July 19th, 2023 Legal Updates

Regulatory Regime for Real Estate: Fostering Growth and Development

In recent years the real estate sector in the Kingdom of Saudi Arabia (“KSA” or “Kingdom”) has undergone reorganisation and now falls under the ambit of the Real Estate General Authority (“REGA”), which was established under Council of Ministers Resolution no (239) dated 25/04/1438H. (corresponding to 23/01/2017G.).

The Council of Ministers Resolution no (69) dated 23/01/1443H. (corresponding to 31/08/2021G.) granted REGA additional competency to establish a decentralised system for land registrations and transfers. Further, pursuant to the Royal Decree (RD) no (M/91) dated 19/09/1443H. (corresponding to 20/04/2023G.) amending the Realty in Kind Registration Law (“RKR Law”), we note that reference to the word “Competent Authority” in the law shall mean REGA. The changes to recorded information and any dealings after the registration will be detailed and recorded in the register. These dealings include transfers, variation of rights, long-term leases and mortgages, et cetera. However, Article 1 of the existing Registered Real Estate Mortgage Law provides two systems of registration that are acceptable:

  1. Registration of mortgages, the process of which is subject to the RKR Law; and
  2. The traditional way of registration through the Ministry of Justice (whether the relevant court or the notary public), which is given the clear and express power to certify estate ownership transfers and mortgages affecting real estate.

It is also worth noting that claims referred to in Article 16 of the RKR Law, which are being considered by the courts at the time of the entry into force of this law and the notations of which are not yet made, may not be continued until a notation thereof is made in the real estate register if the real estate subject of the dispute is located within an area that is designated as real estate registration area according to REGA’s announcement. For making such notation, the claimants shall be granted a grace period of 30 days from the date of announcement of owners’ list in such real estate area. If evidence of such notation is not produced at the first hearing after the expiration of the grace period, the case shall be dismissed.

According to the Royal Decree no (M/85) dated 02/07/1441H. (corresponding to 26/02/2020G.)  amending the Law of Real Estate Ownership of Units, Sorting and Management, REGA is the regulator and already issued the implementing regulations which reflects the universally well-known concept of strata ownership of buildings, that is, buildings are subdivided into individual units. Owners are jointly responsible for common property maintenance and repairs according to their shares.

We also note that according to the Council of Ministers Resolution no (849) dated 02/12/1444H (corresponding to 20/06/2023G) amending the regulations relating to the Sale or Lease of Off-Plan Real Property Units, the Ministry of Municipal, Rural Affairs, and Housing (“MoMRA”) has been replaced by REGA.

On 23/12/1444H. (corresponding to 11/07/2023G.), the Council of Ministers issued its resolution approving the New Real Estate Contribution Law (“NRECL”), which is set to revolutionize property ownership and investment in the Kingdom. REGA supervises the NRECL and contributes effectively to achieving the goals of Saudi Arabia’s Vision 2030. The new law shall seek to regulate real estate shareholding activity and raise transparency, protect the rights of all interested parties in the ownership, and create new funding sources for property development investors. The NRECL represents a significant step towards enhancing transparency, accountability, and buyer protection in the real estate market and provides a robust legal framework that ensures a fair and secure environment for all stakeholders involved in real estate transactions, ultimately contributing to the development and stability of Saudi Arabia’s real estate market.

Authors: Fadi Daher, Partner and Alain Elia.

For further information, please contact Fadi Daher (fadi.daher@glaco.com) and Amr Hammad (amr.hammad@glaco.com).