Dubai’s Escrow Account Law

by Clotilde

Constituting part of the on-going efforts to move away from the burst bubble of 2008, the government of Dubai has applied extensive measures to protect the real estate sector of the Emirate.

The authorities have since been consistently adamant in increasing the confidence in foreign investors in the booming real estate sector. Part of the solution is the introduction of the Law No. (8) of 2007 Concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai (the “Escrow Account Law”), implemented with the aim of protecting its investors and its own real estate sector. Prior to the passing of the Escrow Account Law, various instances were recorded where the developer would interrupt construction of its real estate project, resulting in delays on completion of the construction and an undeniably high level of insecurity to those that had invested into real estate projects off-plan.

The little comfort given to the purchasers of off-plan was further diminished by the lack of regulatory measures in place for the imposition of obligations of the developers in the regulation of their expenditures. What made matters further unstable was the purchasers of off-plan being faced with the unregulated possibility of the developer abandoning the construction and leaving the country, leaving the investors without the property they had purchased for and without their investment. One can therefore see the necessity of the Escrow Account Law, one that aims to deliver to investors a certain level of guarantee and reassurance and boost the feasibility of Dubai’s real estate sector as a reliable investment opportunity.

Fundamentals of the law 

The Escrow Account Law is a measure directly applied to property that is to be sold off-plan anywhere in the Emirate. Dictated under the new law, all payments made towards the purchase of any off-plan property (whether a residential villa, apartment or a commercial building) need to be deposited into the escrow account of the developer. At the time of requesting for a no objection from the relevant authority for the sale of properties off-plan, the developer is required to open an escrow account dedicated to the development project of the property in question. The management and operational aspects of the escrow account are instilled in the predetermined terms and regulations approved by the Dubai Land Department. The Dubai Land Department, specifically its department of Real Estate Regulatory Agency, are tasked with the overseeing that all transactions pertaining to the purchase of off-plan property are in conformity with the law.

Developer’s obligations

The Escrow Account Law, in Article 3, clearly states that the law shall apply to developers that are selling properties off-plan and that shall be receiving payments for the purchase of those properties. The law continues in highlighting that no developer shall be authorised to advertise the sale of properties that are yet to be completed in terms of construction prior to obtaining such formal authorization from the Dubai Land Department.

In light of this, all developers must be registered in the register of developers held and maintained by the Dubai Land Department, and all developers wishing to sell properties off-plan must receive approval to do so. The approval involves the submission to the Dubai Land Department of a number of documents, including title deed to the land on which they shall be constructing, a series of architectural designs and layouts and the trade license and Dubai Chamber of Commerce & Industry certificate of the development company.

Escrow Account 

Under the Escrow Account Law, the developer shall have to open a bank account at one of the accredited banks in the UAE. This bank account shall only be used for one particular development project. Notably, the Escrow Account Law does provide that creditors of the developer are not entitled to seize any funds held in the escrow account.

Upon finalization of the opening of the escrow account, the Dubai Land Department shall regularly request for statements of the revenue and expenditure of the escrow account. The Dubai Land Department shall request any information that it shall require from the bank in regards to the escrow account and may seek a third party’s assistance in the event it shall deem appropriate to audit the statements and information received. It is important to note that depositors may gain access to their own statements and retain copies of such statements. The bank holding and maintaining the escrow account must retain the 5% of the total funds held in escrow for a period of one year after the completion of the development project so as to meet any defects or contingencies arising in the property during this period.


The firm stand on penalties applied to anyone in breach of their obligations under the Escrow Account Law provides further reassurance to investors of off-plan.

Failure to register the development company and to carry real estate development activities without legitimate approval of the relevant authorities shall procure a minimum fine of AED 100,000 (USD 27,225) and a jail sentence.
Furthermore, halting the start of the construction for any inappropriate reason will result in the developer and its project being struck off the register of the Dubai Land Department.