New Abu Dhabi Real Estate Law – Abu Dhabi Law No 3 of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi

New Abu Dhabi Real Estate Law – Abu Dhabi Law No 3 of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi

The long-awaited real estate law aimed at regulating the real estate industry in the Emirate of Abu Dhabi has been released amid much enthusiasm with industry participants hoping it will give impetus to the real estate industry by providing additional clarity and legal certainty.

The enactment of the law represents a watershed in the Abu Dhabi real estate industry, particularly in the ‘Investment Areas’ where the absence of a real estate law has been keenly felt.

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sales, similar to Dubai’s Oqood registration system – importantly this applies to existing sale and purchase
agreements, subject to a 6-month grace period. The Department may also fine developers in case of non-
registration within this period;
• the prohibition of registration fees collected by developers – this means that the existing customary 2%
registration fee applicable on re-sales would be abolished, although developers would continue to have the right
to charge an administrative fee of an amount to be determined by the Department. We expect that in due course
this may open the door for the Department to levy its own registration fee for the initial registration in the
interim real estate register;
• prohibiting mortgages on project land (except for related construction financing which must be expressly
disclosed in the sale and purchase agreements);
• provisions for the cancellation of projects or appointment of a new developer, and return of installments paid
where projects experience delays in starting construction – importantly this applies for existing projects unless
the building has reached at least 50% completion. It is unclear at this stage how much delay there will need to
be to trigger the Department stepping in and cancelling the project, other than what is contractually agreed or as
set out in the Regulations. We expect that this will be approximately 6 months as that is the period before
which the escrow account will be wound down and proceeds distributed;
• the right for the Department to fine developers and use such proceeds to compensate third party purchasers
where the developer is delayed beyond 6 months. Importantly, this may apply to existing developments
depending on the stage of completion. Although there are exceptions for delays beyond the developer’s control,
this demonstrates the importance of clear disclosure to purchasers of the development timeframe and passing on
the risk of such compensation to contractors during the procurement process; and
• the developer now has an express decennial (10-year) liability for the structural integrity of the building, with a
one-year defect liability period. This is similar to the position in Dubai.
The new Strata Law introduces a number of key new features to the laws regulating multiply-owned developments,
• the determination of surveyors’ directions to standardise the area measurement methodology used by
• provisions for the formation of owners associations which will hold title to common property within multiply-
owned developments and be responsible for its repair and maintenance. As with Dubai, each owners
association will have a prescribed form of constitution, and an owners association may itself be a member of a
higher owners association, thereby permitting the registration of ‘layered’ strata schemes;
• provisions for the title subdivision into ‘units’ and ‘common areas’. As with Dubai, the Strata Law
contemplates the ‘volumetric’ subdivision of a building into designated components. This is particularly
important for mixed-use developments that include a hotel as hotel operators wish to avoid being part of an
owners association structure;
• new requirements for the sale and marketing of off-plan units, including that the developer owns or has
development rights over the project land, establishes an escrow account, registers the key development plans
and obtains the approval of the Department. Given the restrictions on withdrawals from escrow, the developer
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will effectively have to self-fund (or obtain loan finance) to enable the project to reach 20% completion of
construction works;
• giving off-plan purchasers express termination rights in cases of “substantial prejudice.” Although certain
examples based on wrongdoing or default are given in the law as to what constitutes “substantial prejudice”,
this list is not exhaustive. We therefore recommend that as much disclosure is given to purchasers to avoid any
potential for purchasers to argue that they have suffered substantial prejudice;
• similar to the position in Dubai, there will be a general requirement for a “disclosure statement” to be attached
to the sale and purchase agreement which provides prescribed information. The form of this disclosure
statement will be set out in the Regulations although we expect that this will be similar to the form prescribed in
Dubai, which requires disclosure of governance documents, utility arrangements and binding service charge
estimates for the first 2 years of operation; and
• provisions for the automatic imposition of a lien to be placed on a real estate unit in the case of unpaid service
charges. Dubai has a similar lien although the enforcement of this lien has proved to be difficult, so it will be
interesting to see whether the same develops in Abu Dhabi.
Further details of the new Real Estate Law will be published in the forthcoming edition of the Measure newsletter
issued by King & Spalding LLP.

Celebrating more than 130 years of service, King & Spalding is an international law firm that represents a broad array of clients, including half of the Fortune
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This alert provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice. In some
jurisdictions, this may be considered “Attorney Advertising.”

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1 Response

  1. GianlucaZogno says:

    Yeah being European kind of sucks, getting a 2DS with Pokémon X on day one cost me about 180 euros.

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