Can You Exit an Off-Plan Deal Before Completion? A Legal Overview

Buying an off-plan property is common in the UAE. For years, prominent names like Emaar, Damac, and Sobha have launched glitzy towers and luxurious communities before breaking ground. Many people love the idea because it's usually cheaper than buying a ready-made property. You pay in instalments, and by the time it's finished, the value often increases.

However, sometimes buyers have second thoughts or their financial situation changes. Or they get a job abroad and no longer need that flat in Dubai Marina, which is still a hole in the ground. In such a case, can you walk away from an off-plan deal before the project is finished? And what does the law say about it in the UAE? Let's break down the ins and outs, so you know exactly where you stand.

Sales and Purchase Agreement (SPA) and Oqood

The Sales and Purchase Agreement (SPA) serves as your rulebook. It's the legal contract between you and the developer that outlines the property details, the payment schedule, the completion date, and what happens if things don't go as planned for either side. Don't sign anything until you have read and understood every single word.

Oqood registration officially records your off-plan property transaction with the Dubai Land Department  (DLD). If your property isn't registered in the Oqood system, your rights as a buyer are significantly weaker. Always ensure this step is completed, as it protects your money.

What Does UAE Law Say?

In Dubai, off-plan sales are regulated by Law No. 19 of 2020. The Dubai Land Department (DLD) closely monitors this practice. All off-plan payments must go into an Escrow Account managed by the DLD. Escrow accounts protect buyers in the event that a developer disappears or the project is cancelled.

Let's understand different scenarios for exiting an off-plan deal:

Scenario 1: The Resale Option

Yes, you can sell your off-plan property before it is complete. It is called "assigning" or "flipping" the property, and it's a common strategy. Instead of exiting the deal by cancelling, you transfer your contract to a new buyer.

Here's what usually happens:

Developer's Approval (NOC): You'll need a "No Objection Certificate" (NOC) from the developer. NOC prevents the developer from objecting to your transfer of rights to a third party.

Payment Threshold: Most developers require you to have paid a certain percentage of the property's total value (typically 30-40%) before they'll issue an NOC for resale. If you haven't reached that mark, you may need to increase your payments to meet it.

New Buyer Takes Over: The new buyer assumes your role. They'll reimburse you for what you have already paid to the developer (plus any profit or premium you have agreed upon) and then take over the remaining payment plan directly with the developer.

DLD Registration: The transfer of rights must be registered with the DLD to make it official and legal. The new buyer will pay the 4% DLD transfer fee.

Scenario 2: You Want Out (Buyer's Default)

Let's discuss what happens if you want to back out of the deal because you can't, or don't want to, continue making payments.

The developer must notify the Dubai Land Department (DLD) first. After that, the DLD sends you an official notice, giving you 30 days to pay what you owe or negotiate a new deal with the developer. If you still haven't resolved the issue within those 30 days, the DLD checks the percentage of the building that is finished and issues a certificate showing the completion percentage. This percentage determines how much money the developer can legally retain and the options available to them in dealing with the cancelled sale.

Project Not Started (or very little progress): If the developer hasn't kicked off construction or very little work has been done, they can usually cancel the contract and retain up to 30% of the amounts you've paid. The rest should be refunded to you.

Project Less Than 60% Complete: If construction has started but is less than 60% complete, the developer can cancel the contract and retain up to 25% of the total unit value (as stated in your SPA). Any amount you paid over the 25% should be refunded to you within one year or 60 days, whichever comes first, if the unit is resold.

Project Between 60% and 80% Complete: If the project is making good progress, between 60% and 80% finished, the developer can still cancel, but they can keep up to 40% of the total unit value. Again, any excess must be refunded within a year or 60 days of resale.

Project More Than 80% Complete: This is where it gets serious. If the property is over 80% complete, the developer has more power. They can demand that you pay the full outstanding amount. If you can't, they might even ask the DLD to auction the unit to recover their money. In some cases, they can terminate and retain 40% of the value, with a refund of the balance.

Scenario 3: The Developer is Delayed (Developer's Default)

What if it's the developer who is late? Maybe they keep delaying, and your promised handover date has passed with no sign of your new home. Your Sale and Purchase Agreement (SPA) should mention the completion date and usually allows the developer some extra time (often up to 12 months, but always check your contract). If they are still very late, even after this extra time, you can take action. You could ask for compensation, cancel the contract, or file a complaint with the Dubai Land Department to help solve the issue.

Compensation: Your contract (SPA) might say that the developer must pay you a set amount for each day or month they are late. It is referred to as "liquidated damages." Check your contract to see if you have this right.

Cancel and Get Your Money Back: If the delay is exceptionally long (your contract should specify how long is considered too long), you can cancel the deal and receive a full refund of the money you paid. To do this, you need to file a complaint with RERA or take legal action in court.

RERA's Help: RERA is the government body responsible for addressing real estate-related issues. You can file a complaint with them. They will check what's happening, talk to both sides and can fine the developer or even stop them from selling more units if they break the rules.

Special Tribunals: Dubai has established a special tribunal to address project cancellations. This group handles disputes and ensures that buyers receive what they are entitled to.

Conclusion

Exiting an off-plan deal before completion in the UAE is certainly possible, but it's not as simple as clicking an "undo" button. The UAE has strong laws to protect buyers from shady developers. However, if you do want to pull out, you may need to negotiate, resell, or pay a penalty. It is not as simple as cancelling a hotel booking. If you understand your rights, responsibilities, and options, you are better equipped to handle these situations.

Have questions about your off-plan contract? Consult with our trusted real estate agents for expert advice and guidance. Contact us now.