What are the rules for opening and withdrawing from an off-plan escrow account?

Dear Questioner,

In the UAE, particularly in Dubai, the Escrow Law governs how funds for off-plan real estate projects are managed to protect the interests of buyers and ensure that developers use the funds appropriately.

This is in line with Law No. 8 of 2007 (Dubai Escrow Law) and Law No. 13 of 2008 (on off-plan sales).

Withdrawals are only permitted after the developer achieves certain construction milestones. These milestones are verified by RERA and independent third-party engineers.

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Dear Questioner,

Thanks for your inquiry!

According to the UAE Escrow Law, all developers of off-plan properties are required to open an escrow account for each project they undertake. This account is used to hold the funds of buyers until the completion of the project.

To open an off-plan escrow account, the developer must submit the following documents to the Real Estate Regulatory Agency (RERA):

1. A copy of the project's master plan and building permit.

2. A copy of the developer's trade license.

3. A copy of the project's sales and purchase agreement.

4. A copy of the project's escrow agreement.

5. A copy of the project's bank guarantee.

6. A copy of the project's construction contract.

7. A copy of the project's insurance policy.

Once the escrow account is opened, the developer must deposit all funds received from buyers into the account.

The funds can only be withdrawn for specific purposes, such as construction costs, project expenses, and payments to contractors and suppliers.

To withdraw funds from the escrow account, the developer must submit a request to RERA, along with the following documents:

1. A detailed breakdown of the expenses for which the funds will be used.

2. Invoices and receipts for the expenses.

3. A certificate from an independent auditor confirming that the expenses are related to the project.

4. A copy of the project's progress report.

5. A copy of the project's insurance policy.

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Greetings,

Dear Questioner,

Recently, several amendments to the escrow account rules have been made. The developer's responsibility and project completion are directly linked to the withdrawal procedures.

Everything will also be monitored by RERA through their independent third-party engineers.

If you need further clarification regarding the procedures, we can schedule a consultation session for you.

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Thank you for your inquiry regarding escrow accounts for off-plan properties!

Under Dubai’s escrow law, developers are required to open an escrow account with an approved bank for each off-plan project.

This account ensures that the funds from buyers are used solely for the development of the project.

To open an escrow account, the developer must register with the Dubai Land Department (DLD) and meet specific requirements, including providing the necessary project approvals, agreements, and insurance.

As for withdrawing funds, developers must follow strict guidelines. Funds can only be withdrawn for specific project-related expenses and must be authorized by an independent engineer who confirms the completion of various construction stages.

The developer also needs approval from the DLD before any withdrawals can be made.

Given the complexity of these procedures and the importance of compliance with local regulations, I recommend seeking professional legal advice to ensure everything is handled properly.

I’d be happy to assist you further.

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Best regards,

Suhail Rana

Dear Questioner,

An off-plan escrow account holds funds securely during real estate transactions for properties under construction, protecting both buyers and sellers.

1. Requirements to Open an Account:

- Parties Involved:

Typically includes the buyer, developer, and escrow agent.

- Documentation Needed:

• Signed purchase agreement
• Identification for all parties
• Proof of funds from the buyer
• Additional documents as required by law

- Escrow Agreement:

This document outlines:

• Deposit amount
• Conditions for releasing funds
• Responsibilities of each party

- Deposit Requirements:

Buyers usually need to deposit a percentage of the property price.

2. Withdrawal Procedures:

- Conditions for Withdrawal:

Funds are released based on agreed conditions like construction milestones or mutual agreements.

- Requesting Withdrawal:

Formal requests must be submitted to the escrow agent with supporting documentation.

- Verification Process:

The escrow agent checks that conditions are met before authorizing disbursement.

- Disbursement Timeline:

Approvals can take days to weeks, depending on the institution.

- Fees:

There may be fees for maintaining the account or processing withdrawals.

Opening an off-plan escrow account requires proper documentation and an understanding of the conditions for fund withdrawal as outlined in the escrow agreement.