Law No. (8) of 2007
Concerning
Escrow Accounts for Real Estate
Development in the Emirate of Dubai[1]
ــــــــــــــــــــــــــــــــــــــــــــــ
We, Mohammed bin Rashid Al Maktoum, Ruler of Dubai,
After perusal of:
Federal Law No. (5) of 1985 Issuing the Civil Code and its amendments;
Law No. (7) of 2006 Concerning Real Property Registration in the Emirate
of Dubai; and
Regulation No. (3) of 2006 Determining Areas for Ownership by Non-UAE Nationals
of Real Property in the Emirate of Dubai,
Do hereby issue this
Law.
Chapter
One
Definitions
and General Provisions
Article
(1)
This Law will be cited as "Law No. (8) of 2007 Concerning Escrow
Accounts for Real Estate Development in the Emirate of Dubai".
Definitions
Article
(2)
The following words and expressions will have the
meaning indicated opposite each of them unless the context implies otherwise:
Emirate: |
The Emirate of Dubai. |
Department: |
The Land Department. |
Chairman: |
The chairman of the
Department. |
Director General: |
The director general of the
Department. |
Register: |
The register maintained by the
Department for registering Developers. |
Escrow Account: |
The bank account of a real estate
development project in which the payments made by purchasers of Units sold
off-plan or by the financers of the project are deposited. |
Developer: |
Any natural or legal person
licensed to engage in the purchase and sale of Real Property for Real Estate Development
purposes, and this includes the master developer and the sub-developer. |
Escrow Agent: |
The financial or banking
institution accredited by the Department to manage an Escrow Account. |
Competent Entities: |
Government entities authorised
to license Developers. |
Real Estate Development: |
Projects for the
construction of residential or commercial multiple storey buildings or
compounds. |
Real Property: |
Anything which is fixed and
cannot be moved without damage or alteration of its structure. |
Unit: |
Any designated part of the
Real Property that the Developer sells to third parties. |
Article
(3)
This Law will apply to Developers who sell Units off-plan in
Real Estate Development projects in the Emirate and who receive payments from
purchasers or financers towards such Units.
Article
(4)
The Department will
maintain a register known as
the “Register of Real Estate Developers” in which are entered the names of
Developers licensed to engage in the Real Estate Development business in the
Emirate. No Developer may engage in such business unless he is recorded in that
register and licensed by the Competent Entities in accordance with their relevant
requirements.
Article
(5)
A Developer may not advertise in local or
international media, and may not participate in local or international
exhibitions to promote the sale of Units or Real Property off-plan, unless he
obtains an authorisation in writing from the Department. The Director General will issue the resolutions required
for the regulation of advertisements in the media, and of participation in
exhibitions.
Chapter
Two
Opening
an Escrow Account
Article
(6)
Any
Developer who wishes to sell Units off-plan must submit to the Department a
request to open an Escrow Account. This request must comprise:
1. a certificate of membership in the Dubai Chamber
of Commerce and Industry;
2. a trade licence;
3. a title deed of the land to be developed;
4. copy of the contract concluded between the
master developer and the sub-developer;
5. initial architectural designs and engineering
plans approved by the Competent Entities and the master developer;
6. a financial statement of the estimated cost and
revenues of the project certified by an accredited chartered auditor;
7. an undertaking by the sub-developer to start the
construction works of the project upon obtaining 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.
Article
(7)
An Escrow Account will be opened pursuant to a written
agreement between the Developer and the Escrow Agent whereby the payments made
by off-plan purchasers, or by the financers of the project are deposited in an
account opened with the Escrow Agent in the name of the Real Estate Development
project.
This agreement will determine the terms of managing the account and
the rights and obligations of the parties to the agreement. A copy of this
agreement will be
submitted to the Department.
Article
(8)
The Department may update the registry entry of the plot
owned by the master developer to indicate that a purchase agreement has been concluded
between the master developer and the sub-developer in respect of this plot, or any
part thereof. A purchaser of an off-plan Unit may request that the Department update
the registry entry of the plot on which the project will be constructed to
indicate that a purchase agreement has been concluded between the purchaser and
the sub-developer.
Chapter
Three
Management
of an Escrow Account
Article
(9)
1. An Escrow Account will
be opened in the name of the
project, and will be
dedicated exclusively to the construction of that Real Estate Development project.
No attachment may be imposed on the payments deposited in this account for the
benefit of the creditors of the Developer.
2. In the event of multiple projects implemented by
the Developer, each project must have a separate Escrow Account.
Article
(10)
1. The Department will
maintain a special register known
as the “Register of Escrow Agents” in which are entered the names of Escrow
Agents.
2. An Escrow Agent must be qualified to manage
Escrow Accounts.
Article
(11)
1. An Escrow Agent must provide the Department with
regular statements of the revenue and expenditure of his Escrow Accounts. The
Department may, at any time, request any Escrow Agent to provide any
information or data it requires, and in all events, the Department may seek
assistance from any person it deems appropriate to audit such statements and
data.
2. If it is proven to the Department that an Escrow
Agent has committed any violation of this Law or of its implementing bylaws,
the Department must notify him in writing and specify a time limit for him to
remedy such violation.
Article (12)
Depositors or their representatives may gain access to
their own accounting records, and may request copies of such records.
Representatives from official authorities may have access to, and obtain copies
of, such records.
Article
(13)
If a Developer mortgages a project in order to
obtain a loan from finance institutions or companies, these institutions or
companies must deposit the loan amount in the relevant Escrow Account so that
it is managed in accordance with the provisions of this Law.
Article
(14)
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 (1) year from the registration of Units in the name of purchasers.
Article
(15)
In the event of any emergency situation where the
Real Estate Development project is not completed, the Escrow Agent of that
project must, after consultation with the 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.
Chapter
Four
Penalties
Article
(16)
Without prejudice to any penalties stipulated by
any other legislation, a jail sentence and a fine of at least one hundred
thousand Dirhams (AED 100,000.00), or either penalty, will
be imposed on any person who:
1. engages in Real Estate Development activity in
the Emirate without a licence;
2. provides the Competent Entities with incorrect
documentation or information in order to obtain a licence to conducts the Real
Estate Development activity;
3. knowingly offers for sale Units in fraudulent Real
Estate Development projects;
4. steals, appropriates, or forfeits any amounts of
money delivered to him for the purpose of implementing Real Estate Development projects;
5. in the case of an auditor, deliberately prepares
a fraudulent report upon auditing the financial position of the Developer, or
deliberately fails to disclose essential facts in his report;
6. in the case of a consultant, knowingly certifies
fraudulent reports on a Real Estate Development project; or
7. in the case of a Developer, deals 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.
Article
(17)
A Developer will
be struck-off the Register where:
1. he is declared bankrupt;
2. he 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;
3. the licence granted to the Developer by the
licensing entity is revoked;
4. he commits any of the violations stipulated in paragraphs
(16) (2), (3), (4), and (5) of this Law; or
5. he violates any of the laws and bylaws
regulating the activity of Real Estate Development in the Emirate.
Chapter
Five
Final
Provisions
Article
(18)
Developers carrying on business at the date on which
this Law comes into force must comply with it within six (6) months from the
date on which it is published in the Official Gazette. The Department may
extend this period as it deems appropriate.
Article
(19)
The Department may charge fees for any services
provided in accordance with this Law.
Article
(20)
Any provision in any other law or bylaw will be repealed to the extent that
it contradicts the provisions of this Law.
Article
(21)
The Chairman will issue the resolutions required for the
implementation of this Law.
Article
(22)
This Law will
be published in the Official
Gazette and will come
into force on the day on which it is published.
Mohammed bin Rashid Al Maktoum
Ruler of Dubai
Issued in Dubai on 6 May 2007
Corresponding to 19
Rabi al-Thani 1428 A.H.
©2015 The Supreme Legislation Committee in the
Emirate of Dubai
[1]Every effort has been made to produce an accurate and
complete English version of this legislation. However, for the purpose of its
interpretation and application, reference must be made to the original Arabic
text. In case of conflict the Arabic text will prevail.