Purchasing or selling of property is a huge financial move. There are local and international buyers in the real estate market in Dubai. The government has severe regulations to maintain the procedure to be fair and safe. The Sales and Purchase Agreement (SPA) is a legal document, which details all the terms of the sale at the core of any property transaction.
It is highly important to understand this contract. Be it your first home purchase, investment in a property or working as an agent, understanding how to read the SPA can help save you the trouble of understanding your rights, problems and give you the confidence to do it. This guide discusses the 10 most important clauses that appear in the majority of the property contracts in Dubai. All the clauses are described in a simple manner, and they are founded on local regulations of RERA, DLD, and the Oqood system.
Clause 1: Parties involved identification
This is the simplest and the initial section of any Sales and Purchase Agreement (SPA). It also indicates clearly who is signing the agreement.
Who is Recognized Here
This section will make sure that the two parties are well identified and known under the law and financially in the entire agreement.
- The Buyer
- Full name (as in the passport or national ID)
- Nationality
- Contact information (address, phone, e-mail)
- Passport/Emirates ID number
- The Developer or the Seller
- Full legal name of seller or real estate developer
- Business registration or license number (when it is a business)
- Formal contact information
- Name and title of the signing officer/person on the contract
You Buy through a Developer (e.g. Roots Heritage)
Ensure that the individual who signs the SPA is authorised to do so officially on behalf of the firm. In case you need it, you may ask for a Power of Attorney (POA) or authorization letter.
Clause 2: Description of the Property
This provision provides a full and accurate description of the property you are purchasing. It prevents misunderstandings and safeguards you when the end results do not correspond with what was agreed.
What This Clause Covers
It presents the main information you should be aware of and what protections this section of the agreement offers.
Plot Number and Location: Distinguishes the particular piece of land or unit, where it is in the building or community.
Size and Layout: It entails the built up area, bedrooms, bathrooms, balconies, etc.
Floor and Unit Number: Ensures that you are buying an apartment in a particular building and on which floor.
View and Orientation: Says where your windows are facing and whether you will have a view of the sea, park, road or other building.
Parking Spaces: List the number of allocated parking spaces, where available.
Features or Promised Amenities: These include things such as:
- Personal terrace or garden
- Communal swimming pool / gym
- Intelligent house systems or appliances
- Any other upgrades or fittings promised
For off-plan properties:
- Architectural drawings
- Floor plans of the future
- Specification list (such as flooring, bathroom fittings, ceiling height, and so on).
Clause 3: Price of Purchase and Payments Conditions
This provision tells you the price of the property, how and when you must pay, and what extra charges might be incurred.
What This Clause Contains
These are the points illustrating what you are agreeing to and what you should expect as a result.
Total Purchase Price: The total price of the property which is agreed between the buyer and the seller or developer.
First Deposit: A small amount of money that you pay at the beginning to seal the deal. Typically between 2 and 10 percent of the overall price.
Payment Schedule: Describes the manner in which the remaining amount is to be paid. It may pursue:
- A construction-linked (payments are made as the building goes on) plan.
- Time schedule (payments at set dates, irrespective of progress).
Additional Fees: Lists other expenses the buyer has to pay, including:
- DLD Registration Fee (normally 4% of the purchase price)
- Maintenance charges
- Commissions in real estate business
- Charges to pay NOC or service fees, when applicable
Clause 4: Dates of Completion and Handover
This condition states the time the property is supposed to be ready and delivered to the buyer particularly in off plan (under construction) properties.
The Important Sections of This Clause
These details will inform you of when and how you will get your property- and what will occur should it fail to be given on time.
Anticipated Completion Date (ACD): This is the expected date by which the project is to be completed and the property be available to be handed over.
Extension Periods: The developers may be given some leeway of 6-12 months after the ACD to factor in building delays by reasonable causes (weather, shortages, etc.).
Delays: In case the developer exceeds the ACD + extension period, the following penalties may be imposed:
- Buyer refund alternatives
- Delay payment Compensation
- Litigation based on the SPA conditions
Clause 5: Conditions Precedent
This provision enumerates the key requirements that have to be fulfilled prior to the Sales Purchase Agreement (SPA) becoming fully valid and binding.
It should be thought of as a checklist where things are put in place before the deal is officially in motion.
Typical Conditions Are:
Before the deal is fully effective, these conditions are supposed to be fulfilled by either the buyer, the seller, or both.
- No Objection Certificate (NOC): The developer provides a document that states that he/she has no objection in the sale of the property.
- Mortgage Approval: When the buyer is availing a home loan, the mortgage has to be first approved by the bank.
- Dubai Land Department (DLD) Approvals: The transaction has to be approved and registered by the DLD in order to complete the ownership process.
Clause 6: Default and Termination Clauses
This clause provides what occurs when either the buyer or the developer does not adhere to the contract. It spells out the legal repercussions and the out options of both parties.
In Case of Buyer Default (breaking of the contract)
This is what the developer can do in terms of the law when the buyer does not pay or fulfill his/her obligations in accordance with the contract.
Failure to Pay (such as installments or fee) May Result in Annulment of the Agreement
In this instance, the developer is entitled to retain a percentage of the amount that the buyer has paid.
The percentage that the developer is allowed to retain is normally indicated in the contract depending on the amount paid and the state of the project.
In Case Developer Defaults (breaches the contract)
In case the developer fails to complete the project within the Agreed Completion Date (ACD) and any grace period agreed to by the buyer, he/she may be entitled to:
- Terminate the agreement
- Ask to get your money back
The rights of the buyer in the case are based on what is stated in the contract and the UAE law.
Clause 7: Arbitration and Jurisdiction
This clause provides the explanation of where and how and in case anything goes wrong, any legal disputes between the buyer and the seller (or any other party) will be solved.
Typically, there are two chief alternatives:
1. Dubai Courts
Any contentious issue will be referred to government courts in Dubai. These courts are guided by the laws of UAE to resolve the case. It is a strict procedure, which usually involves attorneys, hearings and procedures.
2. Arbitration
Rather than proceed to the court, the two sides will resolve the conflict in a confidential way using an arbitrator (an independent legal professional). Arbitration tends to be quicker, more secretive and less complex than court. It is binding and this implies that the two parties have to abide by the final verdict.
Clause 8: Oqood Registration & Transfer of Title Deed
After the Sales and Purchase Agreement (SPA) is signed between you and the seller, the second step to note is your registration of the property with the Dubai Land Department (DLD). This is what renders your ownership formal as far as the law is concerned.
This registration in Dubai is carried out via an online system known as the Oqood Portal, particularly when purchasing off-plan (under-construction) units.
So, What Next after Registration?
In this section, what happens after the property is registered in your name will be explained.
Oqood Certificate
- This is an interim ownership certificate which is issued when you purchase an off-plan property.
- It establishes that you have a registered interest in the under construction unit.
Title Deed
- This is the last document of legal ownership that you get after the property is finished.
- It makes you the official property owner in the records of Dubai.
Paperwork You Will Require
In order to register, ensure that you possess:
- An executed copy of the SPA
- A passport copy and Emirates ID copy
- Receipts of payment (bank transfer receipts or confirmation of payment)
- No Objection Certificate (NOC) of the developer
- DLD registration fee and this is normally 2 percent of the property price
Clause 9: Agency Agreements and RERA Forms
Not only should you sign a sales contract when purchasing, selling or renting property in Dubai. The Real Estate Regulatory Agency (RERA) established by the government demands that certain standardised forms must be utilised at each phase of the property transaction.
These forms ensure that all people namely buyers, sellers and agents share a common legal procedure and are aware of their rights and duties. So, what are these RERA forms and what are they used for? Let us take a look at each one of them:
Form A – Seller-agent agreement
- This form is signed when the owner of a property (seller) engages a real estate agent to sell his/her property.
- It provides information on the property, its selling price, its mortgage, and terms of marketing.
- It also establishes that the seller is ready to allow this agent to advertise the property (online or otherwise).
- Upon signing, the agent proceeds to apply to Trakheesi permit (which is necessary to post ads) at the Dubai Land Department (DLD).
Note: A seller is allowed to sign with a maximum of three agents at any one time. This implies that one property will only be able to have three Form A contracts.
Form B – Agreement Between Buyer and Agent
- This is signed where a buyer employs an agent to assist him or her in locating a property.
- It enumerates the needs of the buyer- his or her location, budget, type of property, and preferences.
- It also contains the commission of the agent, the terms of cancellation and agent responsibilities.
- In case the buyer intends to terminate this agreement, he should complete Form U (see below).
Form F – Known as Sales and Purchase Agreement (SPA)
- This is the principal agreement between the seller and the buyer. It is also called the Memorandum of understanding (MOU).
- It also contains the agreed price, payment conditions and commissions of the agent.
- The two parties must sign it in presence of witnesses and the agent.
- It is a necessary form to begin the transfer of ownership in the legal sense.
- The property can only be registered with DLD and the ownership handed over upon signing Form F.
Form I – Agreement between Two Agents
- It is applicable where two agents (one agent representing the buyer and the other agent representing the seller) are involved in the same transaction.
- It makes both agents work together professionally and respect the rights and commissions of one another.
- This type of form avoids confusion between the agents and safeguards the interests of the buyer and seller.
Form U – Withdrawal of an Agreement with an Agent
- When a buyer or seller desires to terminate his/her contract with an agent (Form A or B), he/she has to utilize Form U.
- It is the only legal method of terminating the relationship with an agent.
- It should contain the cause of termination and the date of termination and it should be communicated to the agent in writing.
- In the absence of Form U, any cancellation may cause conflict or legal problems.
Ejari Contract – Rental Transactions
- Ejari is an independent mechanism run by RERA to record rental contracts.
- In case you are renting a property in Dubai, you have to have your tenancy contract registered by Ejari.
- This registered contract is needed to receive the basic services such as electricity (DEWA), internet, phone, and even visa renewals.
- Ejari guards the tenant and the landlord by making sure that rental activities are fair and that illegal increases of rent are prevented.
Clause 10: Other Clauses and Special Cases
Although the major sections of a Sales and Purchase Agreement (SPA) address the fundamentals of selling or purchasing a property, there are some special cases and additional provisions that the buyer and seller ought to know. These have the potential to influence the legal process, right of ownership and overall costs of the transaction.
Inclusion of Co-Buyer or Co-Signer
Occasionally, a buyer might have an interest in involving a third party in the deal- a family member, business partner or co-investor. Such an individual is referred to as a co-buyer or co-signer.
In order to do this legally, one will need to do the following:
- Mutual Agreement: All the parties (including the developer and the seller) have to agree to include the new person in writing.
- Legal Addendum: A formal letter, referred to as an addendum should be written and signed. This addendum amends the initial SPA with the information of the new member and his or her role.
- DLD Re-registration: The new version of the contract should be registered with the Dubai Land Department (DLD) in order to have the change reflected in the government database.
Abrogation of the Contract
In some cases, either the buyer or the seller might have to cancel the contract that has been signed. This may occur because of delays, funding issues or other personal factors.
This is how the process of cancellation works:
- Follow Termination Clauses: Each SPA will contain a section on how and when the contract may be terminated legally. These regulations should be observed to the letter.
- DLD Involvement: The cancellation should be done with the DLD. This implies making a formal request and any documents to support it (such as delay or payment default).
- Legal Justification or Consensus: The contract may only be terminated in case of a valid reason (e.g., the developer fails to deliver on time) or just in case both sides are in agreement in writing to cancel.
Escrow Account Compliance
In Dubai it is a legal requirement that developers must open an escrow account per real estate project. An escrow account is a bank account that keeps the payment of buyers safe.
This is how it is done:
- The funds you give on the property (like deposits and installments) are directly paid into the escrow account of the project-not the personal or business account of the developer.
- That money can be utilized in construction and the costs incurred in that particular project by the developer.
The reason it is important: This system safeguards your investment. Your money can never be diverted even in case the developer has financial problems. It minimizes the chances of delays or fraud in the project.
Extra costs or Hidden Costs
Most of the purchasers are only concerned with the price of the property. There are other expenses that are not very often stated in the beginning. These can be:
- Agency Fees: The amount that one pays to the real estate agent of his/her services (it is normally 2 percent of the price of the property).
- Maintenance Fees: Recurring charges towards building maintenance, security, cleaning etc.
- Community Fees: There can be charges to use shared amenities such as a pool, gym or park in the event the property is in a gated community.
- DLD Registration Fees: Government charges on the registration of the property which normally is 2% of the purchase price.
Final Thoughts
It is not optional, but mandatory to read and comprehend a Sales and Purchase Agreement of a real estate in Dubai. The SPA is not a pile of papers, but your legal protection. It secures your rights, makes the other party responsible and makes it compliant to the regulation of DLD and RERA.
With the knowledge of what to check, including payment terms and dispute resolution, you can secure your investment to make any mistakes and feel confident of entering your new property.
Regardless of the reputable developer you are purchasing such as Roots Heritage or another respected developer, use the SPA as a roadmap to ownership. Knowing its provisions makes the complexity of real estate a walk in the park- and positions you to achieve success in the Dubai property market.