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Dubai issues escrow account law for property sector

Discussion in 'Dubai property' started by toulouse-lautrec, Jul 25, 2007.

  1. toulouse-lautrec

    toulouse-lautrec New Member

    trying to post the link but the software does not want me to (only after you have made 20 posts..) - maybe the admin of this board wants to rethink these constraints as i doubt they will help to make this board more pular ;)
     
  2. Investor___

    Investor___ New Member

    Dubai issues escrow account law for property sector
    By Robert Ditcham, Staff Reporter
    Published: July 25, 2007, 16:44


    Dubai: Payments towards ‘off plan’ property purchases in Dubai will be protected in specially managed accounts after a law was issued this week by Dubai Government.

    The eagerly-awaited ‘Law No. 8 concerning Guarantee Accounts of Real Estate Development in the Emirate of Dubai’ has now come into effect after being published in the Official Gazette.

    The law applies to any company or individual receiving ‘off plan’ payments for property that is not yet completed. However, at this early stage only properties that are launched from this week onwards will be subject to the law, according to Dubai Land Department.


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    Developers launching new residential or commercial multi-storey buildings and compounds will now have to apply to Dubai Land Department to open a guarantee account, which are known more commonly as trust or escrow accounts.

    To do this they must submit certain documents, including the title deed of the plot being developed, approved architectural designs and layouts, a letter of approval from a master developer and a trade license.

    If these papers are in order, the trust account will be opened according to a written agreement between a developer and the Land Department.

    Money paid by buyers or financiers towards properties will then be deposited in a special account opened under the name of the property development in an approved bank.

    Dubai Islamic Bank (DIB) on Wednesday acted swiftly to launch the Al Islami Escrow Account, the first such service in the region designed specifically for real estate developers.

    After setting up the account, the issue of how they are managed and when money is released becomes crucial.

    The law states that developers must apply to the trust account manager to release money from the account. The developer must first produce a certificate from a consultant working on the property that an agreed stage of construction has been reached.

    The trust account manager then must inform the Land Department about the sums being released to the developer.

    Even when a project is complete the developer will still not be given access to all the payments. The Land Department will keep 10 per cent of the project value for one year after completion until all units are registered in the names of buyers and title deeds are issued in their names.

    Fines of no less than Dh200,000 will be handed out if certain requirements within the law are not kept.

    FULL TEXT OF THE LAW

    LAW NO. (8)

    CONCERNING GUARANTEE ACCOUNTS OF REAL ESTATE DEVELOPMENTS IN THE EMIRATE OF DUBAI

    We, Mohammad Bin Rashid Al Maktoum - Ruler of Emirate of Dubai

    After perusal of:

    - United Arab Emirates Federal Law no. (5) of 1985, as amended concerning Civil Transactions,

    - Law no. (7) of 2006 concerning Real Estate Registration in the Emirate of Dubai,

    - Rule no. (3) of 2006 concerning allocation of areas where foreigners can own properties in the Emirate of Dubai,

    Do hereby promulgate the following law:

    Chapter 1
    Definitions & General Provisions

    Article (1)

    This Law may be cited as (Law no. ( ) of 2006 concerning Guarantee Accounts of Real Estate Developments in the Emirate of Dubai.

    Definitions

    Article (2)

    In implementation of the provisions of this Law, the following terms and phrases shall have the meanings appearing parallel thereto, unless otherwise provided by the context.

    Emirate : Emirate of Dubai

    Department: Department of Lands

    President: President of the Department

    Director: Director General of the Department

    Register: Register prepared by the Department for registration of developers.

    Guarantee Account: Guarantee account of a property development in which sums paid by buyers of units on the plan or by financiers of developments are deposited.

    Concerned Authorities: concerned government or semi-government licensing authorities.

    Developer: A natural or corporate person licensed to carry on property development business in the Emirate, including a main or minor developer.

    Property Development: Projects involving construction of multi-storeyed buildings or compounds for residential or commercial purposes.

    Property: Everything that is permanently fixed in its space and cannot be shifted without destruction or alteration in appearance.

    Unit: A partitioned part of a property which a developer sells to third parties.

    Article (3)

    Provisions of this Law shall be applicable to a who sells units on the plan of the Emirate’s property developments that are not yet completed, whether under or in the process of construction, and who receives payments from buyers or financiers against such units before completion of the developments.

    Article (4)

    A special register known as (Register of Developers) shall be prepared at the Department to register names of developers licensed to carry on property development business in the Emirate. No developer may carry on such business in the Emirate unless being registered in the Register.

    Article (5)

    A developer shall not advertise in local or foreign media, or participate in local or foreigner exhibitions, for promotion of sale of units or properties on the plan or in the process of construction in the Emirate, until having obtained a written permit from the Department. The Director shall issue the necessary decisions to regulate the terms and conditions of advertising in media and participation in exhibitions.

    Chapter 2
    Establishing A Guarantee Account

    Article (6)

    Without prejudice to provisions of Article (3) of this Law, a developer wishing to sell units on the plan shall apply to the Department in order to open a guarantee account and shall enclose the following documents:

    1- Trade license and certificate of registration of membership in Dubai Chamber of Commerce & Industry.
    2 - Title deed of the plot intended for development.
    3 - Letter of approval in relation to the development and issued by the main developer.
    4 - Architectural designs and layouts approved by concerned authorities and the main developer.

    5 - A balance sheet approved by the development’s consultant about sums payable to creditors of the development.
    6 - Building permit issued by concerned authorities
    7 - Copy of a sale contract between the developer and the buyer.

    Article (7)

    A guarantee account shall be established according to a written agreement between a developer and the Department through which sums paid by buyers of units on the plan, or paid by financiers, shall be deposited in a special account opened under the name of the property development in an approved bank in the Emirate.

    The agreement shall determine the conditions of account management, the rights and obligations of contractual parties and other terms and obligations.

    Chapter 3
    Management of a Guarantee Account

    Article (8)

    The Department shall enter into a contract with an approved, experienced and qualified auditor to manage a guarantee account under its supervision. Spending from deposited sums shall be according to the conditions of contract and the provisions of this Law, and the guarantee account shall be governed by criteria of financial and accounting control that are in force in this regard.

    Article (9)

    Depositors or their representatives may examine their own accounting records and request copies thereof. The representative of official authorities may also examine the records as well as obtain copies thereof.

    Article (10)

    In the event that a developer mortgages a development to obtain a loan from financing establishments or companies he shall have to deposit the mortgage sum in the guarantee account. Disposal of a mortgage sum shall be according to provisions of this Law.

    Article (11)

    A developer may apply to the auditor for spending from a guarantee account after submitting a certificate issued by the consultant of a development describing completed stage and the requirement of a subsequent stage. The auditor shall have to inform the Department in writing about sums paid to the developer.

    Article (12)

    Without prejudice to Article (11), an auditor shall disburse payments due to a developer within 7 working days from the date of request for payment or the date of completion of required documents.

    Article (13)

    The Department shall keep 10% of the value of a development in the guarantee account for a period of one year after a developer has obtained a certificate of completion. The held sums shall not be spent until the units are registered in names of buyers and title deeds are issued under their names.


    Chapter 4
    Penalties

    Article (14)

    Without prejudice to any penalties provided for in any other law, a penalty of incarceration and payment of a fine not less than 200,000 Dirhams, or either one of them, shall be imposed on anyone who:

    1 - Carries on property development business in the Emirate without a license.

    2 - Submits false documents or misstatements to concerned authorities in order to obtain a license for carrying on property development business.

    3 - Offers to knowingly sell units in bogus property developments.

    4 - Embezzles, uses or squanders payments delivered to him for the purposes of construction of property developments, and misappropriates such payments.

    5 - Any auditor who deliberately prepares a false report about the result of an audit he conducts on a developer’s financial position, or conceals significant facts from his report.

    6 - Any consultant who knowingly approves false documents about a property development.

    Article (15)

    If proved that a developer is unable to execute a development, the Department shall take necessary legal actions to protect rights of third parties.

    Article (16)

    1 - A developer shall be cancelled from the Register in any of the following events:

    1 - If he declares his bankruptcy.
    2 - If he cancels his license.
    3 - If carries on prohibited business in the Emirate.
    4 - If he repetitively violates provisions of Article (5) of this Law.

    Chapter 5
    Final Provisions

    Article (17)

    Existing developers at the time when provisions of this Law are applicable shall adjust their status in accordance with the provisions herein.

    Article (18)

    The Department may collect management fees against services offered in accordance with this Law.

    Article (20)

    This Law shall be published in the Official Gazette and shall be effective from the date of publication.


    Mohammad Bin Rashid Al Maktoum
    Ruler of Emirate of Dubai

    Promulgated in Dubai on Tuesday 10th of October 2006, corresponding to 18th of Ramadan 1427 AH.

    - The above stated amendments on the draft law was made on 12/12/2000.
     
  3. wayneis

    wayneis New Member

    This is Good News for future Investors. Thanks for the posting I will make it a sticky for a few weeks so others can read the information and the link to the Gulf news paper article is here
     
  4. Di2007

    Di2007 New Member

    That's is good news.. but am I right in thinking it's a little late for me as i've just purchase mine.. Although, hopefully all will be well and I won't need protection!

    Di2007
     
  5. toulouse-lautrec

    toulouse-lautrec New Member

    i've also already purchased but an escrow was offered as part of the purchase agreement :)
     
  6. savais

    savais New Member

    shame the law did not come out earlier. Do you think that the law is for new projects at the moment, but could be applied to current offplan projects in the future?
     
  7. toulouse-lautrec

    toulouse-lautrec New Member


    From the announcement:

    It appears everything you can buy already is not affected, only new offers.
     
  8. wayneis

    wayneis New Member

    From the news article
    Lets see what the Legal Guys make of the following
    Does Article (17) apply only to Chapter 5 or the whole document ?

     
    Last edited: Jul 27, 2007
  9. wayneis

    wayneis New Member

    New property law could lead to more investments

    Article Gulf Newspaper July 26, 2007

     
  10. wayneis

    wayneis New Member

    DIB unveils region's first escrow trust account service

    Link to Full News Article here
     
  11. Wannaberich

    Wannaberich New Member

    Great law but a little too late from what I see.I would imagine that the majority of developments which are to be built in dubai have already been launched?
    On the other hand perhaps it will have an effect on existing projects in terms of their price going up as I assume there could be a lot less developers wishing to proceed in dubai halting this relentless flow of new properties?
    Also,surely far more foreign investors will be attracted to dubai thus again pushing prices up?
     
  12. wayneis

    wayneis New Member

    Further explanation on Law 8 follow the link

    wannabe Good write up of the Law number 8 here may explain things a little more clearly for you.
     
  13. IndustryRE

    IndustryRE New Member

    If I have already purchased property then does this mean at some point before completion then my funds will be transferred into an Escrow account?
     
  14. aaron.cook

    aaron.cook New Member

    long over due, consumers generally need a lot more protection in Dubai. Eventually they will get there, but it will take some time.
     
  15. Goshy

    Goshy New Member

    RERA Document /Escrow law no. 8

    Hello everybody.

    I received the escrow information from Dubai Select, with an attachment document related to the law no. 8


    Thanks to your links, I have a full picture of the law no. 8

    But anyone can help me to find out what exactly the lines on the document sent from Dubai Select say? (As the document is written entirely in Arabic).

    Regards

    Goshy
     
  16. Goshy

    Goshy New Member

    Escrow law no. 8

    Hello

    Is anybody able to answer me please?
     
  17. iloilo

    iloilo Member

    I purchased a unit in Nov-2007 (after the Escrow Account Law was passed) and have already made 2 payments to date. I did not receive any letter/intimation from neither the Escrow Bank nor their solicitors confirming that my money is lying in their safe custody. The only place in the full property Agreement where there is mention about the Escrow Account is under the "Sellers Covenants and Warranties" clause where it says in one plain sentence: "The Seller undertakes to deposit the monies received from the Buyer in the Guarantee Bank Account". What are we supposed to infer from this statement and what is happening in reality - no one knows! Who can throw some light on this in relation to the Dubai Property Market?
     
  18. iloilo

    iloilo Member

    Hello Mr. Wayneis,

    I have not heard from you regarding the query I posted on 7th April. I had purchased a residential unit in Canada 3 years back & every time I issued the cheque to the developers towards the payment instalments, I used to get a letter from their solicitors confirming that they had received my cheque no.??? dated??? towards unit no.??? in such & such project alongwith the details of the building???? and it is being held in escrow a/c no.???? So I presume that escrow law in Dubai should also work along the same lines vis a vis the Canadian Propery Law. Do you have any knowledge of how the escrow account in Dubai works?
     
  19. abey

    abey New Member

    Dear Escrow Officer

    The highlighted portion in the following text has been altered in the RERA website. Why?

    What are the penalties for violators of the escrow law?

    A fine of not less than 100,000 AED and imprisonment for an undefined period will
    be imposed on anyone who engages in any of the following activities:


    • Developing property without a license;
    • Submitting false documents/statements to the authorities in order to obtain a
    license;
    • Advertising units from a bogus property development knowingly;
    • Misappropriating funds paid to the developer for the development of the property;
    • Being an auditor, preparing false reports or concealing facts;
    • Being a consultant, approving false documents; and
    • Being a developer, dealing with an agent who has not been registered with the
    Dubai Land Department.

    The registration of a property developer will stand cancelled if s/he:


    • Declares bankruptcy;
    • Violates any laws connected with real estate development;
    • Cancels his/her license; and
    Doesn’t start construction within six months after getting hold of approval from Dubai Land Department for selling property off-plan.




    Can there be any further rules and regulations on the escrow law?

    The Dubai Land Department will issue rules and regulations concerning the advertisement of property developments. The Department has also made it clear that it will issue further rules for escrow accounts through the recently established Real Estate Regulatory Authority (RERA).
     
  20. pussianny

    pussianny New Member

    relax warning how to subject to during crisis

    To me of 18 years. My guy act ons as the foreman in close shop. To it already declared reduction of the stick, and that whom pleasure not decrease, pleasure discount the pay on 20 %. Certainly it on the one authority is not a lot of, and with another it seems to me at most the creation! And article has be a question of across, there to be resulted the register of 10 not most demanded trades during critical time! I certainly too there is, and at you on act on something has exchanged after emergency? And how you in inclusive procedure it to go through? Also what I can succeed a do over to buoy up my guy at least?
     
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