Dubai’s authorities have implemented the use of escrow accounts in Dubai for off-plan property deals, in order to protect the investments of investors and homebuyers. The use of an escrow account is important as it helps to protect the deposit of the buyer, hence the money is transferred to the right person according to the terms and conditions of the sale. It also holds the funds of homeowners for insurance and real estate taxes.
Escrow accounts are safety accounts in which the money of a buyer is deposited and kept at the time of payment of installments. The escrow accounts are in the control of the regulatory authority of each emirate in the UAE.
The funds kept in an escrow account are only used for the project making, sales & marketing, and consulting services. Let us discuss escrow accounts and their importance in Detail.
What is An Escrow Account in Dubai?
Escrow accounts work as a legal account where the funds of one party are kept until a project is completed. This account is mandated and managed by the authority of the real estate and land department of Dubai to safekeep the money of one party until the property is handed over to the owner.
Escrow account acts as a third party or middle man between the property developer and buyer. The funds are deposited by the buyer in the escrow account and the developer can access the account once they have completed a task in construction. This process ensures the safety of buyers’ money and the money can only be used according to the agreed terms of both parties.
How to Open Escrow Account in Dubai?
A real estate developer in Dubai can open an escrow account by following the steps given below.
- Log on to the “oqood” portal and select the option “Escrow Account Link”
- Select the services you require and submit the application. After the submission of application, it will be transferred to the trustee of the account.
- The next step is verification of application by the trustee, uploading the required documents and forwarding it to the TAS system.
- The application will be verified by the escrow account department and it will be accepted or rejected. After that, the result will be updated in the online system.
Additionally, the escrow account application process requires you to submit the payment plan of the project.
How Does an Escrow Account Work?
It is important to understand how an escrow account works in Dubai. Escrow accounts are founded by the Real Estate Regulatory Agency (RERA) Dubai or TAMM Abu Dhabi (for properties in Abu Dhabi) at the time of contract agreement between the property buyer and developer to purchase an off-plan real estate. After the agreement is signed, it is mandatory for the buyer to deposit the amount mentioned in the contract.
The developer can not use the deposited money in the escrow account other than for sales, Consultancy, marketing, and construction etc. The developer can only access the funds after completing a milestone mentioned in the contract. Once he has completed a milestone the amount will be given to the developer or the project consultant.
If a developer requires the funds other than the previously mentioned purposes, they should make sure to comply with the regulations of the RERA in the contract before asking for any more funds.
Escrow Account Law in UAE
Following are the important laws related to the escrow accounts set by the Dubai Land Department.
- Law no. 7 of 2007 related to Land Registration in Dubai (as revised). Legal system for land registration and contains several conditions related to escrow accounts.
- Law no 13 of 2007 managing the Real Estate business sector in Dubai (as revised). This legal system managed the real estate sector, including clauses regarding the mandatory use of escrow accounts for off-plan real estate property.
It is mandatory for off-plan property developers to abide by the laws of escrow accounts when receiving the money from buyers. The buyer’s money will be deposited in the escrow account and the developer can only access it when certain conditions are fulfilled.
Significance of Escrow Accounts in Real Estate Transactions
Here are several benefits of using an escrow account when buying a real estate in the UAE.
- Escrow accounts play an important role in protecting the funds of Real Estate buyers in Dubai and also protects each party involved in the transaction.
- It acts as a third party and keeps the funds until the payment is done by the buyer this way the process of transaction becomes smooth for both parties.
- The buyer pays the funds in installments which assures the developer that the buyer has enough money to pay the total amount of the property.
- It minimizes any chances of fraud by the developer by withholding the money until he completes his agreed milestone.
- If the project is delayed or canceled by the developer, the funds deposited by the buyer will not be completely lost.
- The funds deposited by the buyer are recorded by the escrow trustees, which makes sure there isn’t any kind of fraud or negligence in the payments.
- Escrow services are designed to keep the transactions straightforward, which is very helpful if multiple parties are involved or if the conditions of the contract are complex.
Key Points For Buyers and Developers
If you want to buy an off-plan property it is important to keep certain factors in mind before investing and setting up an escrow account.
- The reputation of the developer
- The past projects done by the developer
- Developer’s financial history
- Reviews of buyers or investors from previous projects of the developer.
The developer should also make sure that the buyer has enough funds for the property and will not pay payments on time.
How to Check Escrow Account Dubai?
Visit the website of DLD to check escrow account Dubai. The steps involved are,
- Open the official website of Dubai Land Department (DLD)
- From the “Services” tab shown on the main page, select “All Services”
- Click on “information tab”
- Click on “Approved Escrow Account Trustees”
- Select “access this services”
- You can view the list of escrow account trustees
Ending Notes
Opening an escrow account in Dubai for real estate transactions is essential. This initiative is taken by the government to protect the off-plan real estate purchase in the country. Escrow accounts can be used for many reasons, such as online and real estate purchases to protect the obligations between both parties. If all parties are complying with the law, it can help minimize any kind of issues and risks.
If you want to understand more about escrow accounts Contact Al-Riyady. Our expert team is here to answer all your business related queries. We also provide tax consultancy, auditing and Accounting Services, Business Valuation and more.
