What is a gift transfer and what should I know about it?
A gift transfer (also known as “a grant transfer”, or “a Hiba transfer”) is a voluntary transfer of a property, or part of a property, from an individual to another individual, from an individual to a company, or from a company to an individual. It is important to underline at this stage that an off-plan unit cannot be gifted. The individual, or the company, that grants/gifts the property is referred to as “a donor” while the individual, or the company, in receipt of the property is referred to as “a donee”. The main difference from a sale-and-purchase transaction is that there is no requirement of consideration (i.e. payment or compensation) for a property in a gift transfer, that is the property can be transferred from a donor to a donee on an absolutely gratuitous basis and that the Dubai Land Department (DLD) charges significantly less fees in case of a gift transfer.
However, the above arrangement does not mean that an owner of a Dubai property can gift it to any given individual. In fact, you can only gift your property, or share of it, to a “first degree relative”. Under the local legislation, the definition of “first degree relative” comprises relationships between parents and children, and between husband and wife. It is worth noting that relationships between siblings, and between stepchildren and stepparents, do not qualify as “first degree relatives” for the purposes of a gift transfer in Dubai. In other words, you would be able to gift your property only to your parents, spouse, or your children, while you would not be able to grant your property to your siblings, stepparents, stepchildren or any other relatives.
Up until recently, one way of circumventing the “first degree relative” rule and transferring a property from one sibling to another was to carry out a “double gift transfer” of the property. So, let’s assume that Adam owned a studio in Business Bay and wanted to gift it to his sister, Meghan. Obviously, as explained above, Adam and Meghan – even though a brother and a sister – would not be considered as “first degree relatives” within remits of the Dubai law. In order to overcome this hurdle, Adam could first transfer the studio to his mother, Susanna, who would then, in turn, pass it over to Meghan. However, the Dubai Land Department recently put a lid on such arrangements in order to prevent possible misuse. In accordance with a Directive introduced in November 2016, the Dubai Land Department are unlikely to authorize more than one gift transfer on any property in the Emirate. This means that if a property has been gifted once previously, it cannot be gifted again and the next change of ownership transaction on that property will likely be a sale-and-purchase transfer.
What documents will I need?
The required documents for property gifting in Dubai vary depending on whom you are going to grant your property to and the type of the property.
Primarily, you need to have the original title deed to prove that the property in question does indeed belong to you. Bear in mind that an off-plan units cannot be gifted.
Moreover, you will need to provide the authorities with a proof of “first degree relationship” between the donor and the beneficiary of the property. In a child-parent relationship, this can be a birth certificate. In a husband-wife relationship, it is required to provide a marriage certificate and in some cases the letter from the Dubai Courts which confirms that the pair are still in spouse relationship. It is important to note that any birth certificate and/or marriage certificate issued outside of the UAE has to be duly legalized and translated.
If the donor and or the beneficiary is a company or a legal entity, constitutional documents of such company or companies would also be required to establish the ultimate owners and the first degree relationship.
During the process, various approvals and content letters would be required from a developer, facilities management company and concerned authorities depending on the property being gifted and the type of property gifting.
How much will it cost?
The total price for the whole process will depend on the type, value and specific features of the property. Nevertheless, comparing to the sale-and-purchase transfer fees, the property gifting carries a far lesser transfer fee paid to the Dubai Land Department. Where as in the sale-and-purchase transfer it is required to pay to the Dubai Land Department 4% of the property sale price, whereas in the gift transfer you are only required to pay 0.125% of the current official value of the property, or it share, being gifted. In addition, you will also incur some other costs for property registration and issuance of the new title deed. Please contact us to get the full list of costs for your property gifting.
Why to gift?
Gift transfers are very popular in Dubai for inheritance and succession planning purposes. It gives you a full liberty to transfer your property to your loved ones as per your wishes during your life time. Otherwise, after your life-time, all your assets including real estate, will be divided between the legal heirs by the court in accordance with the applicable laws. Unless there is a Will in place for non-Muslims, the court can distribute your assets between extended family members, which may not necessarily be as per your wishes.
It is worth noting that although it may seem not a complicated transaction, the gift transfer can be rather lengthy and could take up to 6 weeks to complete it. So, in the event that the donor and/or the beneficiary are not able to attend the necessary formalities to complete the gift transfer, it is advisable to hire an expert in this filed to handle the whole process on your behalf.
Disclaimer: The content on this page is for general information purposes only and does not constitute as legal advice nor should it be used as a basis for any specific action or decision. Nothing on this page is to be considered as creating a lawyer-client relationship or as rendering of legal advice for any specific matter. Users of this website are advised to seek specific legal advice from their own legal counsel regarding any specific legal issues.