Property contracts in Dubai to be made mandatory

Property brokers have welcomed the planned introduction of mandatory contracts that could help to weed out rogue practitioners.

Dubai’s real estate regulator is set to enforce the use of the standardised contracts to better police the emirate’s property market.

The Dubai Land Department said that three of the standard contracts it issues regulating deals between buyers, sellers and property brokers would become mandatory from the beginning of May.

Standardised property contracts were first drawn up and published by the department in 2008 and are already used by many of the emirate’s property brokers, but real estate brokers are not currently required to use them.

The Land Department said that it would be drawing up new standard contracts that would have to be used in all transactions that relate to the buying and selling of property. It added that models of the new contracts could be found on its property marketplace website, eMart.

The new rules cover form F, which formalises the relationship between a seller and a buyer; form A, which formalises dealings between seller and broker; and form B, which formalises dealings between a buyer and a broker.

Under the current rules, sellers may only name three property brokers to act for them. If this requirement is included in the new forms it could make it harder for brokers not instructed on property deals to try to get a cut by claiming to represent somebody they do not.

Contracts will become formal and completed after they have been recorded and documented at the DLD.

“Having unified contracts between the parties not only avoids the misunderstanding and misinterpretation of articles that could previously have occurred, but it also guarantees the rights of all the stakeholders involved,” said Sultan Butti bin Mejren, the director general of the DLD.

“It contributes to the enhancement of the competitiveness of the real estate market in Dubai and moves it to a new phase of leadership and excellence by establishing the principles of transparency and professional standards,” Mr bin Mejren said. “It will be of great value in assisting us to keep pace with the real estate boom currently taking place in Dubai and will promote confidence in the market.”

Property agents in Dubai welcomed the move.

“This is another step forward for Dubai to position itself as a proper, serious place to do business,” said Mario Volpi, the managing director of Prestige Real Estate. “It is likely to speed up the sales process a little. It will also make it more explicit as to who is paying what charges and fees to whom.”

Last August, Mr bin Mejren was quoted in The National’s sister paper Al Ittihad as saying it would introduce seven new laws this year and next aimed at further regulating Dubai’s property market.

A month later, the DLD announced it was doubling the transfer fee levied on each sale in the emirate to 4 per cent of a property’s value in an attempt to reduce speculation. In November the department opened a new Rental Dispute Resolution Centre to better handle rent dispute cases.

The DLD is also understood to be looking at introducing new standardised rent contracts later this year and refining Dubai’s rent index.

The department’s new rules are coming in against a backdrop of rocketing house prices and rents in Dubai, which have led to fears that the emirate could be sliding towards another correction.

In February, JLL reported that real estate prices rose by 22 per cent last year and could increase by another 10 to 15 per cent this year, putting them back in line with levels in 2008 before the global financial crisis hit.

It also predicted that rents in Dubai could increase by another 10 to 20 per cent this year after increasing by an average of 17 per cent last year.

lbarnard@thenational.ae