Real Estate brokers in Dubai, Legal reference governing the work

Real Estate brokers in Dubai, Legal reference governing the work by Al Zahmy

Perhaps it goes without saying that it is rare to conduct a sale or purchase of a property without a real estate broker, as following-up requirements of investors and meeting their wishes in highly competitive a feverish market needs a full devotion. Only full time real estate brokers shall be able to secure such services. Therefore, the traditional image of the broker as the only person who mediates between the seller and the buyer is no longer valid. Real estate brokerage process now occupies an important sector in which major companies with specialized offices that hire dozens or hundreds of employees, have an integrated archive managed according to the latest accounting and information systems, have a network of relationships to facilitate the search process, display and communication between the parties to the real estate investment process (the investor, the developer, and Land and Property Department) are competing. The legislator in the Emirate of Dubai is coping with these developments and created the legal framework governing it.

It is worth mentioning that the real estate brokerage business before 2006 was organized by the provisions of the Federal Commercial Transactions Law No. (8) of 1984 under Brokerage Contract Chapter. Such provisions are still the reference in cases not stipulated by private law. After 2006, the executive regulation No. 85 of 2006 on the organization of real estate brokers register in the Emirate of Dubai was issued to govern Law No. 7 of 2006 regarding real estate registration in the Emirate of Dubai, and organize a special register for licensed real estate brokers. The executive regulation has done well when prevented non- licensed brokers from conducting any real estate brokerage process (Article 3 the Executive of Regulation). Thus, such vital sector has become subject to the control of government, which increase level of confidence required in this sector.

This article shall handle the most important duties and rights outlined in the Executive Regulations of the real estate brokers register in Dubai

Below are the most important duties and obligations of the broker (Articles (14 to 25):

I. General obligations of the broker (Supervisory entity: The department of property and land)

  1. Commitment to the ethics of the profession (Article 14)
  2. Commitment to the maintenance of a special register of all transactions held by him (Article 15)
  3. The broker’s commitment to maintain documents related to sales (Article 15)
  4. The broker’s commitment to submit all information and documents requested from him (Article 16)
  5. The broker’s commitment, in case of selling on map, to keep a copy thereof (Article 15)
  6. The broker’s commitment not to mediate in a transaction in contradiction with law or regulations in force in the Emirate of Dubai deal (Article 18)

II: The broker’s commitments towards the parties of the transaction:

  1. The broker’s commitment to deliver a carbon copy of the sale documents to contract parties when so requested by any (Article 15)
  2. The broker’s commitment to inform his client of all details of the negotiations, the stages of mediation and any other necessary information (Article 17)
  3. The broker’s commitment to inform the other party of all material matters relating to the agreement and which are necessary to deny ignorance, and to inform the two parties of all the circumstances he knows and be responsible before them for any fraud or mistake on his side (Article 17) and Article (19)
  4. The broker shall be liable for any loss or damage incurred by any of the parties as a result of his work through fraud, deception, without taking into account the norms to be followed or violation of the requirements of the code of conduct (Article 22)
  5. The broker shall not be entitled to claim commission or to be reimbursed the expenses incurred (if he works for the benefit of the other contracting party in violation of its commitments to his representative, or if he accepts from the other party a promise to obtain a benefit, in circumstances in which the rules of good faith and the code of honor prevent accepting such promise) (Article 23) and this article shall be deemed an application a code of honor.
  6. If he authorized many brokers to be jointly liable for its work, unless permits them to work individually, (Article 24)
  7. If he authorizes many people to work as one broker in a joint action, so as to be jointly liable for the implementation of this authorization, unless otherwise agreed, (Article 25)
  8. The broker’s commitment to be honest with regard to any payments, securities or other things given to him by any of the parties to keep or to deliver to one of the parties, and must execute or deliver according to what is agreed upon and the rules of the Secretariat shall apply to the broker with regard to these matters.This article is important as it relates to the provisions, particularly Article 404 of the Penal Code No. 3 of 1987, which reads: ((Anybody who embezzles or squanders funds, bonds or any other movable money, in a way that causes harm to the rightful owner, when it was handed to him as a deposit, lease, mortgage, borrow, use or agency, shall be punished by imprisonment, fine or both.
  9. The broker’s commitment not to establish himself as a party to the contract made through it (as he may not be an agent) even if authorized by a contract party, and the penalty resulting from the conclusion of the contract itself shall be depriving him of the commission in spite of being authorized by the party directed him to conclude the brokerage contract (Article 20)This article should be read deliberately and should draw the attention of every real estate broker, as it is among the guarantees granted by the Regulation to the investor, it denies the real estate broker’s right to commission when violating his duties, and prevents the broker to conclude a contract as a party to the contract.As the real estate broker in this case shall not be entitled to any commission, and the clear purpose of the text is a confirmation of restriction being adopted by the legislature in commercial transactions Act, which deprived the broker of taxi brokering whilst being a party to the contract in accordance with the provisions of Article (263) of the Federal Commercial Transactions Law.

Broker Wage

Included in the provisions of articles (26 up to 33), which include the provisions determining the rights and wages of real estate broker set out in the Federal Commercial Transactions Law, the most important of which are:

  1. For the broker to be entitled to his commission the contract should be in writing, registered and indicates the conditions and the contract shall be referred to in the real estate register (Article 26)
  2. The broker’s wage shall be determined through agreement, otherwise the norms shall be prevailed (Article 27)
  3. The broker shall not be entitled to his brokerage fees unless it led to the conclusion of a contract between the two parties, such entitlement shall be based on the conclusion of the contract of sale and registration thereof in the department, unless otherwise provided in the agreement. In case the sale contract is suspended on an agreed upon condition, the real estate broker shall only be entitled to the contract when the condition is achieved (Article 28)
  4. In case the brokerage contract is terminated, the broker may claim his fees in accordance with the agreement, unless fraud or fatal mistake is proved (Article 29)
  5. If the broker’s instructions or negotiations did not lead to agreement of the parties, he shall not be entitled to any compensation, expenses or costs incurred, unless the Brokerage contract stipulates otherwise (Article 30)
  6. If more than one broker is involved in mediation or negotiation for one party, they all share as if one broker and payment shall be divided in accordance with the terms of the contract (Article 31)
  7. If a party contracted with many brokers independently on one subject, and one of them succeeded to complete the process, he shall be entitled to full payment apart from others (Article 32)
  8. The broker shall be entitled to fees from the party that authorized him, and if both parties were separately liable for the payment of wages owed to him even if those two parties have agreed – with each other – that one party shall bears the full payment, because their agreement is not an argument as it is from a third party (Adapted from article 33)
  9. Governed by the provisions of articles (34 up to 41) and confined to two parties:

I. The quartet committee formed by the Chairman of Dubai department of territory

(In case of previous or subsequent amicable agreement to resolve the dispute through the committee) in accordance with the provisions of Articles 34 and onwards of the above mentioned Regulations.

II. Dubai Commercial Court of first instance

If there is no such agreement (the previous or subsequent amicable agreement to resolve the dispute by the committee formed at Property and Land Department in Dubai) the exclusive jurisdiction of the Commercial Court of First Instance at Dubai Courts, that has general authority to address the issue in the light of evidence presented, shall remain.

It is clear by reviewing the provisions of the Regulations that it is considered a complement to the will of the legislature in order to achieve a balance between the interests of parties to the contract, and therefore it has obliged the real estate broker to offer sale neutrally and objectively, to submit an honest offer of all the main sale-related details and not to commit any fraud or fraud so as to be entitled to the commission.

It is important to refer to the details of the contract between the client and the broker to decide on the entitlement of the broker to his wage, find out whether it includes special conditions, which is a subjective matter to be reached through the contract, the evidence considered proof, such as correspondences exchanged between the parties.

We wish our answers has contributed in explaining the legal concepts.

Yaser Maktafi
Legal Counsel
Advocates & Legal Consultants, Al Zahmy