The Abu Dhabi new real estate law, Law No. (3) of 2015 Regulating Real Estate Sector in the Emirate of Abu Dhabi, has come into effect as of January 2016. This article discusses a few impotent provisions that have been introduced by the new law.

Part one of the new law defines important terms, such as the Real Estate Register, Account Trustee, Off-Plan sales, Service Fees, and so on.

Part two lays out the department’s power structure and authorizes Abu Dhabi’s Department of Municipal Affairs (the “DMA”) to regulate and supervise the real estate sector. In practice, the DMA is authorized to implement laws and regulations, issue licenses, regulate and control escrow accounts and cancel real estate projects.

Part three states the types of entities and persons permitted to engage in real estate-related activities. It is forbidden to practice any real estate-related activity before first obtaining a license from the DMA. Engaging in any real estate-related activity without a proper license from the DMA will lead to several fines, as set out by the law.

Part four of the law states that the developers have to be registered in the Real Estate Development Register which will record and keep all relevant data. Furthermore, off-plan properties have to be registered in the Interim Real Estate Register before any sales agreement can become binding on the parties. The law also prohibits developers from collecting any registration fees from investors; however, subject to the DMA’s approval, it allows developers to charge administrative fees.

Moreover, the law authorizes off-plan sales of properties if and only if certain requirements are met. Apart from mandatory approvals that they have to obtain, developers must, among other things, prove that they own real estate rights on the land and on the project to be built on such land. Another important requirement is that developers must open an escrow account for the development project and must pay moneys only from the escrow account. Additionally, the law does not allow any developer to dispose of any amount held in the escrow account unless the developer has constructed a minimum of 20% of the project.

Off-plan investors may be able to terminate the sales agreements where there has been a gross breach of the contract by the developer. Similarly, the law sets out consequences of delays in starting construction of the project or failing to complete the construction. In such circumstances, the DMA may be entitled to cancel the project and distribute the amount kept in the escrow account in accordance with the priorities set out in the law.

Finally, as stated above, the law sets punishments if any person violates the provisions of the law. For instance, the DMA may punish anyone who engages in real estate-related activates without a proper license by imprisonment or a fine of up to AED 200,000.

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