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As Investments On Property Soars, Sale and Purchase Agreement (SPA) Assumes Significance in the UAE

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Staff Writer, TLR

Published on July 14, 2023, 17:40:59

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As Investments On Property Soars, Sale and Purchase Agreement (SPA) Assumes Significance in the UAE

Investments in property have shot through the roof in the UAE over the past decade and there are more investors in line to grab their share of land. The Sale and Purchase Agreement (SPA) offers several benefits to real estate investors on fronts of sale and purchase.

In Short, the buyer and seller enter into a Sale and Purchase Agreement after they both agree to buy or sell a particular movable or immovable property. The SPA is drafted between the two parties in order to confirm and seal a sale or purchase deal.

Since the SPA holds good in the best interests of the buyer and seller of the property, a well-drafted sale and purchase agreement is highly desirable. Building trust between the two parties is of utmost importance and hence, scrutiny of the SPA document holds great relevance in such cases. Top legal advisors in the UAE encourage the parties to scrutinize the SPA document so that it fits their deals.

The Emirates have various laws in place for the protection of buyers or sellers while also regulating transactions. In Dubai for instance, Law Number 7 of 2013 instituted the Dubai Land Department, Law Number 9 of 2009 governed the interim property register and Law Number 8 of 2007 stated that an escrow account has to be maintained by property developers.

Although the law offers protection to the interests of the buyers and sellers, in certain cases a lack of caution could get both the parties into trouble. A custom suited SPA draft can avoid legal complications since the clauses are clearly defined in reference to the property deal in question.

There are several tips that a buyer or seller must consider before signing the Sale and Purchase Agreement. We have listed them out below for your reference.

Reviewing the Developer’s License

A word of caution from legal advisors state the importance of reading the developer’s permits before purchase. The buyer has to review the licenses and permits so as to trust their property’s wellbeing. The Department of Land in Dubai has a list of developers registered with them that possess valid licenses.

 Registration Record of Property

The Real Estate Regulatory Department authorizes the various real-estate projects in the UAE. The website has a record of registered projects that could be referred to while making a valid purchase.

 Copy of Title Deed

The title deed holds a significant role to check if the actual owner of the property. After reviewing the title deed of the property, the buyer can also check on the rights awarded to the owner and verify if there were any restrictions placed. The buyer could also obtain a community declaration copy to understand the rights involved in the usage of that property.

Details of Essential Parties Involved in the SPA

Certain times, the SPA contract could include multiple parties. For instance, an SPA could involve the developer, manager and owner among others. A careful review of the SPA contract will help in unveiling the involved parties if there are any.

 Review the Payment Schedule

This is in general a document with all details regarding payments to be made and it holds great relevance to the purchase. As it is an important document, the buyer is obligated to review it extensively to get a clear idea about the payment schedule.

 Termination Clause

Another important step is to review the termination clause of the Sale and Purchase Agreement between the buyer and seller. Usually, the initial amount paid by the buyer is retained by the developer/seller in-case the agreement is terminated or the buyer doesn’t make expected payments. On the other hand, the seller is obligated to hand over the property without delay or fails to register the property with the concerned authorities.A careful examination of the termination clause is recommended since it contains highly relevant conditions involved in a purchase.

 Escrow Account Details

As per Law Number 8 of 2007, a registered developer has to maintain an escrow account to which, the investments made by sellers should be directed to. Failing to do so will attract heavy penalties on the developer. The buyer should obtain necessary details regarding the escrow account from the developer in order to safeguard the invested amount of money.

 Dispute Resolution Clause

The laws put into force in the UAE must be reviewed by the buying party as an additional cautionary measure. The dispute resolution clause has to be reviewed for resolving disputes through the UAE courts or arbitration centers. If at all the contract states arbitration, the buyer should get advice from arbitration lawyers available locally.

Authorized Signatory of Power or Attorney

Developers are entitled to authorize power of attorney in order to sign the SPA on behalf of them. These third-party signatories assigned by the developer are called authorized signatories. The buyer involved in such deals should review the power of attorney in detail to have a better understanding of the scheme.

Project Completion Date

The completion date refers to the date at which the developer has promised to complete the project. Every SPA is supposed to include the date at which the developer/seller must surrender the purchased property to the buyer. In several cases earlier, the project completion dates were ignored by buyers. Being unaware of the date makes the buyer lose rights of terminating the contract and seek compensation. A breach of this contract will have several legal consequences for the seller.

Since the Sale and Purchase Agreement has to be made for every sale or purchase of property, the buyer and seller should be well aware of the contract in order to make the whole process smooth. An established and trusted law firm could help out with all concerns regarding SPA in the UAE

For any enquiries or information, contact info@thelawreporters.com or call us on +971 52 644 3004 

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