The right of usufruct in UAE law

A detailed guide about Musataha Right in UAE law, how to apply, required documents, and imposed fees in our following article at Imtilak Global.

What is Musataha Right in Dubai?

Musataha can be defined as a right derived from ownership, granting its holder the right to use and own a specific area of land, for a known fee, for a specific purpose, and for a maximum period of 50 years.

By agreement between the investor and the landowner, the Musataha Right allows investors to invest in lands and establish various types of real estate projects on them, such as constructing residential and commercial buildings. In return, the investor, known as the "Musateh" under this agreement, must pay the land-granting party a share or portion of the profits generated from the projects to be established.

It is worth noting that Musataha Right is currently known worldwide as Freehold, where this right allows the investor to invest in land they do not own.

According to the official records of the UAE, Musataha Right is based on official laws and decrees signed by the Ruler of Dubai. It is mentioned in the UAE Civil Transactions Law No. 5 of 1985.

To regulate the granting of Musataha Right on commercial lands in the Emirate of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President of the State, issued Decree No. 23 of 2022, which regulates the use of commercial lands that the owner wishes to develop and establish real estate projects on.

The main objective of this decree is to encourage and stimulate investors to invest in Dubai, provide investment opportunities and financial returns for them in the real estate and commercial sector, and drive real estate investment forward, thus maintaining the UAE’s economic position globally.

According to the decree issued by the Ruler of Dubai, the duration of the Musataha Right must not exceed 35 years, and if agreed between the landowner and the investor, it can be extended to a maximum of 50 years, non-renewable.

Read also: How to Register Initial Usufruct Right in Dubai.

What is the difference between Musataha Right and Lease?

There are some fundamental differences that clarify the distinctions between Musataha Right and lease in Dubai, which can be explained as follows:

• The rights granted by a lease contract to tenants are limited to personal rights, whereas the rights stipulated in Musataha Right are real rights.
• The lessor grants the tenant only the right to benefit from the property without allowing its use for investment purposes, but under Musataha Right, the investor can benefit from the land and use it for investment purposes, such as establishing residential complexes, commercial or tourism buildings, and other forms of investment in Dubai.
• The duration granted by a lease contract is limited to a few years only, while the duration granted by Musataha Right to investors can reach up to 50 years.
• The Musataha contract allows the real estate development company or investor to share profits with the landowner instead of paying rent.
• The nature of the laws stipulated in the lease contract differs from those stipulated in the Musataha Decree; therefore, each contract has its own law and provisions in the state’s records to refer to when necessary. For example, Musataha Right is inheritable, and investment projects established on the land revert to the landowner after the Musataha contract ends, provided all necessary dues are paid to the investor.

Required Documents to Apply for Musataha Registration in Dubai

The required documents to apply for Musataha registration in Dubai vary depending on the submitting entity, which can be individuals or companies.

The documents required for individuals to apply for Musataha registration are as follows:

Electronic No Objection Certificate from the developer or construction company in Freehold areas (through Dubai REST App)

UAE ID for the investor or a valid passport copy for non-resident foreigners in the UAE

Legal Power of Attorney if there is a representative.

As for companies, the entity must be registered by submitting a company registration application if not previously registered.

Registration Procedures

All registration procedures for Musataha Right in Dubai can be completed in very easy steps, which can be explained as follows:

Go to the service center via the Dubai Land Department website or visit one of the service centers that offer Musataha registration, such as real estate registration trustee offices.

Submitting and Uploading Required Documents via the Digital Vault.

·        The responsible employee enters the transaction data into the system.

Pay the required fees to obtain Musataha Right.

Submit the application electronically.

Deliver the outputs via email.  

Fees

The Dubai Land Department has set the following fees for Musataha contracts:

1. Musataha registration: 1% of the Musataha contract value

2. Musataha contract amendment fee: 2% of the increase in the Musataha contract value

3. Resale of Musataha on vacant land: 1%, and on built-up land: 4% (of building value) + 1% (of Musataha value)

4. Musataha contract transfer: 1% of the Musataha contract value

5. Termination of Musataha contract: 1,000 AED

Can a Long-Term Lease Contract be Converted to a Musataha Contract?

By visiting one of the real estate service centers or the Land Department, a long-term lease contract can be converted to a Musataha contract in Dubai. However, the fees paid for converting a long-term lease to Musataha vary depending on the type of property, which can be summarized as follows:

If the property is industrial, the imposed fees are (1% of the contract value) + (rent value + VAT) + (400 + VAT)

If the property is not industrial, the fees are (2% of the contract value) + (rent value + VAT) + (400 + VAT)

If the client has outstanding payments, the fees are (1 or 2% of the contract value) + (rent amount + outstanding payments + VAT) + (400 + VAT)

For all real estate matters in Dubai, consult Imtilak Global

Imtilak Global provides you with various investment opportunities related to real estate development in Dubai, opening wide horizons for property ownership, and offering many real estate investment options in the best and most valuable areas in the city.

By leveraging all knowledge tools and expertise in Dubai’s real estate market, and being fully aware of all laws related to investment projects, our team at Imtilak Global provides you with free consultation services to learn all the details related to Musataha Right and real estate investment.

Edited by: Imtilak Global©