Dear All,
I have returned back from Hurgada after checking some paperworks there, and it was my first time to Hurgada in fact, but the trip was fruitful and was really worth it.
However, I am starting this thread now in order to keep all the legal questions in one place, so I do not miss a thing.
I have prepared a F.A.Q concerning purchasing a property in Sharm el Sheikh, and I am updating it soon to mach Hurgada, but many information there will still be useful anyways.
I will happily answer any legal enquiries I read on the forum, and for this purpose I am making this thread.
Below I will paste my legal presentation again, in addition to the new F.A.Q:
Legal Procedures to Purchase a Property in Sharm el Sheikh
Purchasing a property in Sharm el Sheikh is different than purchasing a property in any different location in Egypt, according to the difference in legal status. There was an administrative decree issued by the prime minister of Egypt in 2005, abrogating the context of the previous law issued in 1996. Despite the fact that originally an administrative decree is normally unable to nullify law, but this decree is currently the prevalent decree governing the foreigners’ legal status when it comes to purchasing a property in Sharm el Sheikh. The aforementioned decree states that foreigner purchasers in Sharm el Sheikh may not be granted the right to be "landlords" on the properties they purchase, but only would have the "Leasehold" right, for the maximum time of 99 years. Some people believe that purchases are "Freehold" purchases, and since the term "Freehold" originally applies to the right to enjoy a property and all its advantages for good, in addition to the right of disposal, either physical or legal disposal, and since the decree has stated the maximum limit of freehold as 99 years, therefore – legally talking – it is NOT freehold, and not exactly leasehold, it is better to be rephrased to "Usufruct". Usufruct is the best description for the current real estate sales legal name involving foreigners in Sharm el Sheikh, and it, consequently, raises many questions concerning registration of the sale.
Definitions of usufruct on the Web:
• The right to enjoy other goods with the obligation to preserve them, except where the law authorizes otherwise.
http://www.gruposantander.com/pagina...59_3_2,00.html
• (Legal-Civil Law) The right of enjoying a thing, the property of which is vested in another, and to draw from the same all the profit, utility, and advantage which it may produce, provided it be without altering the substance of the thing. For example, in Nevada, the state's water belongs to the people, but is permitted, through the water rights permitting process, to be used beneficially by other individuals or entities.
Glossary has moved
• A legal term from the Roman Empire (in Latin, usufructus), meaning "using the fruit" of land claimed by the State without injuring or destroying the ecological infrastructure.
WE HAVE THE RIGHT TO EXIST, by Wub-e-ke-niew - Glossary
• Usufruct is the legal right to use and derive profit from property that belongs to another person, as long as the property is not damaged. In many legal systems of property, buyers of property may only purchase the usufruct of the property.
en.wikipedia.org/wiki/Usufruct
Property Ownership in Law
The ownership of land by foreigners is governed by three laws: Law No. 15 of 1963, Law No. 143 of 1981 and Law No. 230 of 1996.
Law No. 15 of 1963
Law No. 15 and its amendments (Law 104 of 1985) provides that no foreigners, whether natural or legal persons, may acquire agricultural land.
Law No. 143 of 1981
Law No. 143 and its amendments (55/1988, 205/1991, & 96/1995) governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is equal to approximately one hectare) that may be owned by individuals, families, co-operatives, partnerships and corporations. Partnerships are permitted to own 10,000 feddans, provided that the individual shall not own more then 150 feddans. Joint stock companies are permitted to own 50,000 feddans.
Partnerships and joint stock companies may own desert land within these limits even if foreign partners or shareholders are involved, provided that at least 51 percent of the capital is owned by Egyptians. However, upon liquidation of the company, the land must revert to Egyptians. Article 1 of Law No. 143 defines desert land as the land two kilometers outside the border of the city.
Further, the lease of such land for more than a period of 50 years shall also be considered to be ownership under Law 143. Despite the fact that companies which were formed under the Investment Law No. 8/1997 do not require Egyptian participation, companies that undertake projects over desert land must be owned in their majority by Egyptians. According to the law 55 of 1988, the President of the Republic may decide to treat Arab nationals as Egyptian nationals for purposes of this law.
Law No. 230 of 1996
On July 14, Law No. 230 of 1996 was issued superseding Law No. 56 of 1988. The new law allows non-Egyptians to own real estate whether built or vacant with the following conditions:
1. That ownership be limited to only two real estate properties throughout Egypt for accommodation purposes of the person and his family (family meaning spouses and minors), in addition to the right to own real estate needed for activities licensed by the Egyptian Government.
2. That the area of each real estate not be in excess of four thousand square meters.
3. That the real estate is not a historical site.
Exemption from first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers.
Furthermore, non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is effective (the date on which the realty is recorded at the competent Notary Public Office). Non-Egyptians may only sell their real estate five years after registration of ownership, unless the consent of the Prime Minister is obtained.
Registration, in principle, is this process done in the notary office, to register your sale contract, as a deed, and a proof of owning a property. Since the aforementioned decree stated that foreigners are not granted the rights to be landlord, then it is not allowed for foreigners to register their properties, while practically, even Egyptians are not allowed to register their properties in Sharm el Sheikh. Therefore there has been an urgent need to find an alternative legal method to suit the new status of foreigners in Sharm post the prime minister's decree.
The only option available for foreigner purchasers in Sharm el Sheikh is a legal suit called "Signature Validity". Signature Validity legal suit, however, is a legal suit aims to obtain a court verdict, stating that the signature of the seller in a sale / usufruct contract, is truly theirs. This legal suit, however, DOES NOT touch on the origin of right, or in other words; it is non-concerned about neither who is the current owner of the property, nor who was the previous owner, but is only concerned about the belonging of the signature to the seller, and therefore is a mere precautionary legal suit. This legal suit, however, is the common suit used for sales and usufructs in Sharm el Sheikh, and it has a legal value after all, despite the fact of not being as valuable and authenticated as registration.
Purchasers should take the following procedures into their consideration while purchasing a property in Sharm el Sheikh:
A) Obtaining a real estate certificate and a tax certificate for the property:
Purchaser's lawyer should obtain a "NEGATIVE" certificate for the property from the government, stating that there are no mortgages, pledges, or any other sort of rights arranged to any other party on the desired property. The certificate must be governmental and stamped with the official stamp of the state. Also a certificate must be obtained from the tax authorities determining the exact due taxes on the desired property. There has been a wide-spread myth stating that there are no taxes due on Sharm el Sheikh's properties. The truth, however, is that THERE ARE taxes estimated on each property in Sharm el Sheikh. Those taxes vary in value according to the original usage of the property. Purchasers are requested to consult their lawyer in order to handle the taxes issue. Taxes can be reduced to almost 60 EGP in case if the property is used for the sole purpose of residence, while these taxes would be higher in case if the property was used for the purpose of renting out.
B) Articulating a precise and bilingual sale / usufruct contract:
Sale / Usufruct is actually all about the contract, and therefore it is imperative for a purchaser to have a precise and detailed contract, defining the property boundaries in a definitive manner, purchase price, how did the property evolved to the previous owner, method of payment…etc.
This contract should be articulated in both Arabic and English languages, and it must be taken into consideration that the only authenticated and recognized language in courts is the Arabic language, and consequently English is used for the mere purpose of guidance. Here is a golden advice: NEVER sign a contract which was articulated only in English or any other languages than Arabic when it comes to purchase a property in Egypt, or you will be in serious risk.
C) Authenticating Sale / Usufruct Contract:
Prior to the point of authenticating Sale / Usufruct contract, purchasers are required to issue a power of attorney to their lawyer, in order to be able to act on their behalf in courts. Power of attorney, however, requires the purchaser "Principal" to obtain a multi-entry visa from El Tur city, which is located not far from Sharm el Sheikh, and where all the governmental utilities for Sharm el Sheikh's area are located. After obtaining the power of attorney from the notary office, the lawyer is responsible for establishing the signature validity legal suit. This legal suit takes between 6-8 months before obtaining the final verdict from the court.
These were simply the imperative steps needed to purchase a real estate property in Sharm el Sheikh, which in practice are not any different between Egyptians and foreigners, Except for the fact that Egyptians are entitled to choose between having a sale or usufruct contract, while foreigners have the sole choice of having a usufruct contract.
Appendix
It must be mentioned that Egypt has replaced its old method of registration – out of Sharm el Sheikh – for taking a percent equals to 3% of the purchase price as fees for notarizing a contract. The new policy is to take a certain amount of funds not exceeding 2000 EGP as fees for the registration process, regardless of the purchase price of the sold property. It must also be emphasized that other types of legal suits which purpose to prove the transfer the ownership are unavailable due to some legal hazards i.e. Contract Validity legal suit. This legal suit is available only in case if the seller has registered his property, or obtained a contract validity legal verdict on it, and be SELLER here I mean each seller in the evolution of deed, which is unfortunately not the practical case of Sharm, furthermore, the state collects fees equal to 7.5% for this type of legal suits, and it can take long time in courts, and by long time here I mean 2 years average. There is NO PERCENT taken by the government for the signature validity legal suit, but only administrative fees, which shall be included in the attorney fees.
All the best,
Zeiad Yehia
Solicitor
Frequently Asked Questions on the Legal Side of Buying a Property in Sharm el Sheikh.
Q: I am a novice in Egyptian real estate. I am thrilled yet have my fears, what am I going to face here?
A: Investment in Sharm el Sheikh can be a very profitable idea, or a risky one. It all depends on the choices you make; place to buy, lawyer to choose, and real estate agency to deal with. More details will be explained in the coming answers.
Q: Can I own a property in Sharm el Sheikh?
A: Very good question! The answer, however, is a little bit tricky; since it varies according to nationality and time. In order to make it simple for you I am classifying it into categories. Find your category and you will learn your legal position. Before we start you have to note that in April 2005, there has been a decree issued by the Prime Minister of Egypt, restricting foreigners' ownership to usufruct right up to 99 years. Usufruct in its simplest explanation is the right to enjoy the property of another one for a limited person of time, and also enjoy its fruits "legal fruits i.e. rental income.", and consequently is better than just long-term leasehold, since here you can act like landlord for 99 years even in renting the property out for tenants and collect its revenues. The foregoing decree was followed by another one in February 2007. The new decree was more concerning developers than purchasers, restricting developers commencing on the decree's date from buying land plots as freehold right, and limiting their right to usufruct only, up to 99 years, mentioning that the said usufruct right is renewable.
Now let's elucidate the various categories:
1-
I am an Egyptian / a foreigner who purchased my property before the decree of 2005: You are the landlord of your property, you own it for infinite time, and you have the right to sell it or to dispose of it legally or physically.
2-
I am a foreigner who purchased my property after the aforementioned decree was issued: You have a usufruct right for 99 years. You can live in your property, rent it out for tenants, or dispose of your right legally, but not physically.
3-
I am an Egyptian who purchased my property after the aforementioned decree was issued but before the decree of February 2007 was issued: You are the landlord of your property, you own it for infinite time, and you have the right to sell it or to dispose of it legally or physically.
4-
I am an Egyptian who purchased my property after the Prime Minister's decree of February 2007: Depends. If the developer you have purchased your property from has bought the property before the decree of 2007 then he is the landlord, and consequently you can buy freehold from them and be the landlord of your property, while if the developer had bought the project after the said decree then he is a usfructuary, and subsequently can transfer to you what he owns only, but not freehold right which he never had.
Q: Ok. I now understand. What shall I do now to start purchasing a property?
A: Find a convenient property according to your preference and budget, then find a lawyer to secure your transaction and represent you.
Q: Secure my transaction? What do you mean?
A: You have to make sure that you are buying from the legitimate owner as a first step. Verifying the title of deed is followed by checking whether that legitimate owner is legally permitted to build residential units or not. This can be done via checking the building license, which can take either the form of a written document as in these plots which originally belong to the governorate, or take the form of an engineering drawing with the permitted purpose printed on it and stamped with the stamp of the state, such as the plots which belong to the Tourism Development Public Institution. Restrictions for sales shall also be checked if any, and eventually you have to take the abovementioned owner categories into your consideration, in order not to get involved in a sale against the state's regulations.
Q: Great. I have done all what you said. Now what?
A: Your lawyer shall revise the end-purchaser sale / usufruct contract issued by the developer, in order to make sure terms and conditions are convenient, clearly written, and that none of them is against your interest. You can ask your lawyer to explain the contract for you, and even to amend undesired conditions to a more convenient for, after he negotiates these amendments with the developer.
Q: Ok. This was easily understood. Do I need a visa to buy a property in Sharm el Sheikh?
A: Nope. You do not need a visa over this purpose, but you may need a visa if you decided to appoint your lawyer locally, while you wouldn't need it at all if you appointed him internationally.
Q: Locally and internationally? What are you talking about?
A: There are two methods to appoint a lawyer, elucidated as follows:
1- You are physically in Sharm el Sheikh: In this case you will need to go to El Tur City, 1 hour far from Sharm el Sheikh, and where the governmental utilities exist. You'll need to get a transportation to El Tur city forth and back, then will go to the Visa Department to obtain a 6 months residency visa. You need this visa to be allowed in the notary office to issue a Power of Attorney in Legal Suits to your lawyer, and when you issue it. You have then successfully appointed your lawyer in the official way. The notary public office is very close to the visa department at El Tur city.
2- You live abroad, and cannot be at Sharm el Sheikh at the moment: Your lawyer can send you a form of Power of Attorney in Legal Suits by email or fax, along with detailed instructions on how to authenticate it in your country "very easy for U.K citizens", then you eventually send it back to your solicitor via FEDEX, DHL, or the like, and your lawyer gets it ratified in the Ministry of External Affairs – Ratification Department.
Q: I got it. What is the next step?
A: Your lawyer establishes a legal case on your behalf. The suitable case is called "Signature Validity" legal suit. The said suit purposes to prove that the signature on the contract belongs to the developer. The said case remains processed by court for an average of 7 months until the verdict is obtained in written form, and stamped with the stamp of the state.
Q: Why can't I just register the sale in the notary public?
A: For two reasons; firstly the developer must register the residential compound beforehand, or otherwise no purchaser can register their very sale, and since developer's registration requires full completion of the residential project, it is very unlikely to encounter the case of the registered developer. Secondly if you are a foreigner and your sale is usufruct, property registration applies only to freehold sales, anyway!
Q: What are the legal costs?
A: It actually varies slightly from a lawyer to another, but competent lawyers can be more expensive, but again you will get what you pay for. After all using the wrong lawyer may result in undesired consequences such as selling a freehold right to someone not eligible for it, making the entire transaction null and void.
Q: I study law, and I know that Egypt's law allows foreigners to buy a property in Egypt, I mean freehold right, how can an administrative decree change a law? It is impossible.
A: Excellent question. The Prime Minister has the authority to issue decrees in certain situations and places, purposing to maintain and preserve national security. Please note that the said decree has not annulled the law in entire Egypt, but only in Sharm el Sheikh, and consequently it did not abrogate it, but only incapacitated it in the territory of Sharm el Sheikh. National security decrees which aim to preserve security and safety are applicable and enforceable in their territory as of the date of their release.
Q: That's fine. Now what happens if I want to resell my property? Is there any restriction? And does the usufruct period renew automatically when I sell?
A: Another good question, and another tricky answer; if you are a foreigner who bought your property before the decree of 2005 given that your property is registered "very unlikely" then you are subject of law number 230 of 1996, restricting you to resell your property for 5 years since the date of registration. If you are a foreigner who has a 99 years usufruct right on a property then you can resell at any time, but please note that developers may charge you (or the new purchaser) 5% of the property purchase price in return to issue the new purchaser a new 99 years usufruct contract directly since the developer remains the original landlord.
Q: I have kids. Will the property transfer automatically to them after I die?
A: Mainly yes, but it's still practically better to include this condition in the contract, or add their names in the contract as joint purchasers.
Q: How can I secure the money I transfer to purchase the property I want?
A: There are three good and recommended methods to achieve this endeavor:
1- Transfer the money / installments directly to the developer. This should be done only under the direct supervision of your competent lawyer, and with his permission. Most of developers in Sharm el Sheikh, however, are reputable and trustworthy, and your lawyer will get a receipt for each installment you pay, and he should be competent in the real estate market knowing which developers can be fully trusted to transfer funds directly to.
2- Transfer the money / installments to your real estate agency. Real estate agencies in Sharm el Sheikh provide this service. Your lawyer shall still be supervising the process. Please note that a few real estate agencies are anonymous and that you shall not transfer funds directly to them.
3- Transfer the money / installments to your well known and reputable lawyer's escrow account. The problem is that only very few of the well established lawyers hold an escrow account.
Q: This is all great, but I still am not sure that I understood the legal aspect of purchasing a property in Sharm el Sheikh.
A: You must be joking!
Zeiad Yehia
Solicitor
Please see here for new contact details http://www.totallyproperty.com/egypt...il-change.html