An Overview of Real Property Interests Under the ADGM Real Property Regulations 2024

The Abu Dhabi Global Market (ADGM) provides a robust and innovative legal framework for real property interests within its jurisdiction. Real property ownership and transactions in ADGM are governed by clear and structured regulations, ensuring that all parties involved in property dealings have a clear understanding of their rights and obligations. These Regulations are designed to support legal certainty, transparency, and smooth transactions in the real estate market. In this article, we will break down the types of real property interests recognized by the ADGM, referencing specific provisions of the Regulations to help readers understand how these interests apply in practice. 

This article is part of a series on Real Property regulations in ADGM, which is part of our ADGM Practice service.

Types of Real Property Interests 

The Regulations define specific categories of real property interests that can be established or transferred. These interests, outlined in Chapter 1 of the Regulations, cover a variety of rights that individuals or entities may hold over real estate within the ADGM. Before exploring the different types of real property interests, it is important to first clarify what “Real Property” means under the Regulations. The term “real property” refers to: 

1. 1. Land, buildings, and any items situated on, in, or under the soil, with the intention that these items remain in position permanently or indefinitely. 
   2. Any interest in such land, buildings, or items. 

Freehold Interests (Section 1(a) & (b)) 

Freehold interests represent the most complete form of ownership over land or property. In ADGM, freehold interests are recognized as a valid legal interest in real property. A freehold interest in land is the highest form of ownership, providing the holder with the right to use, lease, sell, or transfer the land at will. Similarly, a freehold interest in real property (other than land) may include fee simple interests or life estate interests, as detailed in Section 1(b). 

• • Fee Simple Interest: This gives the owner full ownership rights over the property, subject to any applicable laws or restrictions. A fee simple interest is the highest form of property ownership. The owner has the right to use, lease, sell, transfer or pass on to your heirs without any conditions except those imposed by law.  

• • Life Estate Interest: A life estate interest gives the holder the right to use and enjoy the property for their lifetime. After the holder’s death, the property does not pass to their heirs directly, but instead, it typically reverts to another party or is passed on to a pre-designated beneficiary. This type of interest is often used in estate planning to allow someone to live in a property for their lifetime while ensuring the property ultimately goes to another person or entity. A life estate is a useful tool for managing property through generations, ensuring that one party can enjoy the use of the property while another person or entity ultimately inherits it.  

Future Interests (Section 1(c)) 

Future interests refer to rights in real property that take effect at a future date or upon the occurrence of a specific event. These are described in Section 1(c) and include several types of future interests, such as: 

1. 1. Reversion Interest: A reversion interest arises when an owner grants a temporary property interest such as a leasehold or life estate to another person, with the understanding that ownership will revert back to them (or their heirs) once the temporary interest ends. For example a property owner grants a life estate to their elderly parent, allowing them to reside in the house for the remainder of their life. Upon their passing, ownership of the property automatically returns to the original owner or their designated heirs. 
   2. Possibility of Reverter: A possibility of reverter applies when property is transferred with a specific condition. If this condition is violated or not fulfilled, ownership automatically reverts to the original owner or their heirs. For example, a landowner donates land to Trust, stipulating that it must be used for building a school. If the Trust later decides to build a shopping mall instead, the property will automatically return to the original owner or their legal successors. 
   3. Right of Entry (Power of Termination): A right of entry, also known as a power of termination, grants the original owner the legal authority to reclaim property if certain conditions are breached. Unlike the possibility of reverter, this right is not automatic the owner must take legal action to enforce it. For example, if a landowner leases a commercial property to a company with the condition that it must be used as a restaurant. If the company later converts it into a nightclub, the landowner has the right to take legal steps to terminate the lease and regain possession of the property.  
   4. Remainder Interest: A remainder interest exists when property is granted to a temporary holder, such as a life tenant or leaseholder, but is set to pass to a third party once the temporary interest expires. For example a father grants his wife a life estate in a residential property, allowing her to live there for her lifetime. However, instead of the property reverting to him after her death, ownership is designated to their child. In this case, the child holds a remainder interest, meaning they will gain full ownership of the property once the life estate ends 
   5. Reservation Agreement: It refers to an agreement that grants a party the right to secure a future interest in real property without immediately creating a legal ownership interest. This agreement can take various forms, such as an option agreement, a lease agreement, a purchase agreement, or any other contract that reserves or allocates a future interest in real estate within ADGM. However, since a Reservation Agreement does not immediately create a property interest, it must be registered in the Register of Future Interests under the Registration of Future Interests in the Regulations.  
      1. For example, a real estate developer enters into a contract with a buyer to reserve an apartment in a new residential tower under construction. The agreement states that the buyer will have the right to purchase the apartment once construction is complete, but until then, no actual property interest is created. This Reservation Agreement ensures that the unit is allocated to the buyer while allowing the developer to retain ownership during construction. 
   6. Executory Interest: It is a future interest held by a third party that does not fall into any of the previously mentioned categories, such as reversion, remainder, or right of entry. Unlike other future interests, an executory interest does not take effect automatically it becomes active only upon the occurrence of a specified event. This type of interest is often used in complex real estate and investment transactions. 

Joint Estates (Section 1(d)) 

A joint estate occurs when two or more persons hold an interest in real property together. ADGM recognizes two main types of joint estates: 

• • Joint Tenancy: In a joint tenancy, multiple individuals own property together as a single unit, with no distinct individual shares. The key characteristic of joint tenancy is the right of survivorship, which means that if one joint tenant dies, their share automatically passes to the surviving joint tenant(s). This transfer happens outside of inheritance laws, preventing the deceased’s share from being passed down to heirs through a will or intestacy. This structure is commonly used among spouses or business partners who want to ensure seamless succession without requiring probate proceedings. 

• • Tenancy in Common: A tenancy in common is a more flexible form of joint ownership where multiple individuals own property in defined shares, which can be equal or unequal. Unlike joint tenancy, there is no right of survivorship—each owner can transfer, sell, or bequeath their share to someone else through a will or inheritance laws. This type of ownership is commonly used among investment partners, family members, or individuals who want to maintain separate ownership rights over their portion of a property. 

Leasehold Interests (Section 1(e)) 

Under Section 1(e) of the Regulations, a leasehold interest is distinct from freehold ownership because it does not provide absolute ownership over the property. Instead, it gives the lessee a temporary right to occupy the premises under agreed-upon conditions. Leasehold interests can apply to residential, commercial, or industrial properties and are common in business districts, where long-term ownership may not be practical. A leasehold interest can also include sub-leases, where the original lessee (tenant) rents out the property to a third party under a separate lease agreement. This creates a sub-leasehold interest, which allows for more flexibility in property usage.  

Strata Interests (Section 1(f)) 

Strata interests are a unique form of property ownership applicable to multi-unit developments such as apartment buildings, commercial towers, and mixed-use projects. Under Section 1(f) of the ADGM Real Estate Regulations, these interests are governed by the Strata Title Regulations 2015, which provide a legal framework for ownership, management, and governance. This type of ownership structure is commonly used in residential apartments, commercial buildings, and mixed-use developments where multiple owners share facilities. For example, If you purchase an apartment in a high-rise building, you own your individual unit outright but also have a shared interest in areas such as lobbies, hallways, elevators, parking areas, swimming pools, and gardens.  

Mortgage (Section 1(g))  

A mortgage is a legal interest in real property used as security for a loan. A lender (mortgagee) holds an interest in the property until the borrower (mortgagor) repays the debt. If the borrower defaults, the lender has the right to foreclose the mortgage taking possession and selling the property to recover the outstanding loan amount. Mortgages in ADGM must be registered in the Real Property Register to ensure legal protection and transparency. This prevents disputes and establishes clear rights for both lenders and borrowers. 

Statutory Charge (Section 1(h)) 

A statutory charge is a legal interest that imposes restrictions or obligations on real property, typically relating to land use, planning regulations, or other statutory requirements. A statutory charge may be imposed by law or regulatory authorities, affecting how the property can be used or developed. 

Easement (Section 1(i))  

An easement is a non-possessory right that allows one party to use another person’s property for specific purposes, such as access, utility installation, or right-of-way. Easements do not grant ownership of the land but provide the right to use part of the property for a defined purpose without possessing it. Easements are typically created for practical purposes, such as allowing one property owner to cross another’s land to reach their own property or to install utility lines. These rights are usually registered to ensure clarity and to avoid disputes. Easement is further elaborated in part 11 of the Regulations. 

Covenant (Section 1(j))

Covenant is a legally binding agreement attached to a property that requires the property owner to either perform certain actions or refrain from doing something. Covenants are often used to restrict or govern activities on the property for the benefit of another party, such as a neighboring landowner or a community. Covenants can apply to a wide range of actions, such as limiting how a property can be developed, restricting the types of businesses that can operate, or maintaining certain aesthetic standards. These obligations “run with the land,” meaning they apply to future owners of the property as well. Covenant is further elaborated in part 12 of the Regulations. 

These different interests serve distinct purposes and offer added flexibility in property transactions, enabling individuals or entities to secure financing, utilize land for specific purposes, and enforce legal obligations on property owners. In the following article, we will explore the various types of conveyances and registrable interests.