Question: I am planning to invest in an off-plan property in Dubai. What are my rights as an investor if the property is not handed over to me on time?
Answer: It would be advisable for you to first conduct basic due diligence prior to signing an off-plan unit sale and purchase agreement. Buyers should visit the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (Rera) or visit the DLD’s website to check and find out the following information about the off-plan unit.
i. If the real estate project (where the unit is located) is registered with the Rera.
ii. If there is an escrow account for the project, and accordingly obtain the escrow account details
iii. The percentage of completion of the project and the expected date of completion?
iv. If the developer is registered with the Rera, and whether the developer owns the development land or if there exists a development agreement between the owner and the developer.
v. If the developer has the required permits and approvals from DLD and Rera to sell units off-plan in the relevant project.
Upon obtaining satisfactory details about the off-plan unit, you may assure yourself that you are investing in a bona fide project.
With regard to your rights as an investor in terms of the timely handover of the off-plan unit, reference may be made to the provisions of Law No (8) of 2007 Concerning Escrow Accounts for Real Estate Property Development in the Emirate of Dubai. The Escrow Accounts Law makes it mandatory for a developer to open and maintain an escrow account for each real estate project proposed to be developed by the developer. This follows the provisions of Articles (6) and (9) of the Escrow Accounts Law, which read as follows:
“A developer who wishes to sell units off-plan must submit to the DLD a request to open an Escrow Account…”
“1. An Escrow Account shall be opened in the name of each property project and shall be exclusively dedicated for the purpose of implementing that project. No attachment may be imposed on the amounts deposited in this account in favour of the creditors of the developer.
2. In the event of multiple projects implemented by the developer, each project must have a separate Escrow Account.”
Furthermore, under the provisions of the Escrow Accounts Law, all payments made by investors/buyers are to be deposited in the dedicated escrow account for the real estate project. This follows Article (7) of the Escrow Accounts Law, which reads as follows:
“An Escrow Account shall be opened pursuant to a written agreement between the developer 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 records of the escrow account are also required to be made available to depositors (including buyers/ investors) or their representatives. This follows Article (12) of the Escrow Accounts Law, which reads as follows:
“Depositors, or their representatives, may have access to their accounting records and request copies of these records. Representatives of official authorities may also have access to, and obtain copies of, these records.”
Finally, in the unfortunate event that a project is not completed, then by the provisions of the Escrow Accounts Law, the concerned escrow agent must, upon consultation with the DLD take all necessary measures to preserve the rights of the various depositors by ensuring that the project is completed and refund of payments made by the various depositors. This follows Article (15) of the Escrow Accounts Law which reads as follows:
“In case of any emergency resulting in the non-completion of a property project, the Escrow Agent of that project must, upon consultation with the DLD, take the necessary measures to preserve the rights of depositors by ensuring the completion of the project and refund the payments made by the depositors.”
Pursuant to the foregoing, you may note that your investments in a bona fide off-plan unit in Dubai shall be secure with the escrow agent, in case the developer is unable to handover the unit to you on time. Under such circumstances, you may approach DLD for further guidance.
It is also important to consider that the terms of the relevant ‘sale purchase agreement’ for the off-plan unit hold great importance.
Therefore, prior to executing the agreement, it would be prudent on your part to satisfy yourself on the terms governing project completion and extensions of time, among other subjects. It would also be advisable on your part to consult with a legal practitioner in Dubai, who may provide you with the necessary advice and assistance on the matter.