The UAE’s real estate industry has proven its worth over the years, attracting investors from all over the world. To facilitate this influx, the government has enacted various laws and implemented rules and regulations to safeguard the rights of both buyers and sellers.
One such requirement is that the Sales and Purchase Agreement must be signed and registered (SPA). The SPA is a written document that details the terms and conditions of both parties’ property transactions. Besides from basic information, the agreement may incorporate other terms agreed upon by both parties. Having said that, the agreement legally binds buyers and sellers to the terms outlined in the document.
Because an SPA is a legal document, it is important in real estate transactions and should be carefully designed. We have included all of the important aspects to include and things to consider before signing the sales and buy agreement in UAE for your convenience.
EVERYTHING YOU SHOULD KNOW ABOUT SALES AND PURCHASE AGREEMENTS (SPA) IN THE UAE
While investing in off-plan properties in Dubai and other Emirates, the SPA is often signed. According to UAE real estate legislation, this agreement specifies both parties’ legal status. As a result, it is advised to prepare and sign the agreement following property inspection.
Let’s take a deeper look at when to sign a buy and sell agreement and what it should contain.
SPA CONTENTS
The SPA is a thorough document that contains all of the factors that might result in contract termination.
That being stated, here are a few items that should be covered in the contract.
LAYOUT OF PROPERTY
The agreement should include detailed specifics about the property layout when it has been completed. This might include the covered space, the interior, the exterior, and the quality of the materials used in the building.
FINANCIAL TRANSACTIONS
The contract should include all financial transaction terms and conditions such as down payment, monthly payments, discounts, and escrow account information.
PLAN OF PAYMENT
The contract should explicitly state the monthly installments and payment schedule for the remaining money.
INFORMATION ABOUT YOU
The agreement must include all of the buyer and seller’s personal information, such as their residential and commercial addresses, phone numbers, and Emirates IDs/Passports.
DATE OF TRANSFER
Because delayed handover of off-plan property is an issue, the developer is required to provide a handing-over date in the contract.
AMENITIES AND FACILITIES
If the developer has promised the buyer any kind of services or amenities when the project is completed, these should be stated out in the contract.
TERMS OF CANCELLATION
Buying an off-plan property is a long-term commitment; consequently, you may need to terminate the project before it is completed. Some developers impose constraints on project termination that may not be favorable to you. Be certain that you read and include cancellation terms that suit both parties.
RESELLING CLAUSE
Reselling, like canceling, might be difficult if the developer does not approve. As a result, it is recommended that the resale provision be included in the contract.
TERMINATION OF A SPA
The SPA can be cancelled if either the developer or the buyers fail to satisfy the terms of the agreement. The defaulting party is given an official notice and 30 days to reconciliation; beyond the grace period, the contract is dissolved.
If the customer fails to pay, the developer will be compensated based on the level of project completion. Below are the various phases of property completion and the compensation the developer can receive.
- Pre-construction: If the customer fails before the project begins, the developer will get 30% of the purchase price.
- Less than 60% Completion: If the property is not completed by 60%, the developer will get 25% of the purchase price.
- More than 60% Completion: Developers will receive 40% of the purchase price if the property is finished more than 60%.
If the developer defaults, the buyer has the option to terminate the contract. Developers typically default when they fail to deliver the property on the agreed-upon deadline. In this situation, the developer is given a 6- to 12-month delay to complete the project. Following the period, the buyer has the option to cancel the contract and get a return of the sum paid.
Note that the termination is subject to the terms of the SPA. As a result, carefully study the termination clause in the SPA. Furthermore, if the court is involved, the court’s decision may effect contract termination and compensation.
CONSIDERATIONS BEFORE SIGNING SPA
There are some things that should be examined while signing a sale and buy agreement in Dubai and other Emirates, similar to the tenancy contract checklist.
VERIFY PROJECT REGISTRATION
When signing a sales and buy agreement in the UAE, the first thing to do is check the project registration. Every real estate development project is registered with the appropriate Emirate authority, and its authenticity may be verified.
If you live in Dubai, the project should be registered with the RERA or the Dubai Land Department. Similarly, the project will be registered with TAMM in Abu Dhabi. To confirm the project registration, go to the appropriate authority’s official website.
APPLY FOR A DEVELOPER’S LICENCE
Only licensed real estate brokers and developers are permitted to operate in the region for the benefit of investors. As a result, request the developer’s license and double-check their registration with the authorities. You can also request a government-issued good behavior certificate.
SCREEN THE CONTRACT
The SPA is the most important aspect of the entire procedure and should be properly examined. Request that the developer sign the contract and thoroughly study every clause for at least a week. If you have a problem with any of the criteria, talk to the developer about it and work out a solution.
Moreover, verbal conversations and promises have no legal standing; so, every verbal condition that you have agreed on should be set down in the contract.
PRIORITIZE SUBTLE CONDITIONS
Subtle conditions are uncommon in the SPA because to the government’s strict rules and regulations. Even so, it is advised to look for hidden conditions that may be printed in smaller fonts or beneath the script. Additionally, watch for the asterisk symbol (*), which indicates that terms and conditions have been imposed.
CHECK THE ESCROW ACCOUNT
The escrow account is a special bank account that is solely used for off-plan transactions. All payments must be deposited in this account by the buyers. To safeguard the security of their money, request the developer’s bank account title and number and verify it with the bank.
VERIFY YOUR EMIRATES ID AND PASSPORT
Once you’ve completed all of the above processes, search for the developer’s Emirates ID and passport number shown on the contract. Check that the developer’s information matches the information in the contract.
These were the exact details of the UAE sales and purchase agreement. Signing an SPA protects investors’ and developers’ rights and ensures smooth real estate transactions. To that end, if you want to invest in a safe real estate market, you may look at a variety of residential properties for sale in the UAE.
