An off-plan property is a property which you buy before its building has been completed. This means, that you are purchasing a plot by just viewing the plan and building model drawings rather than the actual property which you can see.
Question: I’m thinking of buying an off-plan property in Dubai on a payment plan offered by the developer. But what happens if I can’t make the payments to the developer since I’m not taking out a bank loan?
Answer: In Dubai, when a developer sells an off-plan property, it must be registered in the Interim Real Property Register with the Dubai Land Department (DLD). This is required by the Dubai Law No. 13 of 2008 on the Interim Property Register.
Once the off-plan property is registered, it can be sold, mortgaged, or legally disposed of according to Article 6 of the Dubai Law No. 13 of 2008 on the Interim Property Register.
If a purchaser fails to make the payment for the property to the developer, it may be considered a breach of the terms and conditions of the Sale Purchase Agreement (SPA) signed between the purchaser and the developer.
If a developer in Dubai sells an off-plan property and the purchaser fails to pay the purchase price, the developer can notify the DLD (Dubai Land Department). The DLD will then send a 30-day notice to the purchaser, asking them to fulfil their payment obligations. Before sending the notice, the DLD may try to resolve the dispute between the purchaser and the developer amicably.
If the purchaser still doesn’t pay the purchase price, the DLD will issue a document confirming the percentage of completion of the off-plan property sold to the purchaser in favour of the developer. Based on this percentage, the developer can take legal action against the purchaser without going to court or arbitration.
The actions that the developer can take in case of non-payment may include:
1. Keeping the amount already paid by the purchaser and asking them to pay the remaining balance.
2. Auctioning the property through the DLD and refunding any excess money to the purchaser.
3. Terminating the sales and purchase agreement unilaterally, keeping a certain percentage of the purchase price based on the completion of the property, and refunding the remaining balance to the purchaser within the specified time mentioned in Dubai Law No. 19 of 2017 on Interim Property Register.
Based on the laws and procedures set by the DLD, the developer may initiate legal action against the purchaser for non-payment of the purchase price.