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Dubai Development Legal Requirements Al Zahmy .pdf



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Dubai Development Legal
Requirements - Al Zahmy

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

Dubai Development Legal Requirements - Al Zahmy
It can be said that the most important real estate requirements lie in the conditions developed
for the real estate developer business in Dubai, as it is the main cornerstone of all real estate
de elop e t. The real estate de eloper is defi ed u der la as: A y atural or juristi perso
licensed to purchase and sell properties with a view to developing the same with such
definition including the main developer or sub-de eloper. I additio , real estate de elop e t
is defi ed as De elop e t of
o

ulti-storey buildings or complexes for residential and

er ial purposes. The Go er

e t of Du ai de eloped lear a d si ple conditions for

licenses. It supported these conditions with strict requirements to determine the duties and
liabilities of the parties involved in the real estate development together with safeguarding the
same by imposing strict penalties against those who breach such provisions. These actions
ensure transparency and bolster confidence in the real estate sector and reflect its significance
and magnitude for those who strategically plan to invest in a city. The development of the real
estate sector remain promising despite the magnitude of challenges, as evidenced by detailing
subheadings and relating the same to laws as set out in this concise essay.

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

First - License Obvious and Affordable Conditions
In order to proceed with a real estate development project, the real estate developer shall
comply with the provisions of the law governing the off-plan sale of the real estate properties.
This is the most substantial element of real estate development as it represents an investment
and commercial business by offering real estate units to investors against installments with a
view to achieving profits together with a parallel endeavor to convince banks of the profitability
of financing real estate development projects.

The local lawmaker in Dubai determined the legal umbrella governing such business in the Land
Department of the Government of Dubai, which is responsible for maintaining a special register
for real estate developers and determining the banks in which the developers and financers can
deposit the installments of the real estate units under the account of the real estate project.
Accordingly, since inception, the real estate developer has to open the escrow account, in
which the amounts paid by the purchasers or financers of the real estate units sold off-plan are
deposited.

Article (3) of Real Estate Development Escrow Account Act (8) of 2007 stipulates that the
provisions of this law apply to those who sell units off-plan and receive payments from
purchasers. Further, Article (4) emphasizes that no developer may engage in such business,
advertise in local or foreign media or participate in exhibition for promoting real estate units or
properties sold off-plan unless it is registered in and licensed by the Land Department in Dubai
represented by its director general.

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

Article (7) of the Act stipulates in relation to the real estate escrow account that any developer
who wishes to sell units off-plan must submit a request to open an Escrow Account and attach
the following documents therewith:

1. A certificate of membership in the Dubai Chamber of Commerce and Industry;
2. Trade license;
3. Title deed of the plot to be developed;
4. A copy of the contract concluded between the master developer and the sub-developer;|
5. The initial architectural designs and engineering drawings approved by the Competent Entities
and the master developer;
6. A financial statement of the estimated cost and revenues of the project approved by a certified
chartered auditor;
7. An undertaking by the sub-developer to start the construction works of the project upon having
obtained the approval of the master developer for off-plan sale, or an undertaking by the
master developer if there is no sub-developer; and
8. A standard sale contract between the Developer and the purchaser.
All such established conditions are required for opening the escrow account that shall be
contemporaneously accompanied by an agreement made in writing between the real estate
developer and the escrow (the bank in which the payments made by purchasers of units sold
off-plan or by the financers of the project are deposited). Such agreement shall determine the
account management conditions, rights, and obligations of the contracting parties with a copy

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

thereof being deposited with the Land Department.
It is important to shed light on the above conditions because they protect developers due to
the governmental control on such account and ensure that the amounts collected from
investors for purchasing units sold off-plan are only applied towards the real estate project.
These conditions also ensure the real estate developer is honest in relation to such
development and the cash it received for such purpose.

Second - Strict conditions for the performance of the mutual obligations of the real estate
developer and investors who purchase real estate units off-plan in consideration of
installments pro-rata with the completion rate and the hand-over of the real estate unit
We ill ta kle so e of the real estate de eloper’s o ligatio s y a s eri g the follo i g e erpressing question:

When is the real estate developer deemed late in the performance of its obligation to
complete the project?

Real estate developer delay in the performance of its obligations to complete the project is a
very material issue as an expected risk associated with building and construction agreements
with their diversified requirements. Such requirements include the approvals to be obtained
from governmental bodies and the duties of the developer, the main contractor, and
subcontractors. Therefore, a specific body shall be nominated to bear solely such liabilities and
risks in consideration of the investment advantages, margins of profits, and speculations.
Accordingly, the lawmaker has not left this issue to the will of developers or investors or to be
determined at the discretion of courts with their conflicting assessments based on the human
discretion for assessing the extent to which the real estate developer complied with the general
obligations under contract or tort principles.
www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

In recognition of such importance, the Government of Dubai has specifically determined the
standards relating to the issues that the real estate developer may encounter whilst executing
the real estate project. It suffices to demonstrate such cases in order for interested parties to
realize their clarity and sufficiency and so that those interested in the real estate domain can be
familiar with their legally protected rights. The specialists may refer to the resources referred to
herein.

Whereas the review of the real estate law indicates the cases where the real estate developer is
deemed in default in the completion of the project, Article (21) of the Executive Council
Resolution No (6) of 2010 approving the Executive Regulations of Law No (13) of 2008
Regulating the Interim Real Estate Register in Dubai expressly states the reasons deemed
beyond the reasonable control of the real estate developer, as follows:

1. If the plot where the project is to be constructed is expropriated.
2. If a government body has frozen the project for re-planning reasons.
3. If a building remains or manuscripts are discovered within the site of the project.
4. If the Master Developer makes alterations to the project site entailing the alteration of the
project boundaries and area in a manner affecting the performance of the sub-de eloper’s
obligations.
5. Any other grounds to be estimated by the Agency.

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

Third - Strict Penalties for Violations
Each reviewer of the legal texts realizes that the powers vested in dealers and investors are
subject to providing a secure, safe and stable investment atmosphere where the investor has
broadest credit powers by entering into off-plan sale agreements with investors together with
concluding banking finance agreements with banks and financial institutions to finance the real
estate project. Accordingly, the lawmaker has ensured the proper guarantees for both investors
and banks. In this regard, Article (16) of the Real Estate Development Escrow Account Act (8) of
2007 stipulates that:

Without prejudice to any penalties stipulated by any other legislation, an imprisonment
sentence and a fine of at least one hundred thousand Dirhams (AED 100,000), or either penalty,
shall be imposed on those who:

1. Engage in Real Estate Development activity in the Emirate without a license;
2. Provide the Competent Entities with incorrect documentation or information in order to obtain
a license to practice the Real Estate Development activity;
3. Knowingly offer for sale Units in fraudulent Real Estate Development projects;
4. Steal, appropriate, or forfeit any amounts of money delivered to them for the purpose of
implementing Real Estate Development projects;
5. As for auditors, deliberately preparing a fraudulent report upon auditing the financial standing
of the Developer or deliberately failing to disclose material facts in their report;

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

6. In the case of consultants, knowingly certifying fraudulent reports on a Real Estate
Development project; or

In the case of Developers, dealing with a real estate broker who is not registered on the Real
Estate Brokers Register maintained by the Department in accordance with Bylaw No. (85) of
2006 concerning the Real Estate Brokers Register in the Emirate of Dubai.
Furthermore, Article (17) stipulates that the real estate developer shall be deregistered and
punished with penalties set forth in Article (16) in the cases where:-

1. It is declared bankrupt;
2. It fails, without an acceptable reason, to commence construction works after the lapse of six (6)
months from the date on which he was granted permission to sell Units off-plan (as may be
estimated by the Land Department in Dubai);
3. The license granted to the Developer by the licensing entity is revoked;
4. It commits any of the violations stipulated in items 2, 3, 4 and 5 of Article (16) of this Act; or
5. It violates any of the laws and bylaws regulating the activity of Real Estate Development in the
Emirate.
We hope we have managed to make the real estate legal concepts a bit clearer for developers
and investors together with adding information to the legal culture for all interested parties.

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate

Best Regards,
Mr. Osama Bashir
Legal Counsel - Al Zahmy Advocates & Legal Consultants

Call +971 50 327 5790
Email osama@alzahmyadvocates.com

--Roots Land Real Estate is your property partner in the U.A.E. We are committed to assisting you
with the entire process of purchasing or selling your desired property. Our experience in Dubai
a d A u Dha i’s property

arkets has pro ided us ith i alua le insight that is largely

beneficial to investors.
Learn more about http://www.rootsland.com/

www.roostland.com | Dubai Real Estate Broker – Roots Land Real Estate


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