Welcome to the first issue of 2011 of our legal bulletin that is published on a regular basis and circulated to all of our clients. Its primary purpose is to inform the reader of any developments and changes to Federal and Local Laws in an easily digestible format. Additionally, we will also cover broader topics that may be of interest to our clients; and we would welcome feedback on any particular subject that a client would like addressed.In the meantime please feel free to send us an email with any legal questions that you may have and we will endeavour to incorporate these with an answer in the next issue.
Anthony Floyd LLB
Hayley Howard LLM
IN THE NEWS
It was reported in the local press last week (Emirates 24/7) that companies which haveon their payroll more than 100 individuals, must also employ a UAE national to act as its representative when dealing with issues at the Ministry of Labour. According to Mr Humaid bin Deemas, the executive secretary of the Ministry, the UAE national fulfilling this role must be a bona fide member of staff of the organisation. It would not be acceptable to appoint a UAE national merely as a temporary measure to satisfy the requirement and investigations may be made to ensure that the post is a genuine one. Should these investigations determine that the UAE national purporting to be the official representative is not on the company payroll, a fine of 20,000 dhs and 100 black points may be applied.
Recruitment Agencies Reserved for UAE Nationals
The Ministry of Labour last week issued a new set of laws governing the licensing andregulation of private employment agencies. From the date of publication of the newordinance, only UAE nationals may set up recruitment agencies and participate as partners in such businesses. The new rules break down recruitment agenciesinto two categories, the first being mediators whose role is to introduce prospectiveemployees to employers; and the second being the suppliers of temporary labour.As a prequalification to carrying out these activities, a bank guarantee amounting to1,000,000 dhs needs to be presented by those agencies supplying temporary staff; and one for 300,000 dhs for agencies that practice mediation. Additionally, agencies will no longer be able to continue the controversial practice of requesting payment in the form of fees or commissions from individuals as consideration for arranging employment. This charge was also often imposed upon workers outside the country by recruiters affiliated to the UAE agency. If this has occurred, these payments must be reimbursed.According to the Ministry of Labour, these changes have been introduced to bring theUAE’s employment record up to the level expected by the International Labour Organisation. It is hoped that greater transparency will also prevail which will gosome way to dispelling some of the negative press stories that have been circulating in the international media.
Rent Cap Decree
The Dubai government issued on 10th January 2011 a decree that extends, and to a certain degree clarifies, the implementation of the “rent cap”. Previously a landlord was entitled to raise the rent up to a maximum of seven per cent for those properties where the existing rental was considered to be more than 25% below the average price index for that area as determined by RERA. This calculation was considered by many to be rather a simplistic approach as it made no differentiation for example between a property that just fell in the 25% bracket and one that was 50% undervalued. This latestdecree seeks to remedy this anomaly. Henceforth those rents that are undervalued bybetween 26%-30% below the RERA index may be raised by up to 5% of the rent value.For properties between 36%-45% below average rent the increase may be up to 10%For properties in the 46%-55% below bracket the increase can be 15% finally a maximum increase of 20% can be applied if the rent is 56% below the market rate. The effect of this over time should harmonise any major rent discrepancies. It must be stressed that these increases are not of course mandatory. Given however, the currentoversupply of property in the market, falling rents and the disconnect between the RERA index and rents achieved, it is fair to say that the cap carries less weight then it did.
Changes in the Registration of Property in the Name of a Foreign Corporate Entity
The Dubai Land Department (DLD) has recently issued guidelines, published on its website, which seek to clarify and explain its position on the registration of property in the name of offshore companies. In the latter part of last year the DLD stoppedaccepting title registration of properties that were owned by foreign offshore companies,pending a review of the procedures involved. This review has now taken place and theGuidelines for registration came into force on the 1st January 2011.The good news is that the DLD have now started to accept company owned propertyregistrations but there is a caveat to this. It has been confirmed that only those corporate entities owning property that are offshore companies registered in the Jebel Ali Free Zone (JAFZA) will be allowed to register their title. Individual shareholders, or a foreign offshore shareholder, for example a British Virgin Islands Company, may own such a company. In the latter case the DLD will ask for details of the individual shareholders who would normally be expected to produce a notarized and attested version of the share register to prove their ownership. Our understanding is that thiswill enable the DLD to monitor whether a transfer of ownership subsequently takes place by way of a share transfer which would be deemed as a property transfer and thus attract a transfer fee. This Guideline, while unambiguous on the surface, does raise a number of practical issues not least being the effect it has on those non-JAFZA Offshore Companies, for example those registered in Ras Al Khaimah and Sharjah Free Zones that may have purchased property. The best advice that can be given here is that provided registration on the main title register occurred prior to 1st January 2011 and the offshore entity holds the title deeds then the recent policy change will have no practical effect. For those non-JAFZA Offshore Companies that purchased property in the off-plan market and are registered in the off-plan interim property register known as Oqood, a different regime will apply. These companies on completion of the property that they own will have to transfer their title to a JAFZA registered offshore company inorder to obtain a title deed. Our understanding is that provided the owners of the existing offshore company and the new JAFZA Company are the same, and beneficialownership can be proved, a 2% transfer will not apply in these circumstances. There may however be an administration fee charged by the Developer, which should not exceed 5,000 dhs under DLD guidelines. What is not clear from these rules is the statusof freehold areas that fall outside those listed as JAFZA approved. It remains to be seen whether JAFZA will agree to issue its “No Objection Certificate” to such projects although common sense would indicate that some form of accommodation would have to be made here. We will update this bulletin as soon as we have more news.