Law No. 8
Posted by lawno08 on 09/07/2009
Concerning Guarantee Accounts of Real Estate Developments in the Emirate of Dubai
We, Mohammed bin Rashid Al Maktoum, the Ruler of Dubai,
After perusal of Federal Law No. 5 of 1985 in respect of Civil Transactions, as
amended;
Law No. 7 of 2006 in respect of real property registration in the Emirate of Dubai;
and
Law No. 3 of 2006 specifying the areas where non-UAE nationals may own real
properties in Dubai,
Do hereby issue the following Law:
Chapter One
Definitions and General Provisions
Article (1)
This Law shall be named “the Law Concerning Guarantee Accounts of Real
Estate Developments in the Emirate of Dubai No. 8 of 2007”.
Definitions
Article (2)
Unless the context requires otherwise, the following terms and expressions shall
have the meanings as set out opposite each of them:
The Emirate: The Emirate of Dubai
Department: Lands Department
President: The President of the Department
Director: The General Director of the Department
Register: The Register prepared at the Department to register
Developers
Guarantee Account: The bank account designated for a property
development in which the amounts paid by buyers of
units off the plan or the project financing parties will
be deposited
Developer: A natural or legal person licensed to carry on the
activity of buying and selling properties for developing
and that includes the master developer and subdeveloper
Account Trustee: A bank or financial institution certified by the
Department for the management of the Guarantee
Account
Competent Authority: The Government authorities authorised to license the
Developers
Real Estate
Development: The construction of multi-storey buildings or
complexes 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: An allocated part of the property sold by the
developer to third parties.
Article (3)
The provisions of this Law shall apply to a developer who sells off-plan units in
real estate development projects in the Emirate and, in consideration, receives
payments from buyers or financing parties.
Article (4)
A special register to be named “Register of Developers” shall be prepared at the
Department. The names of developers licensed to carry out real estate
development activities in the Emirate shall be recorded in the said register. No
developer may carry out the said activities unless it is registered in the said
register and licensed by the Competent Authorities pursuant to the conditions
issued related thereto.
Article (5)
A Developer shall not advertise in local or foreign media, or participate in local or
foreign exhibitions, to promote the sale of units or properties off the plan, until
having obtained a written permit from the Department. The Director shall issue
the necessary decisions as required to regulate the requirements for advertising
in the media and participating in exhibitions.
Chapter Two
Establishing a Guarantee Account
Article (6)
A Developer wishing to sell units off the plan must apply to the Department to
open a Guarantee Account. The application should be accompanied with the
following documents:
1- Dubai Chamber of Commerce and Industry membership certificate;
2- Trade License;
3- Title deed of the plot to be developed;
4- Copy of the contract executed by the master developer and the subdeveloper;
5- Architectural designs and layouts approved by concerned authorities and the
master developer;
6- A financial statement certified by a certified legal accountant, containing the
revenues and expenses of the project and approved by the development’s
consultant about sums payable to creditors of the development;
7- An undertaking by the sub-developer to commence the project construction
after obtaining the master developer’s approval to sell off plan or an
undertaking from the master developer in case a sub-developer does not
exist.
8- A sample sale contract between the Developer and a buyer.
Article (7)
The Guarantee Account shall be created under a written agreement between the
Developer and the Account Trustee through which sums paid by buyers of units
off the plan or paid by financing parties shall be deposited in a special account to
be opened in the name of the real estate project with the Account Trustee.
The said agreement shall set out the terms for managing the account, the rights
and obligations of the contracting parties and a copy of this Agreement shall be
deposited at the Department.
Article (8)
The Department may record the purchase agreement entered into between the
master developer and the sub-developer related to the land, or any part of it
owned by the master developer, in the folio concerning such land.
Chapter Three
Management of a Guarantee Account
Article (9)
1. The Guarantee Account shall be opened in the name of the project and the
proceeds shall be used exclusively for the purposes of constructing the real
estate project. The Developer’s creditors are not allowed to attach the
money deposited in the Guarantee Account.
2. If the Developer has many projects, a separate Guarantee Account must be
opened for each project.
Article (10)
1. The Department shall prepare a special register named “Register of
Account Trustees” to register the names of the Account Trustees.
2. The Account Trustee is required to be qualified to manage the Guarantee
Account.
Article (11)
1. The Account Trustee must provide the Department with statements for the
revenues and expenses of the Guarantee Account on a regular basis. The
Department may request the Account Trustee at any time to provide it with
the information and data it deems necessary, and the Department may
appoint individuals it considers qualified to audit the statements and data.
2. If the Department finds that the Account Trustee committed any violation of
the rules of this law and/or its implementation regulations, then it shall serve
him written notice and grant him a period to rectify the violation.
Article (12)
The depositors or their representatives may examine their account records
and request copies and the representatives of the official authorities may
examine the records and obtain copies.
Article (13)
In the event a Developer mortgages a development to obtain a loan from
financing establishments or companies, then these establishments and
companies have to deposit the loan sum in the Guarantee Account to be
disposed pursuant to the terms of this law.
Article (14):
The Account Trustee has to retain 5% of the total amount of the Guarantee
Account after the Developer obtains the completion certificate and the reserved
amounts shall not be paid to the Developer until one year after the units are
registered in the names of buyers.
Article (15):
In the event of a force majeure which prevents completion of the real estate
project, then the Account Trustee for that project, after consultation with the
Department, shall take all the required actions to safeguard the depositors’ rights
to ensure the completion of the real estate project or the refund of the depositors’
money.
Chapter 4
Penalties
Article (16)
Without prejudice to any penalties provided for in any other law, a penalty of
incarceration and payment of a fine not less than 100,000 Dirhams, or either one
of them, shall be imposed on anyone who:
1- Carries on a property development business in the Emirate without a license.
2- Submits false documents or makes misstatements to concerned authorities in
order to obtain a license for carrying on a property development business.
3- Knowingly offers to 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 results of an
audit he conducts on a developer’s financial position, or intentionally conceals
significant facts from his report.
6- Any consultant who knowingly approves false documents about a property
development.
7- Any Developer who deals with a broker who is not registered in the Broker’s
Register at the Department pursuant to by-law No. 85 of 2006 regarding the
Real Estate Broker’s Register in the Emirate of Dubai.
Article (17):
A Developer shall be cancelled from the Register in any of the following
events:
a. If he declares bankruptcy.
b. If he does not commence construction within six months of the date
he was granted approval to sell off plan without an acceptable
excuse.
c. If his license is cancelled by the licensing authorities.
d. If he violates any of numbers (2) or (3) or (4) or (5) of article 16 of
this law.
e. If he is in violation of any of the laws and/or by laws regulating the
real estate development activity.
Chapter Five
Final Provisions
Article (18):
Existing Developers at the time this law becomes effective should adjust their
status in accordance with the provisions herein within six months of the date of
publication in the official gazette, and the Department may extend this period to
any other period which it considers suitable.
Article (19):
The Department may collect fees against the services offered in accordance with
this law.
Article (20):
Any article in any law or bylaw is cancelled to the extent it contradicts the terms
of this law.
Article (21):
The President shall issue the necessary decisions to implement the terms of this
law.
Article (22):
This law shall be published in the official gazette and shall be effective from the
date of publication.
Mohammad Bin Rashid
Issued in Dubai 6 May 2007.
19 Rabi’11 1428 H.
