Legal advice

Five Fundamental Steps to Purchase a Real Estate Property in Egypt
Article by:
Hesham shaban chairman of Egyptian British Real Estate
 

The Egyptian real estate sector has recently experienced a substantial growth, partially stimulated by relatively strong demands by expatriates and foreign nationals to purchase properties in Egypt. The purpose of this article is to provide a brief overview of the regulatory regime regulating real estates' purchase and transfer of ownership under Egyptian law and outline the "five fundamental steps" that any potential purchaser should carefully consider prior to buying a property in Egypt.
Brief Overview
The transfer of title real estate in Egypt is completed through two distinct phases, namely the execution of a private sale and purchase agreement between the seller and the buyer followed by the registration of title of the purchaser with the Real Estate Department and Notary Public (this step may not be necessary if you are buying your property directly from the construction company of the project). Foreign nationals are entitled to purchase and own real estate properties in Egypt subject to the restrictions stipulated by the Foreigners Ownership Law (law 230 for the year 1996 and the amendment of the law end of 2004). The said law restricts foreign nationals' ownership of real estate in Egypt to I) No more than two properties; and ii) Each property should not exceed 4000 sqm.
Without prejudice to said law, the purchase of real estates in Egypt by foreign nationals follows the same procedural course of action as is the case for Egyptian nationals. In relation thereto, there are five fundamental steps that should be followed by any prudent purchaser, which are as follows:
Foreword:
Egyptian British for Real Estate& Developments advises all potential purchasers to make a Power of Attorney with a lawyer. ( please check with our legal department to consult about your property title by emailing us at
info@egyptianbritishrealestate.com

 

Egyptian British for Real Estate& Developments can advise you of this procedure and this Power of Attorney can be made for the specific purchase of a particular property only if required.
Step 1:
Check the registration status of the property and review of title documentation, as outlined above, the transfer of real estate properties is perfected though the registration of property with the relevant authorities. This said, it is quite common in Egypt for property owners not to register their title in order to avoid paying the governmental registration fees amounting to 3% (not applicable in Sinai Region) of the value of the property. Hence, the first seminal step to be undertaken when purchasing property in Egypt is to check said registration status. The status of the registration is determined through the review of the title documentation. Furthermore, a comprehensive review of the title documentation should be undertaken in light of the original title documentation and not through copies, in order to ensure that no fraudulent title documents are provided by sellers.
Step 2:
Check if there are any pledges or mortgages registered on the property. Under Egyptian law, mortgages and pledges are recorded on the property itself and are not affected by the transfer of the title. Hence, quite commonly a person who has just purchased a property can discover that his newly purchased property is pledged to a third party. As such factor represents a serious exposure to your title, it is imperative that you ensure that the property you wish to purchase is clear and free from any third party rights such as mortgages and pledges. This check is undertaken through the review of the Official Pledge Registers at the Notary Public Office located in the district of the property.
Step 3:
Ensure that all real estate taxes levied on the property are fully paid. Under Egyptian law exists a real estate tax which is levied on the property itself and not on the owners of the property? The rate of said tax differs as per the location and the standard of the property itself. This tax is not affected or prejudiced by the transfer of the legal
owners and hence it is common for a new purchaser to discover - after completion of the property purchase - that he has to pay certain amounts to the Real Estate Tax Authorities. Accordingly, any prudent purchaser should instruct his attorneys to check the status of payment of the said tax prior to purchasing the property.
Step 4:
Drafting and bilingual comprehensive sale and purchase agreement. The execution of private sale and purchase agreement between the seller and the purchaser is the first phase required under Egyptian law to transfer the title. Quite commonly the seller produces an Arabic draft which in many cases is not readable by the expatriate and does not include all the guarantees, representations and protections that a prudent purchaser requires. Hence, it is highly recommendable that a comprehensive bilingual sale and purchase agreement is produced and/or reviewed by the purchaser's lawyers in order to ensure that no contractual exposure persists.

Step 5:
Registration of purchaser's title. The registration of the title is the second phase required under the Egyptian law to transfer the title from the seller to the purchaser especially in the resale units (this step may not be necessary in case if you are buying directly from the construction company of the project). As a matter of fact, the execution of the sale and purchase agreement creates, from a purely legal perspective, legal and valid obligations between the seller and the purchaser but does not create any rights vis-à-vis third parties and the relevant authorities. In other words, the sale and the purchaser agreement can be used to counter any claims by the seller of the property but does not safeguard the purchaser from potential claims from third parties or the governmental authorities.

 

The registration of the property is the procedure designated to safeguard the purchaser from the claims from third parties and governmental authorities.
There are two courses of action to undertake the registration of property which differ as per initial registration status of the property. The two courses of action can be seen as follows:
a) Registration of the property through the Real Estate Department and the Notary Public Office. This mechanism is commonly used in the connection with the registration of title for properties which were initially registered by the sellers. The timeframe associated with said procedures differs as per the status of the completion of the registration documentation but in all cases would remain in the range of three to six months. When agreeing with the seller on the purchase price, the 3% registration fee should be taken into consideration; as such rate is calculated on the stipulated price of the property. We strongly do not advice on illusionary smaller price on the contract to attempt to decrease the registration amount as such action creates a substantial future exposure on the purchaser.
b) Registration of the property through the courts, the second course of action available to register a property is a court action against the seller of the property requesting the court to issue court ruling confirming the validity of the sale of the property and claming the purchaser as the legitimate owner of the property. The name of such court action is "claim requesting confirmation of the validity of the sale". This course of action may take six to nine months as per the level of co-operation that the purchaser receives from the seller. This course of action is used primarily to register properties located in the new urban communities and Sinai.
 

Conclusion
Based on the above, we urge all expatriates who wish to purchase a property in Egypt especially if it’s a resale unit or when you buy it through an individual sellers) to follow the five steps outlined above in order to safeguard themselves from various potential problems and obstacles which may prejudice their title or their quiet and peaceful enjoyment of their newly purchased property.
 

N. B.
Please note that recently there has been a governmental decree issued from the Ministry of Justice regarding the purchase of property by foreigners. This decree may come into effect on all property purchases in SHARM EL SHEIKH and some other sites in Egypt and may revoke the title status of the property to be a 99 or 50 year leasehold contract and not a freehold contract. Currently this is to be subject to a governmental review within the coming months and detailed notes will be provided to cover any issues regarding previous and future foreign ownership. Definitive notes have not been provided as yet, however this point must be taken into consideration when buying a property in Sharm El Sheikh or the other sites in Egypt which is under the same law( please check with our Legal department about the status of the property you are interested on….

Twelve superb reasons why you should invest in Hurghada, Egypt
1) Tax breaks - no stamp duty on buying property.
2) No capital gains tax on resale's of property and no inheritance tax.
3) Banks - easy to open an account and transfer funds.
4) You don't need a visa to buy a property, however if you live here you will need a 12 month visa, which we can assist you with.
5) Buying and renting out your property for a good investment.
6) The cost of living in Hurghada or generally in Egypt is at minimum50% cheaper than most places.
7) Good schools and good standard of education in Egypt.
8) Local mortgages here are almost impossible to obtain, so you will need to purchase one in the same country you reside in.
9) 9% interest in banks net, when you invest money here.
10) You will need a lawyer to buy a resale property in Egypt while our company the Egyptian British for real estate & Developments provide this service for free for all our buyers through our own legal department to ensure a smooth and professional service for our client’s choice.
11) A safe and friendly environment.
12) Great beaches, under water life and fantastic night life places to go.
 

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