Dubai: Consequences of Buyer Default on Off-Plan Property Payments

Maryam Pervez -

A property sold by a developer before it's built must be registered in the Dubai Land Department's Interim Real Property Register.

Question: I'm thinking about buying a property in Dubai that's still being built, and I'll pay the developer over time as per their plan. But what if I miss payments to the developer because I'm not getting a bank loan?

Answer: According to the laws in Dubai, specifically Law No. 13 of 2008 and Law No.19 of 2017, which regulate property registration, the rules apply in such cases.

In Dubai, when a developer sells an off-plan property, it must be registered in the Interim Real Property Register with the Dubai Land Department (DLD). This is outlined in Article 3(1) of Dubai Law No. 13 of 2008 on the Interim Property Register.

Additionally, properties sold off-plan and registered in the interim real property register by the DLD can be sold, mortgaged, or handled in any other legal way. This is stated in Article 6 of Dubai Law No. 13 of 2008 on the Interim Property Register.

If a purchaser fails to pay the purchase price to a developer (seller), it may be seen as breaking the terms of the Sale Purchase Agreement (SPA) signed between them.

In such a case, the developer (seller) can inform the Dubai Land Department (DLD) about the non-payment. The DLD will then send a 30-day notice to the purchaser, giving them time to fulfill their obligations. Before sending this notice, the DLD might try to settle the issue between the purchaser and the developer (seller) informally.

If a purchaser defaults on payment of the purchase price, the developer (seller) has several options according to Dubai Law No. 19 of 2017 on Interim Property Register:

  1. The developer can keep the amount already paid by the purchaser without terminating the Sale Purchase Agreement (SPA). They can then ask the purchaser to pay the remaining balance.
  2. The property may be sold at auction through the Dubai Land Department (DLD). If the property sells for more than the outstanding amount, the excess money is refunded to the purchaser.
  3. The developer can unilaterally terminate the SPA and keep a certain percentage of the purchase price based on the completion status of the property. The remaining balance is refunded to the purchaser within a specified timeframe.

These actions may lead to legal proceedings (execution proceedings) initiated by the developer against the purchaser for non-payment of the purchase price.

News Source: Khaleej Times