Dubai Real Estate Development Legal Requirements

These are what you need to know about Dubai Real Estate Development Legal Requirements.

Real Estate Licenses 

Licenses are needed in order to proceed with a real estate development project. This is the first rule in real estate development before any developer can proceed with even making a property available for sale.

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.

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:

(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.

Without these opening the escrow account that shall be 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 financiers of the project are deposited) is impossible.

Real Estate Developer’s Obligation

Real estate developers need to be able to deliver the property they applied a license for, especially with the investor’s money on the line. But any delays in the performance of their obligations to complete the project, while an inconvenience, is very understandable and an expected risk. One cause of delay is the fulfillment of requirements. These include the approvals to be obtained from governmental bodies and the duties of the developer, the main contractor, and subcontractors.

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-developer’s obligations.

(5) Any other grounds to be estimated by the Agency. 

Strict Penalties for Violations

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;

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

(7) 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 de-registered 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.

Source: Roots Land Real Estate