Family Property Contracts are a new legal instrument introduced by Law No. (9) of 2020 Regulating Family Property in the Emirate of Dubai (the “Law”). They allow family members who are engaged in business or have common interests to regulate the co-ownership and management of their family property, which can include movable and immovable assets, intellectual property rights, trademarks, and other rights. Family Property Contracts are intended to ensure the continuity, development and smooth transition of family property from one generation to another.
However, there may be situations where a Family Property Contract needs to be terminated, either by mutual agreement of the partners or by external factors. In this article, we will explain the main scenarios and consequences of terminating a Family Property Contract in Dubai, based on the Law.
What is Family Property Contract?
A Family Property Contract is a legally binding and notarized contract that provides for the collective ownership and administration of family owned property for the benefit of the family members who are party to the contract, and their successors. It is a new legal instrument introduced by a law in Dubai, which aims to ensure the continuity, development and smooth transition of family property from one generation to another.
Conditions for Termination of Family Property Contracts in Dubai
There are several situations that can lead to the end of a Family Property Contract. However, as per Article 22 of the Law, the contract will be terminated in any of these cases:
Expiry of the Contract
The first and most straightforward case of termination is when the Family Property Contract expires in accordance with its duration, which must be specified by the partners at the time of signing the contract. The partners can decide how long they want their Family Property Contract to last, as long as it is not more than fifteen (15) years. They can also agree to extend the contract for another period of up to fifteen (15) years, if they all consent to do so.
If the partners cannot reach an agreement on how long the Family Property Contract should last, any partner can ask the Tribunal to let them withdraw their share from the Family Property, after they inform the other partners of their intention in writing and wait for six (6) months.
Agreement of the Majority of Partners
The second case of termination is when a number of partners who own at least fifty-one percent (51%) of the family property agree to terminate the contract before its expiry, unless the Family Property Contract stipulates a different percentage. This means that the majority of the partners can decide to end the contract at any time, for any reason, as long as they meet the minimum ownership threshold or the one agreed upon in the contract. However, this also means that the minority of the partners may not have a say in the termination, and may have to accept the decision of the majority.
Loss, Destruction, or Diminution of the Property
The third case of termination is when the property subject of the Family Property Contract is lost, destroyed, or diminished to a level that makes it impossible for the family property to continue in existence. This means that the contract will automatically end if the family property is no longer available or usable, due to natural disasters, accidents, theft, damage, or any other cause. In this case, the partners will have to settle their rights and obligations according to the provisions of the contract and the applicable laws.
Judgement of the Tribunal
The fourth case of termination is when a definitive judgement terminating the contract is rendered by the Tribunal. The Tribunal is a special judicial committee composed of experts in legal, financial and family management matters, which is responsible for settling any disputes arising from a Family Property Contract. The Tribunal has the authority to terminate the contract if it finds that there is a serious breach of the contract by one or more partners, or if it deems that the continuation of the contract is harmful to the interests of the partners or the family property. The judgement of the Tribunal is final and binding, and cannot be appealed.
Other Cases as Stipulated by the Contract
The fifth and final case of termination is when the contract is terminated in any other case as stipulated by the Family Property Contract. This means that the partners can agree on additional grounds for termination, which are not covered by the Law, but are specific to their situation and needs. For example, the partners may agree to terminate the contract if one of them dies, becomes incapacitated, or wishes to withdraw from the contract. However, these additional grounds must be clearly stated in the contract and must not contradict the Law or the public order.
You may want to know: Power Of Attorney For Property Management
Legal Consequences of Terminating a Family Property Contract in Dubai
The consequences for terminating a family property contract in Dubai depend on the type and terms of the contract, as well as the applicable laws and regulations. Some possible consequences are:
- Loss of rights: The terminating party may lose their rights to the property or its income, as well as any benefits or privileges granted by the contract.
- Payment of damages: The terminating party may be liable to pay compensation to the other party for any losses or damages caused by the termination.
- Legal action: The terminating party may face legal action from the other party or the authorities, if the termination is deemed unlawful, unjustified, or in breach of the contract or the law.
To avoid or minimize these consequences, it is advisable to consult a legal expert before terminating a family property contract in Dubai. They can help you understand your rights and obligations, negotiate with the other party, and comply with the relevant procedures and formalities.
Also know – How to give Authority in Transferring Property Ownership using UAE Power Of Attorney
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Hassan Humaid Al Suwaidi is a UAE Citizen and the founder of the firm HHS Lawyers. He has a vast experience of 20 years of dealing with high-value and complex notary requirements. Hassan has been involved in some of the largest legal settlements in the UAE and is commended for his ability to attain the most favourable outcomes for his clients.
