Protecting Yourself as a Buyer: Understanding Off-Plan Property Risks in Dubai

Dubai’s real estate market has seen a lot of gain in recent times, especially in the off-plan segment. However, as a buyer, you must be fully aware of your rights as well as the risks you might face if you decide to buy a property that is yet to be built. The fines that were recently levied on three developers by the Dubai Land Department (DLD) for off-plan sales regulations violation show the importance of the need for thoroughness in the buying process.

Legal Framework: What Buyers Must Know

According to Dubai's real estate Law No. (13) of 2008 Regulating the Interim Real Estate Register in the Emirate of Dubai, article 4 mentions that

"No master developer or sub-developer shall commence a project or sell its units off-plan before taking possession of the land on which the project is to be built and obtaining the necessary approvals from the competent authorities in the emirate."

This regulation is designed to protect buyers from fraudulent or financially unstable developers.

Moreover, Law No. (8) of 2007 Concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai states that all buyers depositing their payments of off-plan properties to an escrow account is mandatory. The main advantage of this step is that the sole use of the funds is directed to the project, and the chance of the developer misusing the payments from the buyers will decrease.

Recent Violations and Lessons for Buyers

In June 2024, the Dubai Land Department (DLD) took firm action against three developers and imposed AED 500,000 hefty fines for their violation of the regulatory requirements. These developers were engaged in unlicensed marketing activities, selling off-plan properties, and improperly registering and running an escrow scheme. All of these critical safeguards protect the investor and ensure financial security in real estate transactions.

This law enforcement came across as drastic action against all developers and buyers in the UAE's real estate market. Non-compliance is a serious problem for developers, while this is the aspect that touches transparency and consistency in the real estate sector of the UAE. This acts as a warning for buyers to be very careful while investing in off-plan properties.

It is of utmost importance for buyers to confirm a project’s legal status before committing themselves. The process should start by checking if the DLD has registered the project and that the funds are secured within a registered escrow account. If buyers do not do proper research, then they might expose themselves to a variety of risks that would put them in the arms of fraudsters waiting to take advantage of the situation should the developer run into financial risks like project delays or insolvency.

Below are some of the steps that should be considered from the buyer's perspective as a guideline to avoid any frauds or concerns before purchasing the property

How Buyers Can Protect Themselves

1. Verify Developer Credentials

Buyers should first make sure that the developers are registered with the Dubai Real Estate Regulatory Agency (RERA). Buyers can verify the project and the developer's certification with the DLD’s Dubai REST app. Some buyers may think that the developer is acting in good faith since they are advertising and promoting the project; meanwhile, to verify their status to avoid any doubts, check their license activity and if they have taken the necessary approvals with the RERA and the DLD.

2. Confirm Escrow Account Details

Buyers should verify that their payments are made to a registered escrow account. This account helps in safeguarding the buyers’ investment, thus ensuring that funds are only used for the construction of the project. Depositors or their representatives may go through their own accounting records and may ask for copies of such records and obtain copies if needed.

3. Avoid Unregistered Sales and Payments

When a developer requests direct payments that are not through the escrow account or when the developer has not secured the necessary approvals, this is a significant warning sign. Such transactions can significantly jeopardize your investment. Buyers should be sure to deposit any amounts in the escrow accounts ONLY; if the developer insists, buyers must make a case in the RERA.

4. Monitor Construction Progress

Despite the common occurrence of project delays, buyers should not adopt a passive approach. They should be proactive in monitoring their property's progress through on-site visits and by obtaining regular updates from the developer. If the developer is not transparent with the buyers, they will have serious issues such as legal or financial problems.

5. Understand Your Payment Plan and Obligations

Numerous off-plan projects are attractive due to the structured payment plans, but the buyers should make sure that they can meet these obligations. If you are late in making payments, you could permanently lose the amount already paid, as the developers have the right to reclaim and resell the unit.

6. Seek Legal Advice Before Signing

Engaging a real estate lawyer to review contracts and verify compliance with legal requirements can prevent potential disputes and financial losses. A legal expert can help you understand your rights and obligations.

Why This Matters for Buyers

If a project is not registered or does not have an escrow account, buyers have no recourse if the developer fails to deliver. This means the loss of investment and no legal protection. Ensuring compliance with Dubai’s real estate regulations is the only way to safeguard your financial interests.

Conclusion

The laws governing the property market in Dubai primarily aim to safeguard investors' interests, but it is crucial for buyers to independently verify the legitimacy of an off-plan project before making a purchase decision. Buyers can substantially cut down on risk and hence invest more wisely by going through the process of due diligence, making sure that escrow rules are complied with, and getting professional legal advice. Therefore, it is crucial for them to conduct thorough research, pose pertinent questions, and refrain from hastily purchasing off-plan property without thoroughly verifying all essential details.

Legal Disclaimer

This article is only meant to provide general information and does not establish any legal advice. Although every attempt has been made to ensure that the information provided is accurate, it should be acknowledged that laws and regulations evolve, and their application may differ depending on a variety of factors unique to different individuals. Therefore, readers are advised not to act upon the information contained herein without first consulting professional legal counsel.

Darwish Legal Consultants should not be held responsible for any mistakes or omissions that may be present in the content or for any losses or damages that may occur due to reliance on this information.

If you need legal help with real estate transactions in Dubai, including due diligence, contract review, and dispute resolution, please do not hesitate to contact:

Mohamed Darwish

Founder & Legal Consultant, Darwish Legal Consultants

📧 [email protected]

🔹 Specializing in hospitality, real estate, and corporate law in the UAE