Registration of Rights and Verification of Encumbrances

Registration of Property Rights and Verification of Encumbrances

Systems of Rights Registration

Land Registration (title system)

• State guarantee of ownership rights
• The registry contains: owner, description of the property, encumbrances
• Upon registration, the state guarantees the correctness of the entry

Deed Registration (deed system)

• Documents (deeds) are registered, not rights
• Less reliable — requires checking the chain of deeds

Registration by Jurisdictions

UAE — DLD (Dubai Land Department)

• Title Deed — document of ownership right
• Electronic system: all information available via DLD app / Dubai REST
• Status check: instant via title deed number
• Oqood — registration of off-plan contracts (before receiving title deed)

UK — HM Land Registry

• Three sections of the registry:
  • Property Register — description of the property, plan
  • Proprietorship Register — owner, title type (freehold/leasehold)
  • Charges Register — mortgages, restrictions, covenants
• Title types: Absolute (best), Qualified, Possessory, Good Leasehold
• Registration cost: £95–910 (depends on price)
• Registry access: £3 for a copy of the title (Land Registry online)

Germany — Grundbuch

• Maintained by Amtsgericht (district court)
• Sections:
  • Abt. I — owner
  • Abt. II — encumbrances (servitudes, Wohnrecht, Auflassungsvormerkung)
  • Abt. III — mortgages (Grundschuld, Hypothek)
• Principle of public credibility (öffentlicher Glaube)
• Cost of registration: ~0.5% of price

Spain — Registro de la Propiedad

• Nota simple — extract from the registry (€9.02 online)
• Contains: description, owner, encumbrances, area
• Catastro — cadastral registry (may differ from Registro!)

Types of Encumbrances

Due Diligence Before Purchase

Legal Inspection

1. Registry extract (title search) — must be no older than 30 days
2. Verification of encumbrances and restrictions
3. Checking debts (service charge, taxes)
4. Verification of usage permission (zoning/planning)
5. Checking compliance of area (survey vs title)

Technical Inspection

1. Building survey
2. Inspection of engineering systems
3. Energy Performance Certificate (EPC)
4. Check for asbestos, flooding, soil contamination (environmental search — UK)

Financial Inspection

1. Market evaluation (bank valuation)
2. Check of rental history (for investment properties)
3. Analysis of service charge budget (for apartments)
4. Inspection of sinking fund / reserve fund

Digitization of Rights Registration and the Future of Registries

Transformation of property rights registries is one of the key trends in the legal system of real estate. Dubai’s DLD is a global pioneer: in 2020, it launched blockchain integration, enabling ownership verification via the Dubai REST App in seconds — without the need to order paper extracts. HM Land Registry in the United Kingdom is following a similar path: Digital Registration Service (DRS) allows registration to be fully online, reducing the process from 10–20 working days to 2–5 days for standard transactions.

For the investor, the practical takeaway: the more digitized the registration system, the lower the transaction costs, the quicker the due diligence process, and the higher the trust of foreign buyers — which directly affects market liquidity and premium for properties with a “clean” title.

Comprehensive Inspection of Property: From Documents to Physical Condition

Legal due diligence of the property consists of two complementary aspects: legal and physical. Legal due diligence includes checking the registry extract (Title Deed or Grundbuchauszug) for encumbrances (mortgage, easement, arrests), verifying the seller’s identity and right to dispose, analysis of service charges and debts to the management company (especially relevant in Dubai: unpaid service charge may be claimed from the new owner). Physical due diligence — inspection of the object by a professional surveyor (Building Surveyor in UK, Bausachverständiger in Germany). Typical findings: hidden dampness, defects of bearing structures, discrepancy of remodeling to approved documentation. In Dubai, checking compliance of actual area to declared (in sq ft) is particularly important in off-plan: discrepancy up to 5% is considered acceptable under contract, but means real overpayment. Proper due diligence conducted before making a deposit is the best investment in transaction security.

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Practical Tasks

Task 1. The buyer checks an apartment in Dubai via Dubai REST app. Title deed shows: mortgage (Emirates NBD), service charge debt AED 15,000. What steps need to be taken before purchase?

<details> <summary>Solution</summary>

1. Mortgage: the seller must repay the mortgage before transfer (or buyer’s bank acquires it). Two options: a) seller pays off from own funds/buyer’s deposit; b) buyer’s bank does buyout (more complicated, longer). 2. Service charge debt: seller must pay off before receiving NOC. The developer will not issue NOC if there is debt. 3. Additional checks: request NOC from the developer (will confirm no other debts), check Oqood (for any other claims), obtain DEWA clearance.

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Task 2. An investor is considering purchasing a house in Spain. Nota simple shows: Hipoteca (mortgage from Santander bank), Servidumbre de paso (easement — neighbor’s right of passage). Should this be considered when making a decision?

<details> <summary>Solution</summary>

Mortgage: standard situation — paid off at sale using the buyer’s funds (via notary). The notary will ensure cancelación hipotecaria. Easement: more serious issue. Servidumbre de paso means the neighbor has right to pass through the plot. This is: a) non-removable (attached to the land, not the owner), b) may limit use of the plot, c) may reduce value by 5–15%. Recommendation: inspect how exactly the easement goes, assess impact on use, consider price discount.

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