Acquiring And Disposing Of Real Estate In Bahrain – Some Traps To Avoid

Introduction

This article briefly examines the typical conveyancing process in Bahrain and highlights some of the main issues which may need to be considered and / or avoided. Essentially there are 5 stages involved in the conveyancing process in Bahrain:

Pre-contract; Exchange; Pre-completion; Completion; and Post-completion. A straightforward real estate transaction will typically take between 3-4 weeks to achieve completion. Registration of the transfer of title from the seller to the buyer at the Survey and Land Registration Bureau (SLRB) usually takes a further 3-4 weeks (but this could be pushed back significantly depending on the capacity of the SLRB).

Trap 1: Freehold vs. Leasehold

The current position in Bahrain is that only freehold interests are capable of registration in the register at the SLRB. This means that leases do not create a proprietary interest and are therefore purely contractual. This raises a number of issues for a buyer as there is generally less of an appetite for a leasehold interest and this may affect a buyer's ability to subsequently 'sell' its leasehold interest.

A buyer may also find it more difficult to obtain financing (both conventional and Islamic) in relation to acquiring a leasehold ownership interest as a financier's ability to take security over a leasehold interest may be diminished.

If the interest being acquired is a leasehold interest, we would suggest ensuring that the lease is notarised at the Notary Public as under Bahrain law, a lease will bind third parties to the extent that its existence is known about or disclosed. Notarisation acts as a notice to the public to some extent which will offer some protection to a buyer's interest.

Trap 2: Due Diligence

Unlike jurisdictions such as the UK, title information relating to a property is not readily available for public inspection unless the owner has provided its consent for the SLRB to release such information.

Due diligence is therefore normally limited to reviewing title information and other relevant documentation provided by a seller, raising standard enquiries with the seller and undertaking an inspection of the property (which may be accompanied by a survey indicating the state and condition of the property).

However, it should be noted that other searches and investigations can (and should) be made depending on the nature of the transaction and the identity of the parties. For example, we would usually expect the following to be undertaken in addition to the 'usual' due diligence referred to above:

A search of the SLRB to provide confirmation of the status of any...

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