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New mortgage law in Dubai

Dubai seeks to better regulate market with new mortgage law By Saifur Rahman, Business Editor Published: August 19, 2008, 15:06

Dubai: The new mortgage law issued by the Dubai Government is expected to help better regulate the market and boost investor confidence, officials and analysts said on Tuesday.

The law makes all mortgage deals that are not registered with the Dubai Land Department null and void, allowing the department to better regulate property and mortgage transactions.

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued Law No 14 for 2008 that regulates property mortgages and the relations between mortgage issuer and the borrower, Gulf News has learnt.

The 35-article law includes all procedures concerning a mortgage and its legal effects on the concerned bodies, as well as execution procedures on the mortgaged property, and the relations between the mortgage lender and borrower.

It also regulates relations between both parties involved in the mortgage process, and the Dubai Land Department, which is responsible for implementing the law and ensuring the rights of both parties.

Citizens' rights

The law excludes properties granted by the government to UAE citizens for residential and commercial purposes, as those are subject to orders and instructions issued by the Ruler.

The law, which will take effect 60 days after its publishing in the official gazette, stipulates the invalidity of any property contracts that are not registered with the department.

The provisions of the law will be applied to properties for mortgage as property insurance with no difference between full towers or units.

"This is part of the government's initiative to support and regulate the market. It will boost investor confidence," Arif Al Harmi, chief executive of mortgage lender Amlak Finance, told Gulf News. "It is a positive development and demonstrates that the government wants to regulate and improve the business practices in the market."

The law will not change the business practices of the existing lenders in the market, said Al Harmi.

"We have been maintaining the best practices in lending. We make sure that the developer is good, serious and has financial capability to build the project while the borrower has the repayment capacity," he said.

"The Mortgage Law just reiterates the best practices. I'm happy that it has been issued."

Analysts said the move will boost investor confidence, which has recently been hit by corruption scandals.

"It will definitely boost investor confidence in Dubai's property market. More and more banks will now enter the mortgage market with renewed confidence as the law streamlines procedures," Sudhir Kumar, managing director of Realtors International, a property consulting firm, told Gulf News.

"We also expect the mortgage rates to come down to a better and more competitive level."

The law, as published in Al Bayan, allows mortgaging of properties from sold off-plan or those that are still under construction, on the condition they are registered with the lands department.

It also allows mortgaging of leased property for a period of no less than 10 years and no more than 99 year.

The law is applied to properties to be mortgaged whether they are full buildings, units, or plots under the property insurance. The law does not differentiate between full towers, units, plots or rights to a property sold on the map.

Under the law, mortgage lender shall be a bank, financial institution or a finance company licensed by the UAE Central Bank to practice the activity of property finance.

The law makes property insurance mandatory.

"All property mortgage contracts must be registered with the land department otherwise they will be considered invalid," the law says.

The law allows the lender to manage his mortgaged property and to receive its revenues until the time the property is taken away from him by force and selling it in an auction, if the debt is not paid.

Publish date: 20/08/08 10:49
Source: Gulfnews.com

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What will you leave for your greeving family

Under Sharia, a wife will get one-eighth of the husband's estate if the latter dies without leaving a conventional will.

Many expatriates have deepened their roots in the UAE with the introduction of freehold properties. But what happens when one passes away without leaving a will as to who will inherit the property or how it should be divided? While Sharia provides the answers, legal experts say it's most wise to make a will.

British expat John Stuart, 44, owned and ran his own company in Dubai. He had a very good salary, his own villa, stocks, life insurance and a retirement plan.

But when he died of a heart attack, his assets were frozen because he had left no will. His wife and children were virtually penniless while the authorities decided how his assets should be split under Sharia.

But even if you don't own a property, you have perhaps more disposable income here than back in your home countries. If you sum that up, go around your house, you look at your car, jewellery, and such like, it really comes to fairly significant figures. Carol ALderson, Lawyer, Al Midfa & Associates.

In the end, rather than inheriting his entire estate as would happen under the law of his native land, his wife got just one eighth of his estate.

The European couple may be fictional, but their circumstances reflect the necessity for executing wills among the growing number of expatriates planting their roots in Dubai, an estate manager said.

A death can cause other complications, too.

When an Emirati man with personal assets worth Dh18 million died in August 2007, it took three months and several meetings among the 21 beneficiaries before a court settled the inheritance case.

"The majority of my clients own property in Dubai. Most are Europeans, some are Indians and Americans," said Mohammad Marria, estate manager of Just Wills.

Since the UAE introduced freehold property ownership, more people are preparing wills to avoid the complications involved in dividing estates among relatives in case of death.

"Ordinarily, the most significant asset you can own is a property," said Carol Alderson of law firm Al Midfa & Associates during a radio talk show on Tuesday.

"But even if you don't own a property, you have perhaps more disposable income here than back in your home countries. If you sum that up, go around your house, you look at your car, jewellery, and such like, it really comes to fairly significant figures."

"If you're working for somebody, you may have an end-of-service gratuity which becomes part of your estate. There might be a holiday entitlement you haven't taken during the course of that year. Under the labour regulations, you are entitled to a ticket home. If you wanted to be buried in your home country, it helps."

Will attestation

Several law firms like Al Midfa and Just Wills help residents prepare wills for a fee - ranging from Dh900 to Dh2, 000.

Dubai Courts accept wills provided they are attested by the diplomatic mission of the deceased.

In the absence of a will, Sharia automatically apply to both Muslim and non-Muslim estate holders when they pass away.

An intestate - someone who dies without a will - resident is covered by the UAE Private Matters Law, based on Sharia, which governs the division of a person's estate following his death.

"Under Sharia, the wife of the deceased receives one-eighth of the total sum. The parents receive one-sixth. For every share received by the daughters, the sons receive twice as much," said Judge Ali Al Dhabahi, Sharia Court Judge and Head of the Legacy Advancement Committee at Dubai Courts.

The process of dividing assets takes two to eight weeks. The division is based on certain pre-defined principles, explained Ali Al Dhabahi.

However, the beneficiaries can opt to use the inheritance laws of their home country. To apply foreign laws, individuals have to provide an attested detailed copy of the law certified by the local consulate or embassy. All of which is a very lengthy process and the best way out is to make a will, says Alderson.

Minors' share

The UAE legal system recognises individuals over the age of 21 years as adults. Otherwise, the court appoints guardians to their share of the estate.

This appointment of a guardian comes after consultation between the judge and the beneficiary. The inheritance received by the minors is kept at the court's treasury until they reach the legal age.

The guardian still does not have access to the inheritance directly and any withdrawal of money or disbursement of assets is supervised by the courts.

In case an expatriate beneficiary is a minor, the courts provide controlled options for the families which decide to return to their home countries.

Ali Al Dhabahi explained a trust fund must be set up in the home country for the minor beneficiary before the courts allow funds to be transferred. The home country's laws then are applied to manage the trust.

People with assets in other emirates or other countries can apply for inheritance division to be done either in Dubai or where the assets are located.

Al Dhabahi said if a person is a resident in the emirate, working here or owns a property here, he may apply for the procedures to be done in Dubai.

In the case of overseas assets, the UAE courts would have jurisdiction over the distribution of these assets through coordination with the legal authorities of the other country via the Ministry of Foreign Affairs.

Sharia and Conventional Wills

Residents can register Sharia or conventional wills in Dubai. Marria of Just Wills, an Awqaf-certified wills executor in Dubai, said Sharia wills oblige every Muslim to have one as dictated by the Prophet Mohammad's (PBUH) Hadith.

Marria said Sharia wills follow predefined dispositions of the estate. Sharia also allows up to one-third of the total estate to be given as a gift to a charity. A Sharia will also clearly states the executor of the will and guardian of minors or dependents.

But despite the clarity of Sharia wills, Marria said a majority in Dubai favour conventional wills.

"In the past nine months, I have produced six Sharia wills, against seven to eight conventional wills per week," said Marria.

"People opt for the conventional wills due to their lack of knowledge about the Sharia," he added.

Cost

The cost of preparing a will in Dubai can vary between Dh2,000 and Dh3,000. The costs of the transactions at the Dubai Courts add up to Dh220 for the estate division - this includes conflict resolution by court-appointed mediators, experts and judges.

Where there is no will

Here are steps in dividing an estate under Sharia, according to Judge Ali Al Dhabahi, Sharia Court Judge and Head of the Legacy Advancement Committee at Dubai Courts.

1. Registration of inheritance notice. The notice includes the assets of the deceased, and names of the beneficiaries.

2. To register the notice, documents needed include the death certificate, passport copies of the next-of-kin and beneficiaries, a notarised document stating the parents' names and identifications and the presence of two witnesses. The court accepts inheritance notice only from the next-of-kin or whoever holds a power of attorney. Power of attorney notices provided by the deceased prior to his demise become invalid upon death.

3. The only acceptable power of attorney notice would be the one from the legally appointed heirs.

4. The inheritance notice is needed to open a legacy file, where the courts address all the related institutions like the banks and property departments, and transfers all movable assets to the courts' treasury before the execution of the division.

5. The court clears debts accumulated by the deceased before dividing the estate.

Unfreezing accounts

Jasem Al Sharouqi, personal banking officer at Abu Dhabi Islamic Bank, said a deceased client's accounts are kept active until a notice is received from the Ministry of Health (in the case of natural death), or the Ministry of Interior (in the case of death under suspicious circumstances) and the courts' in addition to a death certificate.

Then the deceased's accounts are frozen until further notice is received from the courts. The accounts can only be opened by a court order allowing the heirs to withdraw money or a representative with a power of attorney from the heirs after the deceased person's debts are paid.

In the case of joint accounts, the court contacts the involved parties and reviews the percentage of shares of the deceased before unfreezing the account.

If the person has a partnership in a company the account remains closed and inaccessible by any partner until the deceased is severed from the trade licence and any partnership contract.

Online resources

Al Dhabahi said plans are afoot to roll out an online registration system to create more efficient transactions at the courts with regards to inheritance and estate disbursements.

Publish date: 03/05/08 15:41
Source: www.xpress4me.com

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Home is where the cash is

Succession planning for investors is so important, especially after expanding one's asset base by investing in property. All financial and legal advisors in the region suggest that their expatriate clients draft and validate a will. This is to assure that their assets are distributed as per their wishes. If they don't make a will, the law will say who gets what when they die.

Creating a will can also help to mitigate taxes if the instrument is planned and structured accordingly. This is especially important for UK citizens who are making several investments in the local property market, due to the steep inheritance taxes levied on their worldwide assets when they eventually die.

If an estate passes to the husband, wife of civil partner of the deceased and both spouses are domiciled in the UK there is no inheritance tax to pay.

Getting a professionally drafted will not only brings one peace of mind, but it may also significantly lower one's tax base. Many property investors do not know this.

After creating a will, investors should also periodically update it to reflect changes and any new investments they have made. An amendment to a will is called a codicil, and this must be signed and validated with the same formalities.

Anyone signing a will in the UAE needs to have it legalised by the Ministry of Foreign Affairs. Thereafter, the document has to be translated into Arabic and legalised by the UAE Ministry of Justice and then taken to the UAE Courts for confirmation. These steps are usually undertaken by a professional advisor, and it may also be helpful to have a professional conduct the entire process for you.

According to Mohammad D. Marria of Just Wills, the United Kingdom's largest will-writing company, "It is important for all UAE residents to keep a list of every asset, investment and bank account that they have made here. This is very helpful in case something happens to you."

"Admittedly, the process of validating one's will in the UAE is cumbersome and complex in the first place, and if someone wants to update their will again with new assets later, they will have to start the whole process all over again," says Marria.

Nevertheless, he stresses how important it is to do so.

If an expatriate residing in the UAE dies without having a will (called dying intestate), the family will have to go to a UAE court in order to get the entire estate disposed to the heirs. The judges will determine the heirs and their respective shares by referring to Islamic Sharia law, which is the law of the UAE for matters of inheritance and succession.

In order to have the estate processed, the heirs would be required to get a full family record from the relevant registrar in their home country. This document, which identifies the family descendents, must be legalised and attested by the UAE embassy in the home country. In the process, all direct descendents of the deceased must be notified by the heirs about the death, and this must be done by a registered process.

UK Inheritance Tax

In the UK, when someone dies his heirs are required to pay 40% of the value of the inherited estate, with the first US$592,700 (in the 2007-2008 tax year) exempt. This is what is referred to as the Nil Rate Band.

Many Britons living in the UAE would like to see the Nil Rate Band increased significantly. Some feel that inheritance tax is unfair, and that it amounts to a second line of taxation, since the person who died would already have paid tax on the income which was used to build up the value of the estate in the first place.

According to Mark Nierada, a solicitor and the head of private client services at James Berry & Associates Legal Consultants in Dubai, "The Nil Rate Band has been rising steadily but has failed to keep pace with property inflation. What started out as a tax on the wealthy now affects most property owners in the UK given the rise in property values."

The Labour government have confirmed the tax exempt slice will rise over the next two tax years to US$642,000 (probably estimated to be US$622,200 next tax year and US$642,000 the year after that).

Whereas this is welcome, it remains at best a limited relief for most tax payers and they need to exercise ingenuity to make the most of the available reliefs," says Nierada.

Not everyone pays inheritance tax on death. It only applies if the taxable value of one's assets worldwide at the time of death is above US$592,700, and is only payable on the excess above this threshold. Anything above US$592,700 is charged tax at the rate of 40%.

There are also a number of exemptions which allow tax payers to pass on amounts (during their lifetime or in their will) without any inheritance tax being due.

If an estate passes to the husband, wife or civil partner of the deceased and both spouses are domiciled in the UK there is no inheritance tax to pay even if it's above the US$592,700 threshold.

In addition, most gifts made more than seven years before one's death are exempt as well as certain other gifts, such as wedding gifts and gifts in anticipation of a civil partnership up to US$9,877 (depending on the relationship between the giver and the recipient).

Any gifts one makes to a charity are also exempt.

Tax payers can make small gifts, up to the value of US$494, to as many people as they would like to in any one tax year (6 April to the following 5 April) without being liable for inheritance tax. But one can't give a larger sum: US$988, for example, and claim exemption for the first US$494. Neither is it allowable to use this exemption with any other exemption when giving to the same person.

In other words, it is not possible for a tax payer to combine a 'small gifts exemption' with a 'wedding/civil partnership ceremony gift exemption' and give one of their children US$10,370 when they get married or form a civil partnership.

US$5,900 can be given away in each tax year without paying inheritance tax. One can carry forward all or any part of the US$5,900 exemption that isn't used to the next year but no further. This means one could give away up to US$11,850 in any one year if the exemption from the year before hadn't been used.

It is not possible to use an 'annual exemption' and a 'small gifts exemption' together to give someone US$6,420. But it is possible to use an 'annual exemption' with any other exemption, such as the 'wedding/civil partnership ceremony gift exemption'. So, if one child marries or forms a civil partnership one can give them US$9,877 under the wedding/civil partnership gift exemption and US$5,900 under the annual exemption - a total of US$15,800.

Inheritance tax planning

Married couples and civil partners in the UK who have not undertaken inheritance tax planning are reliant upon a default process, which comes into effect upon the first death of a spouse. On first death, the assets automatically pass to a surviving spouse free of tax.

However, this misses the opportunity to use the inheritance tax allowance of the deceased first spouse. On death of the remaining spouse, the combined estate can then only be reduced by the second spouse's single tax-free allowance (Nil-Rate Band).

This can leave children or other beneficiaries with a potentially large inheritance tax bill to deal with.

Discretionary Will Trusts

An 'Discretionary Will Trust is one way that couples can mitigate or even completely eradicate an inheritance UK inheritance tax liability by taking maximum advantage of the tax-free allowances available to both of them.

According to Mohammad Marria of Just Wills, "A Discretionary Will Trust is a sensible, straightforward and a cost-effective scheme that is fully compliant in the eyes of the Capital Taxes Office (CTO)."

"When we draft your wills for you, we insert specific provisions into them to establish a Discretionary Trust when the first death occurs."

For example, in order to make the Discretionary Will Trust provisions in the wills effective for an estate including real estate, the ownership of the house must be changed to/from 'Joint Tenants' to 'Tenants in Common'.

The Discretionary Will Trust is designed to accept assets up to the value of the personal tax-free allowance when the first spouse dies. Currently, this stands at US$592,700 for the tax year of 2007/8.

However, rather than needing to pass cash into the trust, and by doing so having to sell assets to realise the funds, the trustees are given powers to accept a Loan Note (an 'IOU') from the surviving spouse. This 'IOU' is held by the trustees until the death of the second spouse when it is called-in as a debt on the estate.

In effect this means that, rather than lose out on one of the valuable tax-free allowances, the couple have been able to ensure that both allowances are used.

"Discretionary Trusts work because the UK Finance Act gives a spouse the right to pass his or her entire estate to the surviving spouse inheritance tax free if that spouse is UK domiciled," said Mark Nierada, a solicitor and head of private client services at James Berry & Associates Legal Consultants in Dubai.

"We advise our UAE clients that there is a cap of US$701,000 if the surviving spouse is UK non-domiciled. This is a blessing and a curse - no inheritance tax on first death, but on the second spouse's death his or her estate pays 40% inheritance tax on non-exempt assets valued in excess of US$592,700."

"All this is not necessary if you want or can afford to make gifts of US$592,700 on first death. Not many can do this as the wealth may be tied up in the matrimonial home, or it is recognised that the needs of the surviving spouse must take precedence."

"That is why setting up a Discretionary Trust is so important, to utilise this additional allowance," says Nierada.

Under the provisions of the will, the surviving spouse has full use of original assets such as the house during the remainder of their lifetime. Upon second death, the loan to the trust is repaid from the estate of the surviving spouse which passes tax-free to the trust beneficiaries (usually the children and grandchildren). The Nil-Rate Band allowance of the second spouse is applied to the remainder, and thus both tax-free exemptions have been used.

Nierada concludes, "For most people with a potential inheritance tax liability the Discretionary Will Trust is an essential tax planning tool. It is comparatively cheap to establish and 100% effective. Everyone should have one - a no brainer."

Publish date: 03/05/08 15:11
Source: Arabianbusiness.com Martin Saldamando on Sunday, 03 June 2007

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Where theres a will theres a way

The National Consumer Council has announced the startling results of its research.

This reveals that over 27 million people in England and Wales do not have a will and, more worryingly, that those who need one the most are the least likely to have one.

If you do not leave a valid will, there are statutory rules under the law of England and Wales (called the "intestacy rules") that determine who gets what.

The intestacy rules are viewed by many in the legal profession as outdated and few are aware of their capricious effect (Scots law differs from the English rules, although it is similarly capricious).

Doing nothing

Many married couples or civil partners assume that if one of them dies, all their assets will automatically pass to the surviving spouse or partner.

However, that is not always the case. Automatic inheritance will occur only if the couple hold their assets in joint names. With the rise in house prices, often a couple's largest asset is the family home.

Unless it is owned by the couple jointly as "joint tenants" (a legal term which has no relevance to "tenancy" in the usual sense), the intestacy rules will apply, in the absence of a complete and valid will.

Unmarried couples who die without valid wills are even more at risk, as the surviving partner may be cut out entirely under the intestacy rules, as highlighted by the recent Law Commission Report on cohabitation (published on 31 July 2007).

If a husband/wife/civil partner dies leaving a surviving spouse and children, the intestacy rules state that the surviving spouse is entitled to:

• all the deceased spouse's personal chattels (paintings, cars, jewellery etc)
• a cash legacy of £125,000
• a "life interest" (i.e. the right to income only) from half of the residue of the estate - which might include the family home. Children and other relatives.

The children would receive half the residue outright at the age of 18 and the other half after the end of the spouse's life interest (i.e. on his or her death).

If there are no children, the intestacy rules state that the surviving spouse/civil partner is entitled (in addition to the personal chattels) to a cash legacy of £200,000 and half the residue outright.

The deceased spouse's parents (or if none, brothers and sisters) are entitled to the other half of the residue outright.

In my experience of drafting wills, this is never what a married couple wants and unless the other beneficiaries are over the age of 18 and agree to vary the intestacy rules, there is little that can be done to alter them.

Legal challenge?

The only recourse for the surviving spouse/civil partner is to make a court application for financial provision under the Inheritance (Provision for Family and Dependants Act) 1975.

However, there is no guarantee of success and the court will look primarily at financial needs - the wishes of the deceased (no matter how well evidenced) are not given much weight.

Even worse, an unmarried partner would receive nothing under the intestacy rules and unless the beneficiaries of the estate agree to vary these rules, a court application is the only recourse.

This often results in a heavy financial and emotional toll on the family.

Inheritance tax

In addition to ensuring that your wishes are fulfilled, a properly drafted will can also contain useful provisions for mitigating inheritance tax, particularly for married couples and civil partners.

Changes to inheritance tax have affected not only the rich

This has become even more important following the changes introduced by the government in the Finance Act 2006.

These changes to inheritance tax have affected not only the rich who leave assets in trust for their families during their lifetime, but also those who wish to leave assets in trust for young children under their wills.

The moral of the story is to make sure you make a valid will, prepared by a suitably qualified lawyer, and keep it under regular review as your circumstances change.

Do it yourself?

"DIY" wills are to be avoided, as they can (through ambiguous language or poor drafting) cause more problems than they solve.

It is particularly important to review your will in the following circumstances:

• if you get married or enter into a civil partnership, as this will revokes an earlier will - unless it is expressly made in contemplation of your marriage/partnership and certain requirements are met
• if you separate, as this would not automatically revoke your will
• on divorce
• when you have children
• when your financial circumstances change
• periodically, to make sure your will keeps pace with any changes in the law.

It is also important to choose sensible executors - the people you wish to administer your estate and to give effect to your wishes.

Do let them know where you keep your will. Once you have gone to the trouble of making a careful, valid will, it would be a pity for it to be forgotten or lost!

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

Publish date: 10/02/08 11:24
Source: bbc.co.uk

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Making a Wills and registering it in Dubai

A will is a legal document declaring a person's wish about how his or her money and property are to be distributed after his or her death.

As the UAE is a Muslim country, all courts adhere to the Sharia in regard to inheritance for Muslim expatriates and Emiratis.

But despite the fact that UAE courts only accept transactions related to marriage, divorce and other issues only from Muslims of any nationality, they also accept Wills from expatriates of any religion or nationality as people belonging to Muslim, Christian, Hindu, Buddhist and Sikh faiths reside in UAE.

Expatriate Muslims and non-Muslims who are on a visit visa cannot make a will here, and in case they die here the law of the country will not be implemented in their case.

Property

Expatriates with valid residency visa can make a will and get it registered and legalised at the courts.

The will must be legally approved and attested by the authority from the person's home country, before it can be authorised here as genuine and legal.

If the will gets authorised by the expatriate's home country authorities, then the wishes of the person can be followed regarding disposal of money and property.

But according to UAE Federal Law No. 2 of 1987, Article 17(5) on disposal of property: "The law of the UAE shall apply to wills made by aliens disposing off their property located in the UAE."

The UAE has allowed foreign ownership of land in some areas in Dubai and in some other emirates, but no new law has been issued as to whether Sharia would apply to property owned by non-Muslims.

Expatriates who own property in the UAE should write a Will, have it translated into Arabic and notarised at their embassy or consulate, so as to make sure the property is passed on or distributed as one wishes.

If a person dies 'intestate', which means the person dies without making a will, 'inheritance shall be governed by the law of the country of the deceased at the time of death.' This is according to the UAE Civil Code, Federal Law No.2 of 198, Article 17/1. This law was promulgated to stem confusion surrounding inheritance issues for expatriates.

In the event that the deceased left no Will and he was a Muslim, Sharia would apply and any debt would be first paid prior to any other disbursement of property.

Procedure: Documents needed

Expatriates of any nationality or religion can make a Will at the courts here. You need to have a valid residency visa. The person making the will needs to visit the court. The presence of two Muslim men as witnesses with him or her to attest the application of the will is also important. This is even if the applicant is not a Muslim. Original copies of the ID of the applicant and witnesses have to be submitted. Payment of Dh60 fees for application. You need to appear before a judge with your witnesses for an examination of the will application. The applicant needs to submit documents which should be authorised by his or her country, regarding the terms of the will. You will later return to court to receive the certificate after submitting all the information. But if you wish to cancel the will, you will have to return to court with the witnesses and pay a Dh60 fee and submit all needed documents to get the will annulled.

Publish date: 01/02/08 15:58
Source:

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