Jafza NOC for offshore entities' freehold titles

The Land Department of Dubai has confirmed that only companies formally registered as offshore entities with Jebel Ali Free Zone Authority (Jafza) will be eligible to register properties from January 1, 2011.

The department in a notice said, to consider registering the real estate interests of an offshore entity will require an original Jafza-issued registration certificate, a formal undertaking to notify the department of any change in its share ownership and a Jafza Non-objection Certificate.

The guidelines are not retrospectively effective and apply solely to new registrations after January 1, 2011. Real estate currently registered with the department and held by companies established in other offshore jurisdictions are not affected by the provisions of these guidelines.

Emirates 24|7 reported in November that offshore companies will not be able to register freehold properties in the land department unless they are registered with Jafza.

The new announcement by the DLD effectively changes the legal position established under Law no. 7 by restricting the legal entities that may directly own freehold property. A Jafza offshore company is a holding company that does not trade, but is used to hold assets, he added.

Nick Clayson, Partner and head of real estate, Middle East, Norton Rose Group said the effect of this regime change remains to be seen.

"Certainly a number of typical finance and investment transaction structures will have to change in order to accommodate a Jafza offshore entity. It would appear that the measure is partly to enable the government to have greater insight into the shareholders of offshore companies and that there will be more stringent requirements in respect of revealing company details, which may make investors more cautious in dealing with property in Dubai."

Moreover, it is unclear whether other transactions, such as the change of control of the shareholders of a Jafza offshore entity (or a parent of such an entity) will trigger further obligations such as the payment of transfer fees notwithstanding that the property will remain with the same legal entity in respect of any freehold property owned, he added.

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