interruptions, or any other loss.