Abu Dhabi’s Bold Move: Off‑Plan Terminations Made Easier

In a decisive move to modernise real estate governance, Abu Dhabi has enacted Law No. (2) of 2025, amending Law No. (3) of 2015 on Regulating the Real Estate Sector, and granting developers a conditional right to terminate off‑plan Sale and Purchase Agreements (SPAs) without court or arbitration-an unprecedented shift in the UAE.

 

Designed to tackle delays and disputes caused by buyer defaults, the reform introduces a streamlined, multi-step termination process under Article 3, offering balanced safeguards for developers, purchasers, and financiers. Effective from 2 August 2025, the law aims to protect project timelines while maintaining investor confidence in Abu Dhabi’s off‑plan market.

 

Notice and Opportunity to Remedy

The law mandates that a developer must first issue a formal notice of default, either notarised or sent via registered mail with acknowledgement, to the address specified in the SPA. This triggers a 60-day ‘cure period’ during which the buyer is invited to rectify the breach.

 

After 15 days of issuing the notice, the developer must notify the Abu Dhabi Department of Municipalities and Transport (DMT) and submit two documents:

• A copy of the notice
• A certificate from the escrow account trustee confirming the ongoing default.

 

This step acts as an institutional safeguard to prevent arbitrary terminations and encourages intervention.

 

Mandatory Mediation

Before the 60-day period concludes, the DMT is authorised-either independently or at the request of an interested party-to initiate amicable settlement proceedings. The law emphasises due process and fairness, ensuring buyers are properly informed before mediation begins.

 

If the parties reach an agreement (e.g., rescheduling payments or renegotiating terms), the resolution is formalised via an SPA addendum. If mediation fails and the buyer remains in default after 60 days, the developer may lawfully terminate the contract.

 

Cooling-Off Period and Financial Controls

Even after lawful termination, developers must observe a 30-day cooling-off period before they can remarket the property. This gives buyers final notice and allows regulators to verify the project’s construction schedule compliance.

 

Furthermore, the proceeds from any resale must flow into the project escrow account, and developers may only withdraw amounts proportionate to both the buyer’s default and the stage of construction. An expected government decision will set precise refund procedures and deduction caps, ensuring buyers receive any surplus beyond the developer’s verified costs.

 

Preserved Right to Legal Recourse

Importantly, buyers still retain the right to contest the termination in court or arbitration, preserving access to justice in line with the SPA terms. However, this mechanism is now repositioned as a last resort, with the law favouring out-of-court resolution.

 

Setting a New Benchmark in the Region

This reform places Abu Dhabi ahead of other Emirates, such as Dubai and Sharjah, where judicial proceedings remain the default path for contract cancellation. The law's integration of mediation, escrow verification, and administrative oversight demonstrates a balanced legislative approach, enhancing investor confidence and regulatory efficiency.

 

In summary, Abu Dhabi’s Law No. (2) of 2025 establishes a progressive legal framework that addresses the realities of off-plan real estate development-combining speed, procedural fairness, and consumer protection. Developers must meticulously document compliance with every statutory step, while buyers must remain vigilant about their obligations. This reform is poised to strengthen project delivery, reduce litigation, and cement Abu Dhabi’s standing as a real estate leader in the Gulf.

 

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