Buying a Franchise in Dubai: Check Musataha Rights Before Building Your Outlet

Joining the UAE franchise market may involve building a standalone restaurant or service centre on commercial land rather than leasing ready-built premises. In that case, the brand’s approval of the site is not enough. If use of the land is based on a musataha right, you need to carry out due diligence on a property right with its own registration, construction and financing rules. This guide focuses on buying a franchise to be developed on land covered by Dubai’s commercial musataha regime.

What is musataha, and which rules apply?

Musataha is a right over land granted by its owner to another party to use it under a specified contract. Dubai Decree No. 23 of 2022 governs the granting of musataha rights over commercial land within its scope. Ask a property adviser to confirm first whether the proposed site falls under this decree, rather than assuming that every agreement to use land follows the same rules.

Under the decree, the right is created through a contract between the landowner and the musataha rights holder and must be registered in the relevant register at the Dubai Land Department. It takes effect from the date of registration, so do not treat signing the contract as a substitute for completing registration.

As for the franchise itself, the UAE has no dedicated federal franchise law requiring a standardised pre-contract disclosure document. General contract and civil transaction rules apply, alongside the Commercial Transactions Law issued under Federal Decree-Law No. 50 of 2022 and trade mark legislation. Federal Law No. 3 of 2022 on Commercial Agencies may apply if the relationship meets its requirements and is registered under it. None of these frameworks removes the need for separate property due diligence.

Examine the registered right, not the sales pitch

Before choosing a brand whose business model requires a standalone building, request a copy of the musataha contract, evidence that the right is registered, the land details and its permitted use. Check whether the rights holder is the same company that will bear the construction costs and operate the franchise, and seek a legal explanation for any difference.

The decree sets a maximum musataha term of 35 years, which may be extended with the landowner’s approval to a total of no more than 50 years. The term must be specified in the contract: an indefinite right cannot be registered. What matters when deciding whether to buy is not the theoretical maximum term, but the time actually remaining after design, construction and fit-out.

Also check that the proposed business activity matches the permitted use. Changing the use of the land requires approval from the landowner and the relevant authorities. A franchisor’s approval of a restaurant layout, for example, does not constitute approval to use the land for that purpose.

Summarise your findings in a short checklist: who owns the land? Who holds the right? When was it registered? When does it expire? What restrictions could prevent you from implementing the brand’s business model?

Link your purchase decision to the construction programme and completion certificate

The musataha rights holder must construct the buildings within the prescribed periods and obtain a completion certificate within five years of registration. This does not mean the project can simply wait: the contract may impose a shorter timetable, and the franchisor may require an earlier opening.

The decree also provides for the right to expire if the failure to obtain a completion certificate continues for three consecutive years after that deadline. Do not treat this as an automatic extension or a safe grace period; the consequences of breaching the contract and other obligations need separate review.

Before committing, appoint a consultant to prepare a programme covering design, approvals, construction, fit-out and opening. Then discuss the following with the franchisor:

• When does the franchise term begin in relation to the construction phase?
• Is the opening date linked to securing all approvals and the completion certificate?
• Who approves design changes, and within what timeframe?
• What happens if the brand’s business model cannot be implemented on the site?

The aim is to avoid construction taking up a substantial part of the commercial term during which you expected to operate the business.

Base your financing plans on a right that can actually be mortgaged

The decree allows a musataha right to be mortgaged under Dubai Law No. 14 of 2008 concerning mortgages, subject to prior written approval from the landowner and the Dubai Land Department. Do not therefore base your financing plan on the assumption that bank approval alone is enough.

Ask the bank for its drawdown conditions early and share them with your legal adviser and the landowner. Identify registration, valuation, approval and construction costs, keeping them separate from franchise fees and operational fit-out costs. Also test whether you can cover payments if meeting the financing conditions takes longer than expected.

The decree prohibits dealings in the musataha right before the completion certificate is issued, except for a mortgage that meets the applicable conditions. Do not assume you can sell the right during construction to cover a cash shortfall.

Review ownership restrictions before deciding

The musataha rights holder owns the buildings they construct for the duration of the right, with ownership limited by that term and the designated purpose. Do not assess the investment as though you were buying permanent ownership of both the land and the building.

The decree also requires prior approval from the landowner and the Dubai Land Department, together with co-ordination with the relevant licensing authority, for the sale, mortgage or transfer of ownership of the buildings, companies granted musataha rights, or shares in those companies. This matters if your financing plan includes bringing in a partner later: the franchisor’s consent does not replace these approvals.

The practical takeaway: Before buying a franchise that requires construction, obtain proof of musataha registration, a review of the permitted use and remaining term, a realistic completion programme, and confirmation of the financing conditions and required approvals. A successful brand alone does not make the land suitable for investment.