Transition of Al Reem Island Real Estate to ADGM: Key Updates for Property Owners and Banks

The ADGM Real Property Regulations 2024 introduces significant changes for property owners, apartment owners, banks, and financial institutions on Al Reem Island, impacting the registration of properties, leases, and ownership rights. 

A key milestone in this process was the transfer of the real estate register from the Abu Dhabi Municipality (ADM) to the ADGM Registration Authority (RA) on 1 January 2025. This transition follows Al Reem Island’s move under the jurisdiction of the Abu Dhabi Global Market (ADGM) in April 2023, signaling a new phase in property management with updated rules and procedures. 

This blog is a part of our ADGM’s Expansion to Al Reem Island: A Comprehensive Guide for Businesses.

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Below, we highlight the main provisions of these regulations and offer guidance on how stakeholders can adapt to these changes effectively. 

Key Provisions of the ADGM Real Property Regulations 2024 

Musataha and Usufruct Interests

• • All existing musataha and usufruct interests registered on the Abu Dhabi Real Property Register before 1 January 2025 will be re-registered as leases on the ADGM Register. 

• • Importantly, unless the parties choose to convert these arrangements into leases, the underlying contractual rights and obligations will remain unaffected by the registration process. 

Our Perspective
This provision ensures that the transition to the ADGM framework does not alter existing agreements unless explicitly chosen by the parties. Property owners and tenants should review their contracts and determine whether a conversion to a lease format under the ADGM framework might be more beneficial for their long-term interests. 

Ownership Interests

• • All ownership interests registered before 1 January 2025 will be transferred to the ADGM Register. 

• • For properties held by multiple owners, the default registration will be as tenants in common, unless otherwise agreed by the owners. 

Our Perspective
Owners should ensure their records and agreements are in order, to avoid disputes during the registration process. Additionally, co-owners may wish to review their ownership structures to ensure alignment with their intentions. 

Government-Granted Land

• • For government-gifted properties, the Registrar may impose restrictions to ensure compliance with the requirements of the Abu Dhabi government. 

• • These restrictions could affect leasing, mortgaging, or disposal of the property. 

Our Perspective
Owners of government-granted land should consult legal advisors to fully understand these restrictions and how they may impact their property dealings. Financial institutions must also be aware of these provisions when assessing mortgage or financing options. 

Existing Leases

• • All existing leases will be re-registered under the ADGM framework. 

• • If a leaseholder has only management rights (e.g., under a power of attorney or management agreement), the reversionary interest will be registered to the actual property owner or superior leaseholder. 

• • Claims between lessors and lessees prior to registration will remain enforceable, but future renewals must comply with ADGM regulations. 

Our Perspective
This ensures clarity in ownership and leasehold rights while safeguarding pre-existing claims. Leaseholders and lessors should ensure their documentation is updated and aligned with the new regulatory requirements. 

Corrections and Priority of Registration

• Owners or interested parties can apply for corrections to the Register within six months of registration if errors are identified. 

• Priority of registered instruments will be based on the original date of registration on the Abu Dhabi Real Property Register. 

Our Perspective
This six-month window is critical for correcting any discrepancies. Property owners should proactively review their registration details to avoid future complications. 

For banks and financial institutions 

1. 1. Compliance Requirements: Banks with properties mortgaged on Al Reem Island need to ensure that the property owners (borrowers) take the necessary steps to comply with the new regulations by 1 January 2025. This includes submitting the required applications and documents to the ADGM Registrar. For banks, this means staying informed about the transition process and possibly assisting their clients to ensure compliance. 
   2. Registration of Mortgaged Properties: Mortgaged properties will need to be registered with the ADGM Registration Authority starting from 1 January 2025. This could impact the way the bank’s security interests are documented and protected. Banks will need to ensure that their mortgages are properly recorded in the new system to avoid any legal complications or issues with the priority of their claim. 
   3. Impact on Leases and Property Management: For properties subject to a mortgage, if they have existing leases (especially long-term leases) or are under property management agreements, the bank may need to be aware of how these leases are affected by the new regulations. For example, if a property is leased, the bank must ensure that the lessor’s rights are properly reflected in the ADGM Register. 
   4. Short-term Residential Leases: If the mortgaged property has any short-term residential leases that are in place before the transition date, banks should be aware that such leases do not need to be altered until renewal. However, after the lease is renewed post-transition, it must comply with the new regulations. 

For banks and financial institutions, this transition offers a chance to ensure that their interests are properly safeguarded within the new framework while also advising clients on steps they may need to take to maintain their legal and financial rights. 

Steps to Prepare for the Transition 

1. 1. Review Your Documentation:
      Ensure all property and lease documents are complete, accurate, and ready for submission to the ADGM Registrar. 
   2. Understand Your Rights and Obligations:
      Familiarize yourself with the new regulations and assess their impact on your ownership, leasing, or financing arrangements. 
   3. Seek Professional Advice:
      Consult legal and financial experts to navigate the transition smoothly and address any uncertainties. 
   4. Communicate with Stakeholders:
      Property owners, banks, and financial institutions should work closely to align their records and prepare for the new registration framework. 

The transition of Al Reem Island’s real estate register to the ADGM framework represents a significant shift in the regulatory landscape. While the new framework ensures greater transparency and alignment with international best practices, it also requires stakeholders to adapt to new requirements. 

For further information or assistance, feel free to contact us. Together, we can ensure a seamless transition and safeguard your interests in this evolving real estate environment. 

This article is for informational purposes only and does not constitute legal advice.