Egypt Property Law

 

Egypt propertyEgypt Property Law

Our clients regularly ask us questions regarding Egyptian property law. With common questions ranging from the impact of the new Court Validity Suite, through to payment options and mortgages, it’s increasingly important to fully understand the purchase process.

 

As such, we asked Tarek Fathalla, one of Hurghada’s leading independent property lawyers, to answer some of our client’s most common queries regarding buying property in Egypt.

 

 

Q) I'm a non - Egyptian, and I’m interested in buying property in Egypt. As such, am I still ok to buy?

           

A) You do not need an Egyptian Visa to buy property in Egypt – or to sign the contracts, except if you wish to issue a Power of Attorney to your Independent Lawyer so he can act on your behalf in the Court. This needs only be a Tourist Visa, but not an Airport arrival Visa if you are in Egypt.  

 

If you are not coming to Egypt at the time you're buying the property, your independent lawyer can send you a ‘Power of Attorney’ document which you print out and take to a Public Notary in your country. This also requires a further stamp from the Egyptian Embassy. This way, you do not need a visa.

 

Your lawyer will also be responsible for making an analysis on the Developers documents, verifying that all the necessary documents are in order, issuing you with your own copy of the ‘Due Diligence Analysis Report’ for the development you are investing in, and given with his Legal Stamp of Sanction. Your lawyer will also assess your contract, assessing each article, and including all of this in the ‘Contract Assessment Report’ also with the lawyers ‘Legal Stamp of Sanction.”

 

This report will inform you that everything is in order and that you can then sign your Preliminary Purchase Contract and continue your payments. You pay the developer direct into his account which is usually stated in the contract. You then follow your lawyer’s instructions for Payments, your lawyer will be with you every step, assisting you with any problems or questions until you have your key delivery.

 

 

Q) Is property ownership in Egypt based on a freehold or leasehold system?

 

A) 99% of Real Estate and Land is Free-hold in Egypt. This excludes Sinai - Sharm El Sheikh whereby Land and Buildings are sold on a 99 year Lease basis.

 

Under the new ‘Egyptian Investment Law’, foreigners can now own two plots of land by a Title Deed that Equal to 4000m2. If your unit is 50m2 with a common share in the land - for example, this counts as one plot.

 

Owning Egyptian Real Estate by the Title Deed warrants that you do not re-sell for 5 years, unless you are leaving Egypt to not return to Invest, and then this is only given by special dispensation from the Prime Minister.

 

To give you safety until you obtain the Title Deed, it is highly recommended that you present your signed Original Contract between you and the Seller before the presiding Judge in Hurghada, who will witness it, give his Judgment and give it his official ‘Stamp of Sanction”. This is called ‘The Court Validity Suite’.

 

The Court Validity Suite process gives the purchaser safety against the following:-

  • Bankruptcy of the Developer - Especially in this time of recession, Your Unit will not be taken into consideration by the receivers.
  • In case of double selling, the contract, stamped and witnessed by the presiding Judge proves that you are the rightful owner until the Title Deed.
  • In case of Death, any assets will automatically pass on to the Sellers Heirs, who could rightfully claim under Egyptian Law, that the Contract is not between you and them.

 

Q) What does the purchase agreement look like? The legal shape of contract?

 

A) The Contract is set out over a number of pages and is issued in two original duplicates. One is for your own file (this is the one that is used to present before the Presiding Judge for them to witness and pass Judgment on if undergoing the ‘Court Validity Suite’), and the other is sent to the Developer to keep in their own files.

           

Once the Original Document has finished in the court, you will have your contract back in your own possession.

  • The Purchase agreement first houses the date of signing.
  • The document contains the details of both Parties to the Contract agreement. Including the details of the subject in question.
  • The details within the contract should contain the full information of the first party who is the seller / developer. This means their ID number, their address, and full details, including any company that they are representing.
  • You are the Second Party on the Purchase Contract. Your details should also be included, this having your passport no and full details on your passport, your full name and address.
  • The preamble should state the full details of the unit you are purchasing, which is the subject matter of the contract. The contract should state the unit number and the plot number and location of the land, along with how many bedrooms, bathrooms, the floor level it is on, and the square meter age.
  • Further details of payment schedules, payments made already and agreement to the forbearing is included.
  • Articles bearing the maintenance agreements, payments and penalties, and management companies to oversee the maintenance program of the development resort.
  • If there are any delay penalties relating to late payments by the purchaser and or delivery of your unit.
  • General rules of conduct for living or renting out your unit.
  • All articles within your contract should be explained in the Contract Assessment Report given to you by your Independent Lawyer.
  • The developer only can sign the Contract. If anyone else has been given authority to sign the document, the signatory will have an official “Private Power of Attorney” to sign Purchase Contract.

 

Q) What is the standard payment system used to buy property in Egypt?

 

A) Each developer will have their own approach as to how they would like to receive payment from the purchaser. Typically, a deposit or a percentage is paid at the time of signing the contract, and the remaining percentage is divided over a number of months with the final balance being paid upon key delivery.

           

All information regarding the payment method is included in your contract and your contract Assessment Report. This also contains the payment bank details of where you should transfer the payments. When you start to send payments through the bank to the developer, you should receive original receipts for your payments.

 

 

Q) Can I get mortgage in Egypt?

 

A) Mortgages can be obtained from various Banks throughout Egypt, once you have a primary Contract that has been signed by the Developer and finished its Court Validity Suite.

 

 

Q) How much are real estate taxes in Egypt?

 

A) You can register your name for the property tax, after it has completed construction with finishing. Real Estate Taxes are worked out on a basis of market and rental value. The Tax Authority evaluates your dwelling and takes 40% of this into a consideration for a total of 20% taxes. So you have a 60% free of taxes, and pay 20% out of the 40% valuation.

 

 

Q) How much is inheritance tax in Egypt?

 

A) Inheritance Tax is calculated at 20% on any assets left to the heirs. If the owner of the assets dies while owing money to the Government, this is taken first before passing on the left assets to the chosen heirs.

 

It is advised if you have assets in Egypt, to make a legally standing will from an Independent Lawyer who can carry out your last wishes. Inheritance Laws are different in any country, and in Egypt, you would require a legal will to ensure that your assets go to your named beneficiaries.

 

 

Q) Is it ok to buy apartment for rent? How much roughly will be the monthly rent? How much tax will I be paying on this?

 

A) Taxes on rent are payable by evaluating the rental value, and deducting 40% of which you pay 20% taxes. So you have a 60% free of taxes, and pay 20% out of the 40% surplus. Current rents range from 1,500LE for a small studio up to 8,000 LE for a villa per month.

 

Q) Can I resell my property? What are the tax implications of this? Can I resell before finishing last payment? What is the cost for me to resell?

 

A) Some Developers will allow you to sell (flip) the property before you have finished paying for it, but this would include a percentage payable to the Developer from the first Contract issued from him, from the main first price in the original contract.

 

Often, developers / sellers have a pre-emption clause included in the Contract which means, that they get first refusal on the sale.

 

Most Developers, also, require that new owners continue the previous contract given to the second party at the first point of sale – this means an amount is payable to cover administration charges. It is worth noting that some developers also require a small percentage of the sale, so do check your contract carefully. This area is best checked in your contract and Contract Assessment Report.

 

 

Q) Should I Buy apartment as foreigner or is it better to buy land and construct it myself as villa or building?

 

A) It is better for foreigners to buy a unit off plan or ready built. Unless you are an experienced developer first in your own country, it would not be easy to enlist engineers and specialized workmen to construct your dwelling, and also to obtain all the relevant licenses, but without this experience, it is advisable to buy off plan or ready built.

 

It is surely recommended in any Country that you employ the services of an Independent Lawyer to cover your legal assistance for your Investment. This means that you will receive all the necessary Reports and documents for your purchase, and have an on hand legal representative to assist you and advise you of the steps from the time you pay your reservation fee, to the time you receive your unit at key delivery.

 

 

Q) Do I need a special Visa to buy a property in Egypt?

 

A) You do not need a special visa to be able to buy property in Egypt. The visa you obtain from the Airport is sufficient enough for purchasing property in Egypt.

 

 

Q) In case of buying a property, is it possible for me to obtain a visa afterwards? Is it really necessary?

 

A) It is necessary for you to have a tourist visa if you are living or working in Egypt. This can be obtained easily. If you are European, you can get a maximum one year Tourist visa from the immigration office.

 

 

Q) How I get residential visa?

 

A) You can have a residential visa issued to you from the immigration office, once you have the Title Deed Registration Contract. The price for the Contract should be not less than $50.000.

 

If you start a business in Egypt and establish a company, under the new Investment law (LTD Company, or a Joint Stock Company) and the capital for each partner to obtain a work permit must be not less than 185.000LE per partner. In this case you can obtain a one year Resident Visa and Work Permit

 

 

Q) Can I do the complete real estate registry and deed by myself or do I need lawyer?

 

A) You do need a lawyer for this, even though you cannot register for the Title Deed until your property is finished and registered first by the developer. This registration takes a minimum of 6 months and involves preparation of forms for the Public Notary and necessary Official Documents.

 

 

Tarek Fathalla is a leading independent property lawyer reistered with the British Embassy (Cairo). From his offices in Hurghada provides a wide range of conveyancing services for clients from all over the world. If you would like to find out more about Tarek Fathalla, you can visit his website at www.tarekfathalla.com.