Dubai: Buying an off-plan property? Here is what you need to know

Dubai and the UAE have a robust legal mechanism in place to protect purchasers of real estate property

Question: I am planning to buy an off-plan property in Dubai. Can you take me through the legal formalities of the same? What are my rights and obligations as a buyer? And how is my investment protected when it comes to delivering the property on time?

Response: Dubai and the UAE have a robust legal mechanism in place to protect purchasers of real estate property.

Pursuant to your queries, it is assumed that you are an expatriate. As you intend to buy an off-plan property in Dubai, the provisions of Law No. 7 of 2006 Concerning Real Property Registration in the Emirate of Dubai (the ‘Dubai Real Property Registration Law’), By Law No. 85 of 2006 Regulating the Real Property Brokers Register in the Emirate of Dubai (the ‘Dubai Real Estate Brokers Law’), Executive Council Resolution No. 30 of 2013 Approving Fees of the Land Department (the ‘Dubai Resolution Related to Fees of Land Department), Law No. 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai (the ‘Dubai Interim Real Property Register Regulations’), Law No. 19 of 2017 Amending Law No. 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai ( the ‘Dubai Amended Interim Real Property Registration Regulations of 2017’) and the Law No. 8 of 2007 Concerning Escrow Accounts for Real Property Development in Emirate of Dubai (the ‘Dubai Escrow Accounts for Real Property Development Regulation’’) are applicable.

In Dubai, an expatriate may buy real estate property. This is in accordance with Article 4 of the Dubai Real Property Registration Law.

Initially, you may approach a registered real estate broker in Dubai, explain your requirement and budget, and identity a suitable property to buy. The real estate brokers in Dubai are required to register themselves with the Real Estate Regulatory Agency of Dubai (the ‘RERA’), which is a regulatory body of Dubai Land Department (the ‘DLD’). This is in accordance with Article 3 of the Dubai Real Estate Brokers Law, which states, “No person may conduct the brokerage activity in the Emirate unless he is licensed by a Competent Entity and is registered on the Register.”

Further, once you find a suitable property, you may verify if the developer (seller) of the property has registered that project with the DLD. This is in accordance with Article 4 of the Dubai Interim Real Property Register Regulations which states: “A Master developer or sub-developer may not commence the implementation of a project or sell its units off-plan unless he takes possession of the land on which the project is to be constructed and obtain the necessary approvals from the competent entities in the Emirate.

“In all events, the DLD must create an entry on the registry folio of the Real Property to denote that it is being developed.”

Further, each real estate project registered with the DLD needs to set up an escrow account which is registered with the DLD as well. Any bank or approved financial institution in Dubai could act as an escrow agent. This is in accordance with Article 7 of the Escrow Accounts for Real Property Development Regulation, which states: “An Escrow Account shall be opened pursuant to a written agreement between the Developers and the Escrow Agent whereby the payments made by off-plan Units purchasers, or by the financers of the project, shall be deposited in a special account with the Escrow Agent in the name of the Real Property Development Project.

“The agreement shall prescribe the account management terms and the rights and obligations of contracting parties. A copy of this agreement shall be deposited with the DLD.”

Once the above verifications are completed, you may approach the developer (seller) and sign the Sale Purchase Agreement (the ‘SPA). However, it is recommended to obtain a legal opinion on the contents of the draft SPA from a legal counsel. Upon signing the SPA, you need to pay the initial deposit or the down payment to the escrow account of the project. Thereafter, you may request your broker or the developer (seller) to provisionally register the property in your name which is also known as Oqood registration by paying the applicable fee to DLD. This is in accordance with Article 8 of the Dubai Interim Real Property Register Regulations, which states, “… For the purposes of this Article DLD may, upon the request of a purchaser or on its own initiative, register in the name of that purchaser on the Real Property Register the Real Property Units that have been sold off-plan and registered in his name in the interim Real Property Register, provided that the purchaser fulfils all his contractual obligations.”

Thereafter, once you pay all the instalments, the developer (seller) should hand over the property to you (buyer) after the relevant inspections. In the event of breach of terms and conditions of the SPA, the party concerned may have to compensate the other monetarily and face the legal consequences. Further, in the event of default by you or the developer (seller), the aggrieved party needs to notify the DLD. The DLD will then serve a 30-day notice to the party concerned.

If the obligations are not fulfilled even after the notice, a monetary compensation will have to be offered. This is in accordance with Article 11 of the Dubai Amended Interim Real Property Registration Regulations of 2017.

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