Real Estate: The Costly Mistakes Buyers and Sellers Make Before Sealing the Deal in Dubai and Abu Dhabi

The following essential provisions are typically included in a contract of sale, particularly in the context of real estate transactions, to avoid common transactional mistakes:

• Property Description: This encompasses the specifics of the property being sold, including its location, size, title deeds, and distinctive features. For instance, a residential apartment sale contract would specify the unit number, floor, building name, and square meters.
• Purchase Price: Specifies the property's agreed-upon price and payment terms (e.g., lump sum, instalments, or bank financing) and may establish penalties for defaults or delayed payments.
• Settlement Date: Defines the date on which the buyer completes the ownership transfer and pays the entire purchase price. For example, a contract may stipulate that the property transaction must be completed within 90 days of the signing.
• Cost and Liability Allocation: Details the allocation of expenses, including taxes, utilities, and service charges, between the buyer and seller. For instance, it may stipulate that the seller is accountable for all service charges up to the date of transfer.
• Termination: This section outlines conditions that may result in the termination of the contract, including nonpayment, failure to transfer ownership, or breach of agreement.
• Dispute Resolution: Establishes a dispute resolution mechanism, typically involving arbitration, mediation, or court proceedings.
• Jurisdiction: This specifies the legal jurisdiction that regulates the contract. For properties located in the UAE, the courts of the relevant emirate, such as Abu Dhabi or Dubai, are typically the jurisdiction.

Additional Terms and Mandatory Template

The Dubai Land Department mandates the use of the Property Sales Contract (Form F) for all property transactions. While this template provides a standard framework, it is often insufficient to address all contingencies. To ensure comprehensive protection for both parties, supplementary terms and conditions should be incorporated into the agreement.

These additional provisions may include deadlines for submitting necessary documentation, specific penalties for failing to meet timelines, or agreed-upon upgrades or modifications to the property. For instance, if a seller agrees to rectify certain defects before the handover, this should be explicitly stated as a supplementary clause in the contract.

Disclosure Requirements for Off-Plan Properties

For off-plan properties in Dubai and Abu Dhabi, developers are legally obligated to provide buyers with detailed disclosures.

One key disclosure relates to service charges. In Dubai, this is governed by Article 4 of the Direction for General Regulation Concerning Jointly Owned Properties (2010), while in Abu Dhabi, it falls under Article 15 of Abu Dhabi Law 3/2015. These disclosures ensure that buyers are aware of the financial obligations tied to the property.

Additionally, developers in Dubai must warrant the accuracy of their disclosure statements. Under Article 5 of the Direction for General Regulation Concerning Jointly Owned Properties (2010), developers may be held liable for damages if inaccuracies are identified within two years of the property's original transfer date.

Warranties and Obligations of the Seller

Although sellers are not statutorily required to make disclosures, most contracts include warranties to protect buyers. These warranties often cover:

1. Clear Title: Ensuring that the property is free from encumbrances, liens, or mortgages.
2. Authority to Sell: Confirming the seller's legal right to sell the property.
3. No Outstanding Debts: Assuring that all service charges have been paid and there are no unpaid debts.
4. Compliance with Regulations: Guaranteeing that the property meets all development regulations and has no outstanding obligations.

For example, if a seller fails to disclose that the property is involved in a legal dispute, they may face civil or criminal liability for misrepresentation.

Conclusion

When drafting or reviewing a contract of sale in the UAE, it is essential to include these critical provisions and ensure compliance with mandatory templates and disclosure requirements. Tailored supplementary terms not only safeguard both parties but also reduce the likelihood of disputes, fostering a smoother transaction process.