How Your Money Is Protected When Buying Off-Plan in Dubai

An escrow account is a bank account opened in the project's name, into which buyers' payments are deposited and which is dedicated to building that project. Under Law No. 8 of 2007:

• Each project has its own account, dedicated exclusively to constructing that project.
• Payments from off-plan buyers and from the project's financiers are deposited in it. If a developer mortgages a project to borrow, the lender must deposit the loan in the escrow account.
• Money in the account cannot be attached for the benefit of the developer's creditors.
• The escrow agent must be a bank or financial institution accredited by DLD, and must give DLD regular statements of the account.
• Depositors can access and copy their own account records.

DLD's investor guide adds that escrow accounts are audited and monitored by RERA's Real Estate Escrow Account Division. The rule also covers agents: under Resolution No. 6 of 2010, a broker must pay the sale price straight into the project escrow account and may not deduct commission first.

Practical point: only pay into the project's escrow account, never into a personal or agency account.

Money leaves escrow only as construction progresses and only for permitted purposes. DLD's guidance says payments from an escrow account can only go to the project's contractors, consultants and marketing, with marketing capped at 5% of total sales.

Before payments are released, DLD says the account trustee's engineer visits the site and checks the project.

Two further safeguards follow:

• 5% retention. Once the developer obtains the completion certificate, the escrow agent retains 5% of the account's total value and releases it to the developer one year after the units are registered in buyers' names. DLD describes this as a guarantee against defects.
• Your right to see progress. DLD says that when you receive a payment request, you are entitled to know the project's current completion percentage. Under Resolution No. 6 of 2010, a buyer may ask a court to end the contract if the developer declines to link payments to the construction milestones proposed by RERA.

Separately, Law No. 6 of 2019 on jointly owned property makes developers liable for defects in structural parts for 10 years from the completion certificate, and for repairing or replacing defective installations for one year from handover of the unit. See our snagging guide for handover checks.

A developer cannot legally sell a single off-plan unit until the land, approvals and registration are in place. Under Resolution No. 6 of 2010, a developer may not start a project or sell units off-plan until it has taken possession of the land, has actual control of it, and has obtained the approvals needed from the competent authorities.

The same resolution states that any off-plan sale made before the project is approved and registered with DLD is null and void. Law No. 8 of 2007 also requires DLD's written authorisation before a developer advertises off-plan units or takes part in exhibitions to promote them.

DLD's investor guide lists the licensing steps, which include appointing an engineering consultant and a financial auditor, and providing an unconditional UAE bank guarantee of 20% of the project value or completing 20% of construction. Project registration with RERA and a no-objection to open the escrow account come before units can be registered for off-plan sale.

For wider due diligence on the company behind a project, read how to judge a Dubai developer.

You can check a Dubai project yourself, instantly, with DLD's Project Status Enquiry service. Search by land number, project number or project name on the DLD website, the Dubai REST app, or DLD's WhatsApp service on 8004488.

In the Dubai REST app, the Project Status (Mashrooi) service shows project details, status, developer details and escrow account details, and lets you view inspection details behind the completion percentage.

DLD's investor guide suggests confirming five things before you sign an off-plan contract:

1. Is the project registered with RERA?
2. Is there an escrow account, and what are its number and the name of the escrow agent?
3. What is the completion percentage and expected completion date?
4. Is the developer registered with RERA, and does it own the land or have a development agreement with the owner?
5. Does the developer hold DLD and RERA permits and approvals to sell off-plan in that project?

If you want a formal figure, an investor can request a completion report from RERA's technical auditor. DLD lists a fee of AED 15,000 per unit or villa for this.

A delay does not automatically end your contract or trigger a refund. DLD states that it does not have the authority to terminate a contract between developer and investor; the investor must go to the real estate court, while DLD can help the parties reach an amicable settlement.

Under Resolution No. 6 of 2010, DLD may attempt conciliation and, if both sides reach a written settlement that DLD approves, the settlement becomes binding.

The same resolution lists grounds on which a buyer can ask a court to terminate, including where the developer:

• refuses, without a valid reason, to deliver the final sale agreement;
• declines to link payments to RERA's construction milestones;
• materially deviates from the agreed specifications; or
• hands over a unit proven unfit for use because of material construction defects.

For seriously stalled projects, DLD says that where a project's completion does not exceed 5% and it has not been cancelled, RERA contacts the developer and sets a deadline, and if the developer does not comply, cancellation procedures begin. Where a project is completely suspended and the developer no longer exists, DLD says it will intervene to protect the parties' rights so the project can be completed. Your SPA may also include its own delay terms, so read it closely.

If RERA cancels a project, the rules require buyers to be refunded on a set timetable. Under Resolution No. 6 of 2010, RERA can cancel a project on a reasoned technical report, for example if the developer fails without justification to start construction, commits an offence under the escrow law, has no genuine intention to build, is declared bankrupt, or fails to build through gross negligence.

Once a project is cancelled, RERA must:

1. prepare a technical report and notify the developer in writing;
2. appoint a certified auditor, at the developer's expense, to verify what was paid in and spent; and
3. ask the escrow agent to refund the money deposited within 14 days of the cancellation.

If the escrow account does not hold enough, the developer must refund the shortfall within 60 days of the cancellation decision, unless RERA extends this. If it fails to pay, RERA must take action, including referral to the courts. Law No. 8 of 2007 also requires the escrow agent, in an emergency where a project is not completed, to act after consulting DLD so the project is completed or depositors are refunded.

DLD notes that the cancellation process may take at least three months, because it requires a committee to be formed.

Protection runs both ways. If a buyer defaults, the developer must follow a DLD process before it can end the contract.

Under Article 11 of Law No. 13 of 2008, as amended by Law No. 19 of 2017, the developer notifies DLD, which serves the buyer a 30-day notice to pay and, where possible, mediates a settlement. If the buyer still does not pay, the developer's options depend on how complete the unit is:

Any excess must be refunded within the deadlines set by the law. If cash flow worries you, compare payment plans before buying, or read about selling before handover.