Blog

Traps to avoid when buying property in the UAE

The sales market has been buoyant in the off-plan sector but troubled in the secondary market for some time now. Prices have been sliding since 2015 due to the oil price crash and resulting issues around the Gulf. However, oil is at a four-year high hovering above $75 a barrel and there is much talk of a pick-up in government spending, not just here in the UAE but across the Gulf. It is just a matter of time before the secondary property market starts to come back again so do your homework now to be ahead of the curve when it turns the corner.

When buyers return to the market looking for deals, things start to move fast and that is when mistakes get made. Here are a few to beware of

Pick your broker, don’t let them pick you

We have all heard stories of shady real estate agent, but they are very easy to avoid. Get a recommendation from a friend or a trusted internet review. Sit with them, have coffee, make sure they understand what it is you want, then send them all of the internet adverts of places you love. Let them do the work, sifting out the useless brokers and false adverts. The fees you pay in the end will be the same.

Check your broker is legal

Your broker will probably hold a deposit cheque from you made out to the owner for up to 10 per cent of the property value. You need that person to be scrupulously honest; if he hands the owner that cheque and the owner cashes it, you will have a difficult time getting it back. When the market heats up, every doorman, taxi driver and “friend of the owner” becomes a broker. They are unregulated, loose with the truth (as they don’t have a reputation to protect or regulators to answer to) and don’t know the process. In Abu Dhabi ask to see the agency’s Municipality Registration; in Dubai you can check their Real Estate Regulatory Agency credentials online.

Make your agent a partner

The tradition in the UAE is to use brokers as simple doormen, who provide the keys for you to view the unit. You then use another broker for another unit and so on. In Europe and North America they tend to be more of a partner in the transaction, advising the client, doing their research for them, giving genuine advice. If you’re making one of the biggest transactions in your life you deserve to have professional, expert advice.

Don’t lose your deposit

If you are transferring a property at Rera in Dubai or the Municipality in Abu Dhabi, the whole process will be under their watchful eye. But before you get to that point, stay on your toes as the deposit cheque to secure the property is a huge amount of money. In Dubai, you can use expert conveyancing firms to hold this for you. It is an added expense but worth it for peace of mind. They hold your cheques and you will be using a professionally drafted pre-sale contract. In Abu Dhabi conveyancers have not taken hold yet and this process is still done by the brokers. The pre-sale contract governing when and how your deposit will be returned is often referred to as the Mou (Memorandum of Understanding); they can range from the very clear and well drafted to the dreadful. Make sure your Mou is very clear on when you forfeit your deposit and NEVER make out your deposit to the broker.

________

Read more:

Why property is a good investment if you take out a mortgage

How long do expats need to stay for buying a home to make sense?

Why buy a car in the UAE but not a home?

How buying a home in the UAE can halve your rent

________

Check your documentation

In Dubai the “Form F” is a mandatory unified real estate contract that must be used in property sale and purchase transactions. For the sale of the property, sign Form F as well as the pre-sale contract (an Mou or Sale and Purchase Agreement), as Form F is the Rera-approved document. In Abu Dhabi the pre-sales documentation is called the Mou. Check it is a legally binding and clear document, then sign it to bind you and the seller to the proceeding and then make sure you see the fully signed Mou signed by both parties.

Find out who the owner is

Be very clear in whose name the deposit cheque is and who exactly is signing the pre-sale agreement and Form F (in Dubai). Make sure that in Dubai you have seen the title deed and in Abu Dhabi you have seen either the title deed or Sale and Purchase Agreement (SPA). All the owners of the property should sign the pre-sales agreement, and if a company owns the property, make sure you see the authorisation documents allowing the person that signed to bind the company.

If the property has a tenant, check the lease

When you buy you are bound by the lease, so you absolutely must see it before the deal is complete. If you are looking to move into the property, in Abu Dhabi the tenant needs two months’ notice before the end of their current lease for you to move them out; you can’t move them out mid-lease. In Dubai the owner can only move in upon expiration of a tenancy contract if the landlord has given a 12-month written notice to the tenant sent through registered mail. If the seller says he has given this notice already, the buyer should review the evidence.

Don’t ignore the fees

Ask all parties – your bank, the developer and the agent – what the fees are. All told, these could be 4-7 per cent of the purchase price, so you need to know. Because of the new title registration system in Abu Dhabi, transfer fees can be anywhere between Dh1000 and 2 per cent of the purchase price. I have seen examples of brokers trying to make the fees more palatable by not mentioning all of them.

Know what comes with your purchase

Many a buyer has arrived at their new property with the perfectly manicured garden and pool removed and the built in cupboards and white goods nowhere to be seen. Your pre-sales agreement should set out what comes with the property you are buying. It should have a schedule stating if the kitchen goods are included, that the seller will leave the garden, the parking spaces and everything else you are acquiring. Don’t take possession and find an empty property when you were expecting furniture.

Ben Crompton is the managing director of Crompton Partners Estate Agents

With inputs from Barnaby Crompton, the chief executive of Crompton Partners Estate Agents