UAE Developers Can Now Terminate Off-Plan SPAs Without Court Action

An unprecedented shift in the UAE's real estate sector has granted developers a new, conditional right to terminate off-plan sale and purchase agreements (SPAs) without the need for court intervention. This significant change, recently reported in UAE newspapers, aims to streamline the resolution of disputes arising from buyer defaults, ensuring project timelines are protected while maintaining robust safeguards for purchasers.

 

How it Works: The New Process

The new framework, particularly outlined in Abu Dhabi Law No. (2) of 2025, allows developers to unilaterally rescind an off-plan SPA if a buyer is in material default of their contractual obligations, such as missing key payments. This process bypasses the often lengthy and costly judicial or arbitration routes, but it is not an automatic right. Developers must strictly adhere to a multi-step, regulated procedure to exercise this power.

 

1. 1. Formal Notice and Cure Period: A developer's first step is to issue a formal, notarized notice to the defaulting buyer. This notice initiates a 60-day "cure period," giving the buyer a chance to remedy the breach and fulfill their payment obligations.
   
    

2. 2. Regulatory Notification: Within 15 days of sending the notice, the developer must inform the relevant authority, such as the Abu Dhabi Department of Municipalities and Transport (DMT). The developer must submit the original notice and a certificate from the escrow account trustee that verifies the buyer's continued default. This step acts as a crucial checkpoint, preventing arbitrary terminations and involving a government body in the process.
   
    

3. 3. Mandatory Mediation: The law encourages a mediated settlement during the cure period. The regulatory authority can, either on its own or at the request of either party, initiate an amicable resolution process. This mediation might lead to renegotiated terms, a revised payment schedule, or other agreed-upon solutions. If a settlement is reached, it is formalized as an addendum to the SPA, and the contract continues.
   
    

4. 4. Contract Termination: If the buyer fails to remedy the default and no settlement is reached after the 60-day period, the developer can then terminate the SPA. The regulatory authority can then remove the buyer's name from the official registry for the unit, and the developer may proceed with remarketing the property.

When and Why this is Important 

This new legislative framework is a direct response to the challenges faced by developers when buyers default on their payments. For off-plan projects, milestone payments are critical for funding ongoing construction. When a buyer defaults, it can threaten the project's financial viability, leading to delays that affect all other investors.

 

According to Sunil Ambalavelil, Chairman of Kaden Boriss, this shift is a "masterstroke" in balancing the interests of both developers and buyers. It allows for contractual enforcement without the need to go to court, which saves considerable time and legal expenses. For developers, it streamlines their ability to manage a project's financial health and maintain construction timelines.

 

The law also includes safeguards to protect the buyer. For instance, even after a lawful termination, developers must observe a 30-day "cooling-off" period before they can resell the unit. The proceeds from any resale must go back into the project's escrow account, and developers are only permitted to retain a portion of the payments based on the project's completion percentage. Any surplus must be refunded to the buyer. This ensures that while developers can protect their projects, they cannot unjustly benefit from a buyer's default.

 

Ultimately, this reform positions the UAE as a leader in creating a balanced and efficient real estate market. It addresses a real-world problem by providing a clear, regulated, and out-of-court solution for buyer defaults, which is expected to enhance project delivery rates, reduce litigation, and strengthen investor confidence in the off-plan market.

 

For any enquiries please fill out this form, or contact info@thelawreporters.com  Follow  The Law Reporters on WhatsApp Channels