Buying property in Egypt pitfalls & the 2 legal routes

April 12, 2020 2:54 pm

Go Investment writing-1149962_1280 Buying property in Egypt pitfalls & the 2 legal routes Uncategorised

Buying property in Egypt pitfalls

Foreigners can now buy and own property in Egypt under law number 230 of 1996 and there are 2 ways for the purchaser to carry out the final legalities when completing the property transaction. It can feel complicated when looking at all the information online as to the best process to undertake, however there are fairly basic principles when looking each method and there are advantages and disadvantages for both systems that you should recognise to avoid the common buying property in Egypt pitfalls.

The Full Registration process in Egypt

Firstly, there is the full registration process which offers maximum protection to the buyer, this is the recognised way to transfer property ownership in Egypt and it takes 18-24 months to complete. It provides an excellent method of protection, especially when purchasing a resale property, which has been owned by multiple buyers. Although its restrictive nature does makes it impractical for foreign buyers to pursue when buying property for investment purposes.

This is because it restricts buyers to own only 2 properties of less than 4,000 sqm in total, it also does not permit the owner to rent the property out for 5 years or resell before 5 years and even if they do wish to sell after this period, they should seek the approval of the prime minister.

Realistically, this is not a good option for a property investor who wishes to purchase multiple properties, rent them out and also have the flexibility to resell the properties as and when they wish, this process would become a one of the main buying property in Egypt pitfalls if the investor is unable to utilize their investment properly.

The Signature court validity process in Egypt

This is when the second option becomes more favourable and this is the Signature court validity option, which is generally the method taken by 99% of foreign buyers, to have legal protection without the inherent restrictions imposed by the full registration process.

This option initially came about as a solution to legally recognizing property purchases in Sharm el sheikh, this was bought about bychanges imposed via an administrative decree in 2005 which changed the way the 1996 law applied to purchases in Sharm.It meant that unlike in areas like Hurghada where foreigners can own the property as a freehold, purchasers in Sharm could only have their contract legitimized as a 99-year leasehold ownership.

Summary to avoid buying property in Egypt Pitfalls

Although buyers outside of Sharm el sheikh can carry out the full registration, this newer process is now the most dominant way for foreigners to complete legalities for their purchases, regardless of the other options available.This is because it allows a foreigner to purchase as many properties as they wish without restriction, also they can sell when they like and they do not have to wait for a specific timeline.

Although this option can be seen as a weaker form of protection, it is not really a concern if you are purchasing off plan, as one of the main reasons for the full registration process is to ensure that the previous owners do not have any debt secured against the property which could compromise the sale for a new buyer. When buying off plan, then it is easier to check this, as an independent due diligence on the developer and the land documents will be able clarify the developer’s position.

On the UK government guidance website to avoid the buying property in Egypt pitfalls, they recommend “Verifying the legality and rightfulness of the ownership as well as the permissions provided to the real estate developer. This includes the seller’s ownership of the land on which the building is constructed, and that it was built by virtue of a construction license issued from the competent Egyptian governmental authorities.”[1] This information should all be contained in the developers due diligence, so if you are buying off plan you should ask to see this document.

In summary, when purchasing off plan to avoid buying property in Egypt pitfalls then you should consider which method is best for your circumstances.The most popular and non-restrictive method to legalize the sale in the courts for foreign owners tends to be via the signature court validity option, which can be carried out via giving power of attorney to a lawyer to complete the process for you and it will take around 6-8 months to complete. If you will take this method, then it is important to obtain an independent due diligence of the development, to ensure that everything has been checked.

When purchasing an older property or resale, then for peace of mind it would be much more recommended to carry out the full registration process to make sure there are no debts against the property and that you can legally own the property,as the UK government guidelines warn “Many older buildings are not registered and sometimes are subject to disputes among many members of the owning family; therefore, it is crucial to verify that the property is registered.”[2]

This option comes with restrictions but on risk assessment then it may be the better option to avoid any complications later on down the line, a good lawyer can check the property history for you trace the ownership documents to ensure that the property is free from previous owner debts and that the person selling has the right to do so based on the legal documents, then as extra protection then they can then register this for you to transfer this legally into your name.

So depending on what you are purchasing and your personal situation, then this should be a helpful guide to choosing the best option for you and avoid buying property in Egypt pitfalls.

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By Namira Davies (LLB) (LLM) International Law, Co-director Go Investment Ltd, selling properties in Hurghada for 10 years and helping buyers avoid the buying property in Egypt pitfalls. (This is written to give guidance based on industry knowledge and experience and should not to be used as legal advice).


[1]https://www.gov.uk/guidance/buying-property-in-egypt

[2]https://www.gov.uk/guidance/buying-property-in-egypt

 

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