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Joint Ownership in Dubai: Everything You Need to Know
As Dubai’s real estate industry continues to expand and diversify, offering lucrative opportunities to local and international investors are beginning to investigate flexible ownership types taking advantage of opportunities in this dynamic industry.
One format that is gaining traction is joint ownership, or co-ownership. Joint ownership is simply when two or more individuals or entities collectively own the property.
This is a great way for owners to share the financial burden of ownership, broaden their investment capabilities, and participate in high-value assets which otherwise might be daunting for an individual investor.
This blog post aims to elaborate on various ins and outs of Joint ownership in Dubai, delving deeper into aspects such as:
- Type of joint ownership and its legal frameworks
- Benefits and potential pitfalls that should be considered
- Challenges and considerations of co-ownership
Intrigued, let’s get straight into it.
What is Joint Ownership?
Joint ownership, often referred to as co-ownership, is a form of ownership and co-ownership where two or more people jointly share ownership rights on a single property.
The real estate market in Dubai continues to attract a wide variety of investors and recently has offered more opportunities for different types of investors to pursue different ownership structures, so, joint ownership is a more popular form of ownership.
Joint ownership or co-ownership is typified by a joint ownership agreement. A joint ownership agreement, allows each co-owner to have an ownership share that is defined and deemed understood by the co-owners, and in this regard can be equal or unequal vested shares, depending on the agreement of co-owners.
Ownership shares are typically allocated based on several factors including the cash contributed by each party when acquiring the property as a joint ownership agreement.
While the ownership can be tailored in many ways modified to satisfy the desires of the co-owners at the time of including the purchasing transaction process.
If party A, for example, is contributing a larger cash input or financial risk than party B, then party A may be allotted a larger membership interest in the ownership of the property. On the contrary, if party A and party B are equal contributors in an investment in the joint ownership of the property, then they would receive equal ownership.
Types of Joint Ownership
Dubai acknowledges differing categories of jointly owned real property that are subject to different legal ramifications:
a. Tenancy In Common:
A tenancy in common is a situation where the co-owners jointly own the property and have an undivided share of ownership of the property and may each own equal or unequal shares in ownership. Each co-owner has the right to sell, transfer and will their share of ownership.
If a co-owner dies, the proportional share is automatically transferred to the remaining co-owners. Joint property ownership as joint tenants is usually common with spouses or family members.
b. Corporate Ownership:
If the property is owned by a company or corporate entity, the shareholders will be seen as joint owners, which is typical for different types of commercial property and/or larger investments.
Benefits of Joint Ownership
Joint ownership of property can provide several benefits for investors in Dubai:
1. Shared Cost Responsibilities
The first and biggest advantage of joint ownership is being able to share costs. Cost sharing can assist owners in purchasing, operating and maintaining a property that they would otherwise be unable to purchase independently.
2. Broader Investment Portfolio
If you own property with another party via joint ownership, you can own a more diversified real estate investment portfolio. Co-owners can have investments spread over many properties, providing the potential for risk diversification and upside potential.
3. Flexible Ownership Structure
Dubai’s legal framework is favorable for variable structuring of joint agreements. The co-owners can determine ownership proportions, responsibilities and the terms for why or how profits and proceeds are to be shared.
4. Greater Investment Potential
Joint ownership can also offer investors the possibility of pursuing investments that would not be available to individual investors. This is especially important to acquire Golden Visa and in the pricy Dubai luxury real estate market as there are many desirable, high price properties on which demand is often very high.
Challenges and Considerations of Joint Ownership
Although there are numerous positive aspects of co-ownership, there are also challenges and considerations that prospective co-owners may want to consider:
1. Decision Making
The ownership of property with more than one owner can create complexity and difficulty in decision making.
Conflicts can arise over how the property will be used, maintenance issues, or when it is time to sell the property.
2. Financial liabilities
Co-owners will be sharing all of the financial liabilities attached to that property, e.g. mortgage, maintenance, taxes etc.
If a co-owner cannot make the financial payments related to the property the other co-owners may need to pay their part of the funds that are owed.
3. Exit strategy:
If you do have an ownership agreement, it is recommended that an exit strategy be agreed upon from the beginning.
All co-owners should agree on how the property in question will be valued and sold, in the event one or more co-owners wish to no longer be a co-owner of that property.
The key points are as follows:
- Dubai Land Department (DLD): All property agreements, including Joint ownership Agreements, must be registered with the DLD. The DLD is in place to protect the rights of all owners and sets out the ownership structure for the property.
- Inheritance Laws: Most importantly, (for non-Muslims), the inheritance laws of Dubai will nearly always mirror the laws of the domicile of the deceased, unless a person’s will states otherwise. Joint tenancy with right of survivorship will, in nearly all cases, supersede the inheritance laws.
Conclusion
Investors in Dubai who are interested in joint ownership of property are on a fantastic opportunity to maximize their investment in real estate and share the financial burden.
There is a ton of planning, clearly established agreements, and an understanding of the law surrounding property ownership to be responsive to when investing in real estate.
Where joint/ co-ownership is concerned, having all of these factors considered is imperative, but the good news for co-owners is that can take advantage of taking consideration the benefits of joint ownership and the complexities of Dubai’s changing property landscape, if they are willing to deal with the challenges they face collectively from the start and work collaboratively with legal & financial advisors.
