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An escrow account is a bank account where funds are held in trust whilst two or more parties complete a transaction. In Dubai, “Law No. (8) of 2007 Concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai” was introduced to protect investors and the Dubai real estate sector. It requires a real estate development project to have an Escrow account in which the payments made by purchasers of units sold off-plan or by the financiers of the project are deposited. The law aims to give investors a guarantee and assurance of their investment. It also boosts the feasibility of Dubai’s real estate sector as a reliable investment opportunity.
The Escrow account law
The Escrow Account Law applies to developers who sell off-plan units in Real Estate Development projects in the Emirate of Dubai and who receive payments from purchasers or financiers towards such units. The law states that all payments made towards the purchase of any off-plan property need to be deposited into the escrow account of the developer. There are banks that are designated to deal with escrow accounts for real estate. The escrow account law is monitored by the Real Estate Regulatory Agency (RERA), which is under Dubai Land Development (DLD). The RERA and escrow laws enable people to purchase off-plan properties with confidence and offer protection from fraudulent dealings.
Management of the Escrow account
An Escrow Account is opened in the name of the project and will be dedicated exclusively to the construction of that real estate project. No attachment may be imposed on the payments deposited in this account for the benefit of the creditors of the developer. In the event of multiple projects being implemented by the developer, each project must have a separate Escrow Account. For transparency, depositors or their representatives may gain access to their accounting records and may request copies of such records. Also, representatives from official authorities may have access to and obtain copies of such records.
Promotion of off-plan units
A developer may not advertise and may not participate in local or international exhibitions to promote the sale of off-plan units unless he obtains authorization in writing from the Dubai Land Department. The developer has to meet all the required permits, regulations and approvals from both DLD and RERA to be given authorization.
After completion of the project
An Escrow Agent must retain five percent (5%) of the total value of each Escrow Account once the developer obtains the completion certificate. The retained amount will be released to the developer one year from the registration of units in the name of purchasers.
Delays or non-delivery by Developer.
In the event of any emergency where the Real Estate Development project is not completed, the Escrow Agent of that project must, after consultation with the Dubai Land Department, take the required measures to preserve the rights of depositors and ensure that the Real Estate Development project is completed or depositors are refunded their payments.
Disclaimer: The content on this page is for general information purposes only and does not constitute legal advice nor should it be used as a basis for any specific action or decision. We advise our readers to seek specific advice from relevant authorities regarding any specific issues.
