Both Dubai and Ras Al Khaimah (the “RAK”) have established comprehensive legal frameworks for the management of off-plan sale agreements, particularly in relation to the termination of contracts and developers' payment retention in the event the purchasers fail to fulfil their financial covenants in terms of their scheduled payments according to the off-plan sale agreement. Both jurisdictions are alike in numerous areas, including completion percentages and developer protections, while they differ on certain aspects of procedures and dispute resolution mechanisms. The article discusses the essential provisions from the legal frameworks of Dubai and RAK. Whereas we are going to shed the light on the implications of Article 20, 24, 47 and 50 from Ras Al Khaimah Law No. (12) of 2023 On Regulating Real Estate Development in Emirate of Ras Al Khaimah (the” New Law”) , which is very similar to the legal approach of Dubai Article (11) of Law No. (19) of 2017 Amending Law No. (13) of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai which has been recently amended by Law No. (19) of 2020 Amending Law No. (13) of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai (the “Interim Registration Law”).
Overview of Dubai and RAK Legal Provisions
Dubai
In Dubai, an off-plan sale agreement must be registered with the Dubai Land Department (DLD) via Oqood to be legally enforceable. The legal systems of Dubai and RAK that govern off-plan sales are both sufficiently protective of developers against the risk of financial losses that result from a purchaser's default on payments. Interim Registration Law allows the developer, where the percentage of the completion of the project exceeds 80%, to;
- maintain the Off-plan Sale agreement concluded with the purchaser, retain all amounts paid by the purchaser, and claim the balance of the price of the Real Property Unit from the purchaser;
- request the DLD to sell the real property unit, subject of the Off-plan Sale agreement, by public auction to collect the remaining amounts payable to the developer and hold the purchaser liable for the costs arising from the sale; or
- unilaterally terminate the off-plan sale agreement, retain up to forty percent (40%) of the value of the project stipulated in the off-plan sale agreement, and refund any amounts in excess of this to the purchaser within one (1) year from the termination of the agreement or within sixty (60) days from the date of resale of the unit to another purchaser, whichever occurs earlier.
If the completion percentage is between 60% and 80%, the developer can unilaterally terminate the agreement, retain up to 40% of the value, and refund any excess to the purchaser within one year from the termination of the agreement or 60 days from the date of resale of the unit to another purchaser, whichever occurs earlier. If the developer has commenced work on the project and the completion percentage is less than 60%, they can terminate the agreement, retain 25% of the value, and refund any excess within one year from the termination of the agreement or 60 days from the date of resale of the unit to another purchaser, whichever occurs earlier.
If the developer has not commenced work on the project for any reason beyond his control, without negligence or omission on his part, he may terminate the off-plan sale agreement, retain up to 30% of the amounts paid to him by the purchaser, and refund any amounts in excess of this to the purchaser within sixty (60) days from the termination of the agreement.
If the project is cancelled due to RERA, the developer must refund all payments made by the purchasers.
RAK
Off-plan sales in RAK are regulated by the Ras Al Khaimah Municipality and RAK Real Estate Regulatory Authority (the “RAK RERA”) and the off-plan sales agreement must be registered with RAK Department of Lands and Properties (the “RAK DLD”) . RAK New Law Article 50 somehow follows the same legal framework of Interim Registration Law. As it permits the termination of contracts, and the retention of the amounts paid when the purchaser breaches their obligations. Whereas RAK New Law allows the developer the right to terminate a contract with a purchaser if they complete more than 80% of the construction of a project, following the more or less the same legal provisions of the Interim Registration Law, whereas they can either maintain the contract, keep all payments, claim the balance of the price of the project from the purchaser, request the RAK DLD to sell the unit at auction or unilaterally terminate the off-plan sales agreement and retain up to 40% of the value of the project stipulated in the off-plan Sales agreement and refund any amount to the purchaser within one year from the termination of the agreement or within sixty days from the date of resale of the unit to another purchaser.
If the developer completes between 60% and 80% of the unit, they can terminate the contract by their own free will, deducting up to 30% (which is less than the amount stipulated in the Interim Registration Law by 10%, as there is no difference if the project is not completed up to 80% or from 60% to 80%) of the price stipulated in the off-plan sales agreement and refunding the excess within one year from the termination of the off-plan sales agreement or within sixty days from the date of resale of the unit to another purchaser. If the developer starts working on the project according to approved designs and has a completion rate less than 60%, they can terminate the contract by their own free will, deducting up to 30% of the price (which is higher than the amount stipulated in the Interim Registration Law with 5%) and refunding the excess within one year from the termination of the off-plan sales agreement or within sixty days from the date of resale of the unit to another purchaser.
If the developer fails to start working on the project for any reason beyond their control, they can terminate the contract by their own free will, and deduct “not more than” 20% of the payment and claim the balance of the price of project from the purchaser, which is less than the amount stipulated in the Interim Registration Law, as it mentions that up to 30%) . Which can be seen as reasonable, as if the developer did not commit to their obligations, the purchaser shouldn’t bear an excessive amount from the termination of the off-plan sales agreement.
In case of cancelling a project by reasoned resolution from the Real Estate Regulatory Administration in the Department Competent (the “Administration”), the developer should refund all amounts received from Purchasers; cancellation shall be subject to the below:
- If the developer failed to start the project within six month from registration or as extended from the Administration Director by a similar period.
- If there is a material reasons accepted by the administration to start the project.
The project shall not be cancelled except after refunding the entire amounts paid by the purchasers and clearing the rights of the contractor, consultant, escrow account trustee, and any other rights resulting from the same project. Cancellation of the project shall not result in exempting the developer from responsibility, whatever type thereof, towards the department of RAK municipality or third parties.
However, RAK New Law offers extra stages such as the Administration intervention as stipulated in article 50 (2)(B) “Make amicable settlement,” acting as a mediator in this case. Whilst the Interim Registration Law article 11(B) states that the Dubai Land Department (the “DLD”) states that “where possible,” this provision could be a grey area, whereas the DLD is not obliged to enter a mediation to reach an amicable solution?
More interpretation of the above
According to our interpretation to the laws, RAK Administration could be actively involved in the procedure of informing the purchaser about their breach and helping them make an amicable settlement before the termination occurs. The Administration will issue an official document confirming the developer’s completion percentage if no settlement is reached within a specified timeframe, which in turn will allow the developer to act based on the completion percentage. Hence, satisfaction is sought through negotiations and other forms of counselling. This requirement for administrative involvement can provide additional security to the purchaser since it encourages negotiation and settlement rather than immediate termination by the developer.
On the other hand, Dubai’s system does not have any necessity for such mediation from an administrative body prior to contract termination. Though Dubai developers must follow a certain structured process, without an intermediary, the procedure will be more direct and more to the benefit of the developer who needs to terminate quickly. However, such a direct approach limits the available negotiation space between the parties, and this is probably a disadvantage for the purchaser, especially in cases where they are concerned about the delays of the project.
Completion Percentages and Payment Retention
RAK New Law and Interim Registration Law outline completion thresholds for developers. Developers can terminate contracts, refund payments, or reimburse excess sums if construction is delayed. However, in Dubai this is no longer the case, with Law No. 19 of 2020 amending Article 11 of the Interim Registration Law to confirm that a developer must return all amounts received from a purchaser if it has not commenced works as of the time of termination. This provides more comfort to the purchaser when they purchase a property in an off-plan stage; at least there is an opportunity for the purchaser to be refunded with the whole amount instead of keeping a certain percentage as the old law stipulated before; this provides some relief to the purchasers. This shows that Dubai is keen about attracting developers and investors. From the hospitality perspective, Dubai is willing to add 27,000 rooms till 2030, thus facilitating investments.
As RAK New Law follows the same process in Article 50, like the Interim Registration Law, this percentage-oriented mechanism is crucial for expressing the financial structure of the development company and avoiding losses caused by purchaser defaults. However, the additional stages in RAK’s process involve the Administration’s verification of completion rates, adding procedural complexity that may disrupt the termination process but provides more protection for the purchasers. RAK's new law introduced in 2023 follows the same scheme of the Interim Registration Law updates enacted in 2020 in terms of project delays or cancellation. Yet, the RAK New Law provides more details in terms of project delays, and if there are any material reasons approved by the administration, we believe that those “Material” reasons need to be identified to safeguard the purchaser's rights.
Flexibility for Purchasers
Both legal frameworks allow for dispute resolution mechanisms; however, Ras Al Khaimah's system has a more flexible approach to developers. According to Interim Registration Law, it grants developers the right to terminate contracts and appropriate payments without judicial or arbitration intervention, given that the percentage of the completion of the work is achieved. The advantage of this speedy process is that it is in favor of developers, as they can easily revert to defaulting parties. Besides, it does not grant the purchaser the right to block payments or acts against the developer if the developer fails to complete the project according to the plan, which could be fatal for them.
However, RAK grants the purchaser the right according to Article 47 of the law Purchaser Right to Withhold Due Payment, as stipulated below:
“If the agreed payments are related to specific completion rates in real estate development project, Purchaser may withhold due payment in payment schedule if Developer fails to commit to completion rate equivalent to this payment, provided notifying Administration, Developer and Escrow Account Trustee before due date of the payment.”
This grant raises an option for the purchasers who have the perception that they did not get an honest deal. And safeguard the purchaser’s financial interest against any project delays or mismanagement from the developer. However, the purchaser must ensure that they notify the above authorities before the payment due date.
The fact that the intervention of the Administration grants a chance for a more collaborative process to be built in resolving the dispute, which can be an alternative to formal legal action available. Which provides a fair resolution to both parties and not only to the benefit of the developer.
Conclusion: Comparative Analysis of Dubai and Ras Al Khaimah Laws
In Dubai and RAK, both legal systems address the situation if the developer fails to proceed with the project due to uncertainties or any other circumstances beyond their control. In Dubai, the developer has to refund the purchaser if the contract has not been fulfilled with no further liability. In the same way, in RAK it is given to the developers the right to terminate the contract and refund the purchaser if the project is delayed or cancelled; the percentages held are determined relative to the stages of the project. Such protection guarantees that the developers should not suffer economic punishment for delays that are not within their control, like, external factors, or regulatory problems. However, RAK has another protection for the purchasers that could be considered “unique,” whereas the purchaser can withhold payments if it is according to a completion percentage failing the developer meets the completion percentage agreed in the off-plan sales agreement.
In conclusion, both Dubai and RAK offer strong legal protections for developers, but with key differences in approach. Dubai’s legal framework provides a more streamlined and developer-friendly process for contract termination and payment retention, with clear completion thresholds and limited opportunities for purchasers to withhold payments. RAK on the other hand, offers a more balanced approach with administrative involvement and greater flexibility for purchasers, including the right to resort to judicial or arbitration procedures. The mediation process in RAK and the option for purchasers to challenge unfair actions by developers provide an added layer of fairness, but they also introduce potential delays in the process. Ultimately, the choice between Dubai and RAK will depend on the developer's strategic view; both jurisdictions are booming in terms of the tourism sector, especially after Wynn resort is about to open in Q1 2026. The developer and the purchaser ultimately contribute to UAE economy; therefore, the UAE is thriving to always facilitate investments yet safeguard all parties to remain a stable yet evolving country amongst the Gulf region.
