Buying off-plan means paying for a property that is still to be built. Dubai addresses this risk with a legal framework supervised by the Dubai Land Department, built mainly on two laws: Law No. 8 of 2007 on escrow accounts for real estate development, and Law No. 13 of 2008 on the Interim Property Register.

1. Only licensed, registered developers can sell off-plan
Developers must be entered in the DLD’s Register of Real Estate Developers and licensed by the competent authorities. They cannot advertise or exhibit off-plan units without written DLD authorisation. They also cannot sell off-plan before taking possession of the land and obtaining the required project approvals. An off-plan sale contract signed before project approval is null and void.

2. A dedicated escrow account for every project
Before selling off-plan, a developer must apply to the DLD to open an escrow account. The application includes the trade licence, the title deed, approved plans and an auditor-certified financial statement of estimated costs and revenues.

• The account is opened with an Escrow Agent, a bank or financial institution accredited by the DLD, in the name of the project.

• Each project must have its own separate account.

• The funds are dedicated exclusively to constructing that project, and the developer’s creditors cannot attach them.

• Money from project financiers also goes into the escrow account.

3. Funds are released against verified construction progress
Escrow agents must send the DLD regular statements of revenue and expenditure, and the DLD can audit them at any time. The DLD’s escrow activation service ties disbursement to a recent DLD technical report on construction progress (no older than three months). The DLD produces these reports after a site visit and data collection. Investors also have the right to ask for the project’s current completion percentage, confirmed by a DLD-approved project consultant, when a payment is requested.

4. A 5% safety retention
Once the developer obtains the completion certificate, the escrow agent retains 5% of the account’s total value. It is released to the developer one year after the units are registered in the buyers’ names.

5. Oqood and the Interim Property Register
Every off-plan sale must be entered in the DLD’s Interim Property Register (Oqood). A sale or other transaction that transfers or restricts ownership is void unless it is registered there. Registered units can still be sold or mortgaged during construction. When the project receives its completion certificate, the developer must enter it in the main Property Register, with units registered in the names of buyers who have met their contractual obligations.

6. If a project cannot be completed
If a project cannot be completed, the escrow agent must act with the DLD to protect depositors’ rights. That means either ensuring the project is completed or refunding depositors.

The law also sets penalties. Unlicensed development, fraudulent project sales and misappropriation of project funds carry imprisonment and/or a fine of at least AED 100,000. Developers can also be struck off the Register.

7. Tools to verify before you invest
The DLD’s Dubai REST app lets investors in off-plan projects see the completion percentage, actual project photos, the escrow account number and payments due. The DLD’s Project Status Enquiry service is also available on its website. Always check that the project is registered and that the escrow details match before making any payment.

This article is for general information only and does not constitute legal advice.