Sale and Purchase Agreements in the UAE: Key Clauses Every Property Buyer Must Review Before Signing

A Sale and Purchase Agreement (SPA) is the definitive legal foundation of any real estate transaction. It governs the entire commercial and legal relationship between a buyer and a seller, regulating matters such as the purchase price, payment schedules, completion timelines, representations and warranties, termination rights, and dispute resolution mechanisms.


In the UAE’s rapidly evolving property market, the SPA is the primary instrument through which contractual ownership is established, subject to subsequent registration with the relevant land authority. Given its far-reaching financial and legal consequences, a comprehensive legal review of the SPA is not merely advisable — it is essential.

From a regulatory perspective, SPAs in the UAE are principally governed by the UAE Civil Transactions Law (Federal Law No. 5 of 1985, as amended), which sets out the core principles relating to contract formation, validity, performance, and remedies. This federal framework is supplemented by emirate-specific legislation, particularly in Dubai, including Law No. 7 of 2006 concerning property registration, Law No. 13 of 2008 regulating interim registration (Oqood), Law No. 8 of 2007 governing escrow accounts for off-plan developments, and Law No. 27 of 2007 relating to jointly owned properties. Together with regulations and directives issued by the Dubai Land Department and the Real Estate Regulatory Agency (RERA), these laws form the regulatory backbone that determines compliance, investor protection, and the enforceability of SPAs in the UAE.

 

Critical clauses buyers must scrutinize

1. Title and ownership
   
   The seller must expressly warrant clear, marketable, and unencumbered title to the property, free from mortgages, liens, disputes, or third-party claims. Any ambiguity exposes the buyer to significant risk, including refusal of title registration and future ownership disputes. Buyers must also confirm that all regulatory approvals and planning permissions have been duly obtained.
   
   
2. Completion and handover timelines
   
   The contractual completion date and any applicable grace periods require careful review. Developers often reserve broad extension rights under force majeure provisions. Buyers should insist on a defined maximum delay period, compensation for late delivery, and a clear termination right if delays exceed an agreed threshold. Without these safeguards, capital may remain locked in indefinitely.
   
   
3. Termination and forfeiture rights
   
   This clause determines how and when either party may exit the contract. Many SPAs permit developers to terminate the agreement and forfeit a substantial portion of buyer payments, even for minor defaults. Termination rights should be mutual, cure periods reasonable, and forfeiture strictly capped in accordance with UAE law to prevent unjust enrichment.
   
   
4. Refund mechanisms
   
   Vague wording such as “refunds within a reasonable time” should be avoided. The SPA must specify a fixed refund timeline — typically 30 to 60 days — identify the repayment source, preferably the escrow account, and prohibit discretionary deductions. Delayed refunds remain one of the most common causes of real estate litigation in the UAE.
   
   
5. Variations and specification changes
   
   Developers frequently reserve wide discretion to alter layouts, reduce unit sizes, or substitute materials. Buyers should contractually restrict this right. Any material variation — such as a reduction in area beyond an agreed threshold — should trigger compensation or a right to terminate. Without such protection, buyers may receive a materially inferior unit with limited legal recourse.
   
   
6. Assignment and resale rights
   
   This clause directly affects the buyer’s exit strategy. Excessive restrictions on resale, high transfer fees, or discretionary consent requirements can severely impair liquidity. Buyers should ensure that resale rights are commercially reasonable and fully compliant with RERA regulations.
   
   
7. Escrow account protection
   
   For off-plan properties, the SPA must confirm that all payments are deposited into a RERA-approved escrow account. Any request for payments to a developer’s general account constitutes a serious regulatory red flag and exposes the buyer to significant recovery risk.
   
   
8. Reciprocal default provisions
   
   Penalty clauses must be balanced. If buyers are penalised for late payments, developers should face corresponding consequences for construction delays or contractual breaches. One-sided penalty regimes significantly prejudice buyers and undermine contractual fairness.
   
   
9. Inspection and defect liability
   
   The SPA should provide for a formal snagging period prior to handover and impose strict timelines for rectification of defects. Ideally, a retention mechanism should apply until all issues are resolved. Without this, buyers may inherit construction defects at their own expense.
   
   
10. Service charges and sinking funds
    
    Buyers should seek full transparency regarding projected service charges, escalation mechanisms, and management structures. Open-ended clauses permitting unilateral increases can create substantial long-term financial exposure.
    
    
11. Dispute resolution and jurisdiction
    
    The SPA must clearly identify the dispute resolution forum. While arbitration is common, UAE courts often provide more practical and enforceable remedies in property disputes. Jurisdiction and enforcement practicality should be carefully assessed.
    
    
12. Force majeure
    
    Overly broad force majeure clauses are frequently misused to justify commercial delays. These provisions should be narrowly drafted and limited to genuinely extraordinary events beyond human control.
    
    
13. Entire agreement clause
    
    This clause confirms that only the written terms of the SPA are legally binding. Buyers must ensure that all sales assurances, representations, and marketing commitments are expressly incorporated into the contract.
    
    
14. Governing law
    
    The SPA should expressly confirm that UAE law governs the agreement. Foreign governing law clauses complicate enforcement and significantly weaken buyer protection.
    
    

Conclusion

A Sale and Purchase Agreement is not a standard formality; it is a legally binding instrument that defines financial exposure, ownership rights, and long-term security. Too often, buyers rely on sales assurances while overlooking critical legal risks embedded in the fine print. A professionally conducted legal review before signing remains the most effective safeguard against delayed handovers, unfair forfeiture, hidden liabilities, and unenforceable rights.

 

A Sale and Purchase Agreement (SPA) is the definitive legal foundation of any real estate transaction. It governs the entire commercial and legal relationship between a buyer and a seller, regulating matters such as the purchase price, payment schedules, completion timelines, representations and warranties, termination rights, and dispute resolution mechanisms.

In the UAE’s rapidly evolving property market, the SPA is the primary instrument through which contractual ownership is established, subject to subsequent registration with the relevant land authority. Given its far-reaching financial and legal consequences, a comprehensive legal review of the SPA is not merely advisable — it is essential.

 

From a regulatory perspective, SPAs in the UAE are principally governed by the UAE Civil Transactions Law (Federal Law No. 5 of 1985, as amended), which sets out the core principles relating to contract formation, validity, performance, and remedies. This federal framework is supplemented by emirate-specific legislation, particularly in Dubai, including Law No. 7 of 2006 concerning property registration, Law No. 13 of 2008 regulating interim registration (Oqood), Law No. 8 of 2007 governing escrow accounts for off-plan developments, and Law No. 27 of 2007 relating to jointly owned properties. Together with regulations and directives issued by the Dubai Land Department and the Real Estate Regulatory Agency (RERA), these laws form the regulatory backbone that determines compliance, investor protection, and the enforceability of SPAs in the UAE.

 

Critical clauses buyers must scrutinize

1. Title and ownership
   
   The seller must expressly warrant clear, marketable, and unencumbered title to the property, free from mortgages, liens, disputes, or third-party claims. Any ambiguity exposes the buyer to significant risk, including refusal of title registration and future ownership disputes. Buyers must also confirm that all regulatory approvals and planning permissions have been duly obtained.
   
   
2. Completion and handover timelines
   
   The contractual completion date and any applicable grace periods require careful review. Developers often reserve broad extension rights under force majeure provisions. Buyers should insist on a defined maximum delay period, compensation for late delivery, and a clear termination right if delays exceed an agreed threshold. Without these safeguards, capital may remain locked in indefinitely.
   
   
3. Termination and forfeiture rights
   
   This clause determines how and when either party may exit the contract. Many SPAs permit developers to terminate the agreement and forfeit a substantial portion of buyer payments, even for minor defaults. Termination rights should be mutual, cure periods reasonable, and forfeiture strictly capped in accordance with UAE law to prevent unjust enrichment.
   
   
4. Refund mechanisms
   
   Vague wording such as “refunds within a reasonable time” should be avoided. The SPA must specify a fixed refund timeline — typically 30 to 60 days — identify the repayment source, preferably the escrow account, and prohibit discretionary deductions. Delayed refunds remain one of the most common causes of real estate litigation in the UAE.
   
   
5. Variations and specification changes
   
   Developers frequently reserve wide discretion to alter layouts, reduce unit sizes, or substitute materials. Buyers should contractually restrict this right. Any material variation — such as a reduction in area beyond an agreed threshold — should trigger compensation or a right to terminate. Without such protection, buyers may receive a materially inferior unit with limited legal recourse.
   
   
6. Assignment and resale rights
   
   This clause directly affects the buyer’s exit strategy. Excessive restrictions on resale, high transfer fees, or discretionary consent requirements can severely impair liquidity. Buyers should ensure that resale rights are commercially reasonable and fully compliant with RERA regulations.
   
   
7. Escrow account protection
   
   For off-plan properties, the SPA must confirm that all payments are deposited into a RERA-approved escrow account. Any request for payments to a developer’s general account constitutes a serious regulatory red flag and exposes the buyer to significant recovery risk.
   
   
8. Reciprocal default provisions
   
   Penalty clauses must be balanced. If buyers are penalised for late payments, developers should face corresponding consequences for construction delays or contractual breaches. One-sided penalty regimes significantly prejudice buyers and undermine contractual fairness.
   
   
9. Inspection and defect liability
   
   The SPA should provide for a formal snagging period prior to handover and impose strict timelines for rectification of defects. Ideally, a retention mechanism should apply until all issues are resolved. Without this, buyers may inherit construction defects at their own expense.
   
   
10. Service charges and sinking funds
    
    Buyers should seek full transparency regarding projected service charges, escalation mechanisms, and management structures. Open-ended clauses permitting unilateral increases can create substantial long-term financial exposure.
    
    
11. Dispute resolution and jurisdiction
    
    The SPA must clearly identify the dispute resolution forum. While arbitration is common, UAE courts often provide more practical and enforceable remedies in property disputes. Jurisdiction and enforcement practicality should be carefully assessed.
    
    
12. Force majeure
    
    Overly broad force majeure clauses are frequently misused to justify commercial delays. These provisions should be narrowly drafted and limited to genuinely extraordinary events beyond human control.
    
    
13. Entire agreement clause
    
    This clause confirms that only the written terms of the SPA are legally binding. Buyers must ensure that all sales assurances, representations, and marketing commitments are expressly incorporated into the contract.
    
    
14. Governing law
    
    The SPA should expressly confirm that UAE law governs the agreement. Foreign governing law clauses complicate enforcement and significantly weaken buyer protection.
    
    

Conclusion

A Sale and Purchase Agreement is not a standard formality; it is a legally binding instrument that defines financial exposure, ownership rights, and long-term security. Too often, buyers rely on sales assurances while overlooking critical legal risks embedded in the fine print. A professionally conducted legal review before signing remains the most effective safeguard against delayed handovers, unfair forfeiture, hidden liabilities, and unenforceable rights.