Article 26 (1) of the Dubai Property Law provides that, “Any agreement or disposal or default made in violation to the provisions of this Law or with the intent to circumvent its provisions shall be null and void”. Article 26 (2) gives any interested third party, the Lands Department and the Public Prosecution the right to request the court to declare such a transaction void. This is directed at so called ‘sham arrangements’. This provision is not saying, for example, that long leases granted to foreigners in areas that are not designated areas are illegal. What this provision is aimed at, are those agreements that purport to give a property ownership right to someone who is not entitled to own it and is not entitled to register it. What would be void, for example, is a Sale & Purchase Agreement for the sale of a freehold right in favor of a foreigner in respect of a property in Deira, as foreigners do not have the right to own freehold property in Deira. That is an obvious example.
A more suitable example might be the ‘nominee ownership’ type arrangements that we sometimes see, where a foreigner who wishes to own property will reach an arrangement with a UAE national, wherein the UAE national will hold title to the property at the Lands Department, but for all intents and purpose the foreigner considers himself to be the property owner. The best advice to any foreigner wishing to ‘own’ property in a location which is not approved for foreign ownership is to take a long lease of the property. Whilst the lease cannot be registered, the foreigner would at least have contractual rights pursuant to the lease, which can be enforced and a lease arrangement is not illegal or invalid.
