Right of Disposition in Iraqi Law

In Iraq, real estate is considered more than just a fixed asset; it represents a fundamental part of the country's economic fabric and plays a pivotal role in reconstruction and sustainable development. Therefore, it is crucial to understand the right of disposition in Iraqi law. Amidst rapid economic changes, the importance of comprehending the legal frameworks that govern ownership and real estate transactions, especially the concept of "the right," becomes prominent.

In fact, this right is a milestone in Iraqi real estate law, as it clearly differs from the concept of full ownership, raising many questions about its nature, the extent of its authorities, and its investment potential.

The ambiguity surrounding the right of disposition under Iraqi law stems from its historical roots, which extend to the Ottoman legal system. It combines the powers of use and exploitation that individuals possess while the state retains the bare ownership of the land. This legal overlap makes dealing with the right and the right of disposition under Iraqi law a challenge that requires a deep understanding of its provisions and applications.

In this regard, Osama Tuma for Legal Services and Advisory provides you with a comprehensive guide on the right of disposition under Iraqi law.

The Legal Foundation of the Right of Disposition in Iraqi Law

The right of disposition under Iraqi law is defined as an original real right, which grants its owner direct authority over a specific object without the need for intermediaries. The Iraqi legislator stipulated this right in Article 1169 of the Civil Code, which authorizes its owner with the powers of use and exploitation of state-owned agricultural lands, including benefiting from their soil. Despite the margin of authority this right provides to the disposer, the bare ownership of the land remains with the state.

The unique nature of the right dates back to its historical background, as it is considered an extension of the land system that prevailed during the Ottoman rule. At that time, the bare ownership of the lands belonged to the state, while individuals were granted the right to exploit and use them with the commitment to certain conditions.

This historical background explains why the right differs from full ownership and how the state remains the essential element in all matters related to this right. The legal nature of the right of disposition is that it is an "incomplete right" compared to full ownership. This incompleteness produces important legal and economic consequences.

Initially, the scope of the right of disposition in Iraqi law was limited to agricultural exploitation, whether plant or animal. The Iraqi legislator linked the continuation of the right to the exploitation of the land for agricultural purposes, considering the failure to do so a reason for the termination of the disposer's rights and the seizure of the land from them.

The law also specified the types of state-owned lands covered by this right, which are:

Pure state lands: The ownership and all rights of which belong to the state.
Tapu-assigned state lands: The right to which has been assigned to individuals.
Lizma-granted state lands: The right to which was granted under settlement and "Lizma" laws.

The ability to exploit and use state-owned lands does not give the disposer the authority to dispose of the bare ownership itself, as the ownership of these lands remains with the state. However, the state retains the right to "extinguish" or terminate this right for purposes of public interest, such as establishing public utility projects.

This fundamental restriction on the disposer's authority distinguishes the right radically from full ownership, as a full owner cannot be forced to cede their ownership except in specific expropriation cases, which makes understanding this restriction essential for any investor or individual seeking to deal with these lands.

Distinguishing the Right of Disposition from Other Real Rights

In fact, it is necessary to compare the right of disposition in Iraqi law with other similar real rights, most notably the right of ownership and the right of usufruct. While each of these rights grants specific powers over an object, each is distinguished by its own limits.

Comparison with the Right of Ownership

The right of ownership is considered the broadest real right, granting its owner three main powers: use, exploitation, and disposition. These powers collectively give the right of ownership its full economic value and allow the owner the freedom to dispose of their property through sale, gift, or mortgage, unless this conflicts with a legal text or a contractual condition.

In contrast, the right of disposition provides the disposer with the powers of use and exploitation only, while the power of disposition of the bare ownership remains the property of the state. The disposer cannot sell or give away the land itself; their dispositions are limited to the right they possess.

This fundamental restriction makes the right an "incomplete ownership" or a "right branched from the right of ownership," which requires special legal provisions, such as the state's right to extinguish this right if public interest so requires.

Comparison with the Right of Usufruct

The concept of the right of disposition in Iraqi law is similar to usufruct in some aspects, but there are clear distinguishing points, including:

Scope of Application: The right of disposition is limited to state-owned agricultural lands only, while the right of usufruct can be applied to any object, whether real estate or movable property.
Duration of the Right: The right of disposition under Iraqi law is a permanent right that transfers directly upon the death of its owner to the "holders of transfer rights," whose shares differ from the normal inheritance shares of the heirs, while the second right is considered a temporary right, as it ends with the death of the usufructuary.
Disposition: The usufructuary may sell or give away their right, but this does not prevent the right from expiring upon their death. The disposer, however, can lease or lend their right.
Guarantee: It is considered a financial right that is included in the disposer's financial liability, allowing creditors to seize it and seek its execution to settle debts.

Legal Dispositions

To perform any legal disposition, such as a sale or mortgage, on the right, the right of disposition in Iraqi law must meet the necessary legal conditions and pillars for its validity. These pillars are the cornerstone upon which the disposition is based to ensure its legal effects, and they are: legal capacity, sound consent, and a lawful object and cause of the disposition.

Iraqi law distinguishes between formal contracts and consensual contracts. Real estate dispositions are considered formal contracts that are not concluded merely by the consent of the two parties, but require specific procedures. According to the Iraqi Real Estate Registration and Civil Law, the sale of real estate is not concluded until it is registered with the competent Real Estate Registration Department.

Therefore, any real estate sales contract outside this scope is considered void and does not have any legal effect. The result is that it is impossible to demand the transfer of ownership; rather, the parties must only get back the amount paid.

In this context, the promise to sell real estate outside of the real estate registration is considered an "unnamed contract" and is not considered a sales contract. Responsibility for the illegal disposition may result in compensation for the promisee, but the defaulting party is not obliged to complete the sale.

Among the most important legal dispositions that can be made on the right of disposition in Iraqi law are:

Mortgage: The disposer can use their right of disposition as collateral for a debt, and creditors can seize it and enforce it as a financial right.
Leasing and Lending: The disposer has the right to lease their right or lend it to others for their use and exploitation.
Inheritance and Transfer: Upon the death of the right holder, the right transfers to the holders of transfer rights, who are subject to special distinguishing provisions in the distribution of that right.

As for the effects of incorrect dispositions, the Iraqi legislator equated a void contract with a corrupt contract. A void contract is not concluded and does not create any effect. In special cases, the disposition can be "suspended" on the permission of the right holder, such as the disposition of a "meddler" who deals with someone else's property without their permission, as it does not take effect unless the property owner permits it.

Conditions that prevent disposition are considered valid only if they are based on a legitimate motive and are limited to a reasonable period. They cannot be registered if they are contrary to the law.

The Right of Disposition under Iraqi Law as a Lever for Investment in the Modern Iraqi Landscape

The increasing economic changes in Iraq towards diversifying sources of income have prompted the legislator to amend its legislation to allow the right of disposition in Iraqi law to be freed from traditional restrictions. This shift represents a great investment opportunity that was not previously available.

Modern investment laws have allowed the allocation or leasing of real estate burdened with the right for investment projects under agreements between the investor and the right holder. Article 54 of the Federal Budget Law for 2023 also permitted the establishment of industrial, agricultural, and service projects on agricultural lands that lack a water share or are considered unsuitable for agriculture.

This is an exception to the laws that had restricted these lands to agricultural use only. In fact, this legal development opens new investment horizons where unused lands can be rescued from their marginal status to a high market value. Investment projects can target the following areas:

Residential and Commercial Projects: In cities experiencing population growth and urban expansion, such as Baghdad and Erbil.
Real Estate Tourism: In historically famous cities like Najaf and Karbala, where hotel projects and residential units can be developed.
Industrial and Service Projects: That meet the needs of various sectors, such as food and industrial projects.

Realizing these opportunities requires adherence to precise legal procedures, including the necessity of obtaining the state's approval as the owner of the bare ownership of the land, in addition to the approval of other partners in the right. It may also be necessary to "correct the category" of the land to match the nature of the project, which is an administrative and legal procedure that reflects the restrictions on the disposer's right.

This shift reflects the government's direction towards increasing the economic value of real estate and diversifying the economy.

How to Protect Your Right

Despite the investment opportunities that the right of disposition in Iraqi law can provide, dealing with it involves multiple legal challenges and risks, especially in the complex real estate landscape of Iraq. Disputes are not limited to individual conflicts but are intertwined with broader problems such as corruption and encroachments.

The most prominent disputes that you may face include:

Seizure and Encroachments: Iraq suffers from a situation that allows for the illegal seizure of many government properties, causing disputes to occur between individuals and influential parties.
Forgery and Fraud: Forgery of title deeds is one of the most complex issues, especially in the absence of the original owner in Iraq. Courts may register claims to invalidate the records of forged real estate, where the judiciary affirms the return of the real estate to the one who holds the original title deed after proving the forgery.
Boundary Disputes: Disputes arise over the boundaries of real estate, which requires an "original survey" to correct the record, or a complete expropriation of the property may be requested when the remaining part cannot be used.

To overcome these challenges, the Iraqi legal system has several means for settling disputes, starting from amicable solutions to courts. The parties can resort to:

Negotiation and Mediation: These are effective options for settling disputes without the need for a judicial path.
Resorting to the Competent Judiciary: If these solutions fail, the competent courts are an option to obtain a judicial judgment.

Conclusion

The right of disposition in Iraqi law is a special and unique right with a deep historical legacy and great investment opportunities, especially with the recent legislative changes.

Thanks to the new laws, the right of disposition under Iraqi law is no longer confined to agricultural exploitation but also provides opportunities for establishing industrial and tourism projects, which enhances its contribution to driving economic development.

For more details, please contact a law firm in Iraq.