As anywhere in the world, it is recommended to make a will covering the appropriate transfer of your real estate ownership in Dubai. There are several ways of doing so, which one to choose and its implications are described by an expert in the following article on the various laws.
By: Michele Carby, Partner | Holborn Assets
What is in a name? For some people it is everything, for others it serves as little more than a ‘badge of convenience’. It is no great surprise that those who most often resort to disguising ownership of their Dubai real estate by locking it away in opaque off-shore companies rather than their own names tend to be non-nationals.
Of course the people who take this option are invariably convinced of its good sense and benefit, whether this amounts to preserving the rights of ownership for their heirs or, at a more general level, a desire for whatever reason to preserve the anonymity of the ownership. In general and in either case this reduces to trying to evade what is seen as the unavoidable and rigorous strictures of the prevailing Shariah rules.
This interpretation, in turn, raises two important questions.
The first is the general issue of whether the rights of non-national owners of Dubai real estate are properly and sustainably protected under the law, within the prevailing ethical code, through transfers of ownership, and to the same extent enjoyed by national and GCC citizens. The second, which follows logically from the first, seeks to establish if the rights of this category of owners are necessarily subject to Shariah rules, or if there are contingent and overriding civil legislation which effectively offers a get-out, making arrangements such as ‘off-shoring’ ‘foreign’ ownership redundant?
My impression is that many of the non-national owners who resort to registering offshore companies in which they have a beneficial interest as the owners of their property do so mistakenly, supposing Shariah genuinely poses a threat to their rights, bequests and heirs’ interests. They fail to understand the scope of the laws which apply to wills, bequests and the inheritance of real estate in Dubai, the way in which these in turn interact with Shariah rules, and the implications for transferring title to heirs.
In general, their fears are unfounded. Let me explain why.
Inheritance and wills
Inheritance involves the devolution of property on the death of its owner according to the provisions of his/her Will or under the rules relating to intestacy which are part of the provisions which regulate the administration of estates.
The Will is the document by which a person (the testator) appoints an executor to administer his estate after his death. This directs the manner in which the estate is to be distributed to the beneficiaries the testator specifies. To be valid the Will must comply with the formal requirements of the Wills law which apply to the deceased.
The legal basis for the law of the inheritance in the UAE is found in the Shariah. Shariah is the primary source of Islamic law and is based mainly on the Quran and the Sunna – the sayings of the Prophet Mohamed (PBUH) which serve as a complementary source to the Quran. Shariah, however, is not a codified law. It is an abstract form of law capable of adaptation, development and further interpretation.
The deceased’s estate
According to Shariah, whatever a person owns at the time of his/her death whether it is property, money, bonds, gold, share, or clothes falls into his/her estate. However, items the deceased acquired through a breach of law while he is still alive will not be included in his/her estate.
Pensions provided by the government or the employer of deceased are properly considered ‘awards’, and not part of the deceased’s estate. If before he died the deceased gifted something of which he had actual ownership and he had seen the recipient possess it, this item should not be included in the inheritance.
If, however, the deceased merely stated verbally or in writing words to the effect ‘I gift this to you’ and the gift was not physically received by the recipient before the demise of the deceased, then this item remains within the ownership of the deceased and will be included in his estate.
If the gift was given to the recipient during an illness of which the deceased later died and the deceased had made the beneficiary take possession, this act of giving falls under the rule governing wills. Furthermore any property the deceased mortgaged during his lifetime but failed to leave sufficient money in his estate to settle does not form part of the estate.
Rule of the law of the deceased
Under the UAE Civil Code, Federal Law No.5 of 1985 as amended, Article 17.1 provides that: ‘Inheritance shall be governed by the law of the deceased at the time of his or her death’. However in relation to real property, as an exception to the general rule, Article 17.5 states: ‘the law of the UAE shall apply to Wills made by foreigners disposing of their real property located in the state’.
This apparently contradictory exception by Article 17.5 is the root cause of the doubt among non-Muslims and foreigners that their Wills would be recognized under UAE law and it is this same Article which has encouraged so many to choose the offshore option. The suggestion that the wills of non-nationals choosing to make a bequest of local real estate were subject to UAE law was taken to mean Shariah rules.
Clearly, the applicable law referred to should correctly be taken to mean Article 17.1 of the Civil Code. Equally clearly, this allows non-nationals and non-Muslims living in the UAE to inherit the estate of a deceased through the provision that the law of the deceased at time of his or her death shall apply – not Shariah law.
There is a procedure and there are requirements. For example, relatives of the deceased are required to prove their eligibility to inherit the estate of the deceased. They also have to prove to the Court the appropriate legal jurisdiction which applied to the deceased at the time of death and therefore properly governs the distribution of the estate.
Following verification of the eligibility of successors and the authenticity of the documentation, the Court will issue a Certificate of Inheritance as per the law of the deceased. This certificate should be registered with the land register, in Dubai the Land Department, in accordance with Article 11 of Law No.7 concerning Land Registration in the Emirate of Dubai.
So clearly, non-national and non-Muslims can inherit according to the law of the deceased at death but how does the law view the Wills of deceased foreigners and non-Muslims?
Previously, within the UAE, only citizens of the country or GCC nationals in certain circumstances could own local real estate. However, Law No.7 of 2006, Concerning Land Registration in the Emirate of Dubai, brought about a change and explicitly permitted foreign ownership of property in Dubai, though only within designated areas. Article 11 of the same law states: ‘If the estate of a deceased contains Land Rights, then the Certificate of Inheritance shall be registered in the Land Register and disposals by any heir of any of these rights shall not be effective or recognized against third parties unless registered in the Land Register’.
With regard to the Wills of a foreigner disposing of their property in the UAE, Law No.28 of 2005 concerning Personal Status (Family Law) is relevant and applies. This special law restricts the application of the general law in the UAE legal system. Article 1 states: ‘The provisions of this Law shall apply to non-UAE nationals unless the foreigner elects to apply his or her personal status law’.
Therefore, if the non-Muslim chooses to apply his or her own law to Wills for property located in the UAE, their successors must follow the following steps to have their Will recognized and registered in the Land Register.
First, an application needs to be made for a grant of representation in the deceased’s country of domicile. Second, once probate is obtained, it must be notarized, legalized and/or attested before it may be recognized by UAE authorities as authentic and valid. Third, on recognition in accordance with the laws of the country to which the deceased belonged, the trustees or executor have full power to administer the estate of the deceased in accordance with his or her wishes.
In the case of intestacy, a letter of administration will also need to be obtained from the country of domicile. This would also need to be notarized, legalized or attested. The Trustee must approach Dubai Court to apply for recognition of the will. His or her application must be supported with the required documentation. Once the Trustee satisfies the requirements, the court will issue the certificate recognizing the Will or Testament.
Impact of Shariah rules
Despite the clear direction of the law as previously stated it should be borne in mind that it is not permissible in the UAE to apply the provisions of a law specified by any article of the code – The Law of the Deceased – if such provisions are contrary to the rules of public morals.
Public morals are the basic moral structure of the society. Matters relating to personal status such as marriage, inheritance, sovereignty, freedom of trade, circulation of wealth, rules of private ownership are not to conflict with the definitive provisions and fundamental principles of Islamic Shariah.
Article 27 of the UAE Civil Code states: ‘It shall not be permissible to apply the provisions of a law specified by the preceding Articles if such provisions are contrary to Islamic Shariah, public order, or morals in the State of the United Arab Emirates’.
Article 28 adds: ‘The law of the United Arab Emirates shall be applied if it is impossible to prove the existence of an applicable law or to determine its effect’.
According to Article 27, it is not permissible in the UAE to Will a bequest to a same gender partner as such relationships flout the public morals of the UAE.
As per Article 28, it is the responsibility of heirs to prove to the Court the law in their home country governing inheritance should apply and they elect to have this to be the case. If the heirs fail to convince the Court then it is the law of the UAE which shall apply.
The requirements are stringent to the point of requiring heirs to provide a copy of the appropriate law or articles of their country – certified and legalized – and that they believe apply to their case.
Nevertheless, it is clear there is some misapprehension by those non-nationals who opt to ‘offshore’ their Dubai property interests purely to safeguard their heirs and because they question whether their Wills are likely to be given due consideration. Clearly and explicitly, the law safeguards their interests. They have no reason to fear.
For more information, please contact Michele Carby at Holborn Asset Management on +971 50 618 6463 and on e-mail at [email protected]