Real Estate Development in Abu Dhabi
Article 12
Chapter 1 – Real Estate Development Projects
- No person may practice a real estate development activity unless they are registered in the Real Estate Development Register as a main developer or sub-developer.
- The developer registered in the Real Estate Development Register according to the provisions of this Article shall not be exempt from the obligation of obtaining any other licenses, permits or approvals from any other governmental entity to be able to conduct its work.
Article 13 Registration of Real Estate Projects
- The developer shall register the real estate projects with the Department according to the provisions of this Law and its Executive Regulation and the Department’s instructions.
- The Department shall mark an annotation on the Real Estate Register regarding the land where the real estate development project will be constructed, indicating that the project is subject to the provisions of the Law and that no disposition of the land is permitted without the approval of the Department.
- The Department shall delete the annotation mentioned in the previous Clause following the execution of the real estate development project and registration of its units in the names of the buyers in the Real Estate Register, or because of cancellation of the project according to the provisions of this Law.
Article 14 Marketing Real Estate Development Projects Sold Off-Plan
- Developers may not have recourse to advertising through the local or foreign media nor may they participate in local or foreign exhibitions to promote the off-plan sale of the real estate units of the real estate development projects. before obtaining a written permit from the Department which shall issue such permit within (30) days from the date of submitting the application along with all the documents requested by the Department from the developer to this effect according to the provisions of the law and the Executive Regulation.
- If the developer wishes to market his own Real Estate development project through a broker, he shall conclude a contract with the licensed broker pursuant to the provisions of this Law and deposit the brokerage contract concluded therewith with the department for registration in the real estate development register.
- The Department shall issue the resolutions and instructions required for the organisation of the conditions of advertising in the local and foreign media as well as the participation in the local and foreign exhibitions.
Article 15 Off-Plan Sale
- No real estate unit may be sold off-plan unless the following conditions are fulfilled:
- The approval of the competent entities on the real estate development project.
- The deposit of the main or subsidiary development plan of the real estate development project before the Real Estate Register at the Department. including the initial floor plan and initial compound plan.
- The developer shall hold property rights to the land on which the real estate development project will be established or the contractual rights. which allow him to develop the land and grant property rights to the real estate units to be constructed on the land.
- The developer shall submit proof that he has possession of the land on which the real estate development project will be constructed.
- The developer has opened a project escrow account.
- Obtaining the approval of the Department on the disclosure statement related to the real estate unit as per the form prepared by the Department and which shows all the data related to the real estate unit and the real estate development project.
- The buyer shall be bound to pay the value of the off-plan Real Estate unit according to the actual completion percentage of the construction works, unless otherwise agreed with the developer.
- The Department shall issue the resolutions required for the organisation of the matters related to the methods and mechanisms of off-plan sale as well as the documents that should be exchanged between the concerned parties in this regard.
Article 16 Inadmissibility of Imposition of Registration Fees
The developer may not collect any fees, whether registration fees or other fees, expenses or remuneration related to any dispositions of the real estates, except for the administrative fees received from others and within the maximum limit specified by the Department.
Article 17 Breach of Execution of the Off-Plan Sale Contract
- The developer or the buyer may rescind the off-plan sale contract should there be any substantial violation committed by any of them, and that, following the notification of either party of the correction of the violation. Any of the following cases are, without limitation, considered as a fundamental breach by the developer:
- Should he reject, without any justification accepted by the Department, to deliver the final contract of sale of the real estate unit to the buyer.
- Should he abstain from linking the payments to the construction completion phases.
- Should he substantially change the specifications agreed-upon.
- Should it be proved, following the delivery of the real estate unit, that it is unusable because of fundamental defects in construction.
- Any other cases determined by the Department according to the procedures specified in the Executive Regulation.
- The developer shall not be considered as having breached his obligations in the following cases:
- Should the land on which the real estate development project be expropriated for public benefit.
- Should any of the governmental entities freeze the real estate development project because of re-planning.
- Should there be buildings, excavations or service lines found within the site of the real estate development project.
- Should the main developer have introduced amendments to the site of the real estate development project, which resulted in the change of the borders and area of the project in a manner that affects the implementation of the sub-developer1s obligations.
- Any other cases determined by the Department.
- The Developer shall notify the mortgagee creditor of the buyer1s breach before rescinding the contract in order to give the mortgagee the chance to correct the violation committed by the mortgagor debtor.
Article 18 Account Opening the Project Escrow Account
Chapter 2 – Creating the Project Escrow
- The developer who wishes to sell off-plan real estate units of the real estate development project shall submit an application to the Department along with the supporting documents specified by the Department to open the project escrow account where all the amounts paid by the buyer of the real estate units or any other amounts are deposited according to the provisions of this Law and its Executive Regulation.
- The developer and the account trustee shall conclude an agreement under the name of “The Escrow Account Agreement” as per the form prepared and approved by the Department to create the account in the name of the relevant real estate development project.
- An escrow account shall be opened for each individual real estate development project. provided that the amounts deposited therein are exclusively allocated for the purposes of construction of this project as well as for the settlement of its financing payments according to the provisions of this Law and the conditions determined in the project escrow account agreement. Should the real estate development project be consisted of many projects that will be completed in different stages. the developer shall open an escrow account for each individual project.
- The real estate development projects executed prior to the application of the provisions of this Law shall be exempt from the conditions of this Article, provided that all the approvals required for the commencement of the projects are issued and that the percentage of completion of construction is not less than {70%) of the whole project.
Article 19 Disposition of the Funds Deposited in the Project Escrow Account
Chapter 3 – Management of the Project Escrow Account
The terms and conditions of the agreement of the project escrow account shall be observed when disposing of any amounts thereof. In all cases, no amount may be disposed of unless the developer has completed not less than (20%) of the construction works of the relevant real estate development project, provided that the Executive Regulation determines the manner of assessment of the completion percentage.
Article 20 Attachment of the Funds Deposited in the Project Escrow Account
The amounts deposited in the project escrow account may not be attached, without prejudice to the right of the buyer of the real estate unit sold off-plan in the real estate development project and that of the contractor and funder of such project to claim any money paid or due thereto pursuant to the construction or financing contract in any of the following cases:
- The real estate development project is cancelled or abandoned by the developer.
- The real estate development project is suspended by the developer and the Department considers such suspension as a cancellation or abandonment of the project.
- The registration of the developer is cancelled according to the provisions of this Law.
- A final judicial decision is issued.
Article 21 Obligations of the Account Trustee
- The account trustee shall provide the Department with periodic statements every three months concerning the receipts and payments of the project escrow account, an annual report prepared by an accredited auditor on the relevant account, the paid amounts and the extent to which they are consistent with the provisions of this Law and the project escrow account agreement.
- The Department may at any time request that the account trustee provides it with the statements of receipts and payments or any other information or data it deems necessary to access thereto.
- Should the account trustee violate any of the provisions of this Law and its Executive Regulation or the conditions of the project escrow account agreement, the Department shall notify this trustee of such violation and grant him a deadline to correct it. The account trustee shall respect the conditions of notification and implement the same within the period specified therein.
Article 22 Access to Data
Any person who deposits any money in the project escrow account according to the provisions of this Law may access the statements related thereto which are kept with the account trustee, and may obtain copies thereof.
Article 23 Mortgage of the Real Estate Related to the Real Estate Development Project
The developer may not place the land of the real estate development project or any property right pertaining thereto under mortgage, unless for the exclusive purpose of obtaining a funding for the construction of this project and provided that the developer and his funder respect the following:
- The buyer of the real estate unit shall be notified that the land of the real estate development project or the property right pertaining thereto is placed under mortgage and stipulate such matter explicitly in the sale and purchase contract.
- The developer undertakes and the funder of the developer approves, that the mortgage of the real estate unit, for which the buyer has fully paid its price and deposited it in the project escrow account, shall be removed.
- The bank or the funding institution shall be bound to deposit the whole amount of funding in the project escrow account and not to pay it directly to the developer.
Article 24 Amount of the Performance Bond
- The account trustee shall retain not less than (5%) of the overall value of the real estate development project as a performance bond to repair the defects that may appear after completion of the project.
- The amount mentioned in the previous Clause or any part thereof may be disbursed by the developer only after the lapse of one year from the date of the real estate development project completion certificate and the fulfillment of all the conditions of the performance bond during this year.
- The Department may approve the application of the developer to withdraw the amount of the performance bond mentioned in the first Clause of this Article before the lapse of one year from the date of completion thereof in return for a bank guarantee submitted by the developer to cover the withdrawn amount.
Article 25 Delay in Start or Delivery of the Real Estate Development Project
- Should the developer fail to start the real estate development project according to his contractual obligations. and buyers owning not less than (5%) of the sold real estate units file a complaint before the Department. the latter shall conduct an investigation concerning such project. If it is found that the developer has delayed the start of the project without an acceptable excuse in violation of the provisions of this Law, its Executive Regulation or the developer’s contractual obligations, the Department may cancel the project, in which case, the amounts deposited in the project escrow account shall be distributed to the depositors according to the provisions of Article (26) of this Law.
- The Department may impose a delay penalty on the developer to be paid in favour of the buyer of the real estate units if said developer delays the delivery of the real estate development project for more than (6) months from its expected date of delivery in accordance with the schedule to which the developer was committed before the Department, unless he proves that such delay was due to a reason beyond his control.
- The provisions of this Article shall not be applied to the real estate development projects of which work started before the effective date of this Law and the completion percentage is not less than 50%.
Article 26 Failure to complete the project
- If the developer fails to complete the real estate development project, the account trustee shall, following the approval of the Department, take the measures required to preserve the rights of the depositors in order to ensure the completion of the real estate development project according to the permits granted thereto. Such measures may include the completion of the real estate development project by the funder or another developer.
- If it becomes impossible to find a solution for the completion of the real estate development project within the period of (6) months from the date of approval of the Department according to the provisions of Clause (1) of this Article, the account trustee shall distribute the remaining amounts deposited in the project escrow account according to the following order and under the supervision of the Department:
- The unpaid expenses of the account management to the account trustees and up to a maximum limit specified by the Department.
- A pro rata division between the real estate development project’s funders, the buyers of the real estate units in the project or their funders if the amounts available in the project escrow account are not sufficient.
- A pro rata division between the project 1s contractors and suppliers if the amounts remaining in the project escrow account are not sufficient.
- Developer.
- The distribution abovementioned in the previous Clause shall not cause prejudice to the right of the creditors to have recourse against the developer for any shortage according to the provisions of the agreements and contracts concluded with the developer.
