What all to consider before signing sale purchase agreement in Dubai

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With a persistent variation in the property prices, the buyers are climbing the bandwagon to earn profits on investment. The developers are equally or slightly more beneficial from such a trend. 

Once both the
parties, buyer and seller agree to buy or sell a specific unit, they
enter into a Sale and Purchase Agreement commonly known as SPA in UAE.

SPA is a most frequently used jargon in commercial transactions
especially in the real-estate sector. In order to finalize a deal of
either a property or any other movable or immovable asset, a well
drafted SPA is required. Even though having a SPA is one of the primary
and most crucial requirements for the parties, yet parties fail to
scrutinize this document to understand their legal status pursuant to
the laws of UAE. It is always advised by Real Estate Lawyers to
carefully review the contents of the SPA before signing it or parties
must seek legal assistance. In line with the preceding, the Corporate
Lawyers in Dubai have mentioned a few notable points in this article
which must be carefully read and understood by parties before entering
into SPA.

Every Emirate has promulgated numerous laws regulating the
real-estate transaction within their Emirate. Accordingly, Dubai has
issued innumerable laws such as Law Number 7 of 2013 establishing the
Dubai Land Department, Law Number 9 of 2009 governing the interim
property register, Law Number 8 of 2007 on the Escrow account to be
maintained by Developers. All the foregoing laws offer protection to the
buyer's post purchasing the property within Dubai. Even though we have
ample of legislation safeguarding the interest of the buyers who are
purchasing property in Dubai but that will come into effect only post
the breach in the contract thus, prevention is always better than cure.
As evident from enormous cases, buyers are still in a hurry to sign the
SPA without glancing at the clauses mentioned in the agreement. Thus, it
is advised to all our readers to thoroughly review the terms of the
agreement or at least carefully look into the following issues before
signing the SPA:

1. Review the license of Developer

It is essential for the buyer to review the permits of the Developer
and to ensure if the developer is registered with the Dubai Land
Department. This step is easy and most important as no one wants to sign
the deal with a wrong developer. Thus, Department of Land, Dubai has
provided a list of developers registered with them, through which one
can ascertain if the developer is holding valid licenses and
simultaneously registered with the authority.

2. Seek registration record of project

Each and Every real estate project in the Emirate of Dubai is
registered with either Land Department or through Oqood as authorized by
Real Estate Regulatory Department of Dubai (RERA). Through convenient
access to the website of either authority, one can ensure if the project
is registered or not as the authority has provided a non-exhaustive
list of approved projects in Dubai.

3. Obtain a copy of the title deed

It is pertinent for the buyer to check if the actual owner of the
property, as what is mentioned in the title deed is mentioned in the
SPA. Thus, reviewing the title deed of the property is paramount. Apart
from reviewing the title deed, the buyer must also review the rights
awarded to the owner of the property and should verify if there are any
restrictions. In addition to title deed, the buyer can also seek a copy
of community declaration for understanding the rights in relation to the
use of the property.

4. Review the details of essential parties in the SPA

To hasten up the procedure, buyers often neglect to check the parties
involved in the contract as sometimes there are numerous parties to the
contract that is the owner, developer, manager and more and seller only
refer one party in the contract or rather a shell company just for
signing agreements. Thus, it must be carefully reviewed, and due
diligence on the seller is utmost necessary.

5. Check thoroughly the payment schedule

Considering a general scenario, the payment schedule terms offered by
the developer are often too lengthy and extensive. However, they are
one of the important document as it is the only obligation of the buyer
under the contract. It must be reviewed cautiously to check if it meets
the construction stages offered by the Developer.

6. Review the termination clause of the SPA

Termination provisions in a SPA are the most debatable clause as
evident from the numerous cases filed before the competent courts in
Dubai. In a general termination clause, the Developer retains the
initial investment amount paid by the purchaser in the event of
termination of the agreement or if the buyer fails to abide by his
financial obligations.
Accordingly, the buyer must carefully examine the termination clauses
allowing him to rescind the contract, upon default of sellers
obligations such as delay in handing over the property or failing to
register the property with the authority and similar.

7. Check the details of the Escrow account

Dubai Law Number 8 of 2007 on maintaining the escrow account, obliges
each contractor or developer in Dubai to maintain an escrow account for
the project and all the investment made by the sellers should be
submitted in the escrow account. The property developers, failing to
abide by this provision can face hefty penalties. Thus, it is essential
for the buyers to seek details from the developer or RERA of an escrow
account to ensure the security of investment amount.

8. Study the dispute resolution clause

Buyers must carefully study the governing law to ensure if the law
regulating the contract is of UAE. In addition, he must check the method
for resolving disputes which can be either through UAE courts or
independent arbitration centers. In case the contract opts for
arbitration, buyers must seek legal advice from Arbitration Lawyers in

9. Check a power of attorney for authorized signatory

Sometimes, the developers authorize third parties to sign the
contract on their behalf which is commonly known as authorized
signatories. Ergo, the buyers must carefully review power of attorney
granting signatory rights to the authorized signatory.

10. Check the completion date of the project and consequences for failure

Every sale purchase agreement has a completion date on which the
seller will hand over the unit to the buyer. However, we have witnessed
numerous cases, wherein the sellers fail to oblige with the hand over
date. On the other hand, buyers being unaware of the completion date
lose their right of terminating the property and seeking compensation.
Therefore, buyers must determine the completion date of the project and
should understand the legal consequences for the seller, if they breach
the provision of the contract. 

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