Start Searching

( Optional ) ID #: City:
Dist.:
Type: Cat.: For: Price: Curr.: Search

Buying Process

 

Buying Process

Five Fundamental Steps to Purchase a Real Estate Property in Egypt


The Egyptian real estate sector has recently experienced a substantial growth partially stimulated by relatively strong demands by expatriates and foreign national to purchase properties in Egypt. The purpose of this 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 of 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. Foreign nationals are entailed 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). 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 4000sq . Meter.

Without prejudice to said law, the purchase of real estates in Egypt by foreign nationals follows the same procedural course of action as it 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:

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 through the registration of property with the relevant authorities. This said, it is quite common in Egypt for property owners not to register there title in order to avoid paying the governmental registration fees amounting to 3 % 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. Further more, 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 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. 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-أ -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 the initial registration status of the property. The two courses of action can be seen as follows:

آ·
Registration of the property through the Real Estate Department and the Notary Public.

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 completeness 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 three percent 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.

آ·
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 saleâ€‌. This course of action may take six to nine months as per the level of cooperation 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 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.

 

Enter your message
Send Reset