In the world of hospitality real estate, it's common for projects to be sold long before people can actually experience them. Buyers sign up for products without even seeing the finished lobby, hotels get operators on board before the rooms are ready, and developers count on early success to drive everything forward. Such a system isn't inherently risky. The risk only arises when rushing substitutes proper planning.
For this reason, Ras Al Khaimah Law No. (12) of 2023 (the “Law”) views off plan sales more as a regulated legal procedure than a commercial expedient. After all, when units are sold based on plans, the greatest asset is the trust that must be safeguarded well before the first guest checks in.
More often than not, the problem starts at the ownership structure. A sub-developer secures part of a master hospitality project under a staged payment plan, sales launch quickly, reservations are taken, and marketing moves forward as if the right to sell were implicit. In reality, that assumed right may not exist at all, and when it does not, the consequences can be fatal to the project. If the contract between the main developer and the sub developer does not explicitly give the latter the right of selling off plan, then any early sale will not have a legal basis. The momentum that seems to be on the surface turns to be the exposure underneath.
After this, the matter escalates.
Developers in hospitality projects frequently think that registration of the project or progress in the construction would be sufficient to get sales started. The Law, however, is very clear in stating that no off plan sale will be valid without a formal permit issued by Real Estate Regulatory Administration in the Department ( the “Administration”). Any transaction done in the absence of such a permit is deemed to be invalid. The practical upshot of this is that buyers may be under the false impression that their units have been legally secured, when in fact the transfer has not occurred. In the hospitality industry, where operator commitments, financing schedules, and brand positioning heavily rely on early sales, such a loophole can disrupt the very foundation of the project.
Marketing then takes the risk up a notch.
Hospitality developments thrive on stories. One goes to see exhibitions, leaflets get circulated worldwide, and projects are marketed as attractions rather than as mere buildings. Nevertheless, the Law demarcates a rigid barrier. Advertising of off plan units locally or overseas is not allowed unless the sale permit has already been granted. Even post permitting, promotions must be consistent with the regulatory environment, including approved delivery dates, registration numbers, and escrow details. When the marketing in hospitality is ahead of licensing, besides the regulatory exposure, it is the buyer confidence that gets eroded as soon as inconsistencies become visible.
However, the stage that is most neglected is reservation.
In hospitality projects, reservation deeds are mostly regarded as unofficial moves with the purpose of "booking" units until the rest of the details are sorted out. Nevertheless, the Law interprets them quite differently. Therefore, becoming binding on the parties involved is the reservation contract. After signing, the deposit amount may be considered as part of the total price of the property and must be fully transferred to the escrow account. During this waiver period, the developer cannot, from a legal standpoint, sell or even offer the unit to another person without the consent of the party who has been granted the right of first refusal, no matter how much the demand might be.
It is at this point that the commercial forces struggle with the legal ones. Sales personnel in high demand resort or hotel apartment projects keep promoting the units that have been reserved, assuming that they can be flexible. In case of conflict, the Law does not provide a shelter for urgency. It is exclusivity that it enforces.
After that, it is the matter of timing.
In case the developer does not hand over the sales contract in the time frame stipulated in the Law, the buyer will have stopped being remote. They will be able to ask the Administration either to order the completion of the contract or to cancel the reservation and get back the money in full. This is the typical setting of a deal in the hospitality industry with the operator's contract, financing conditions, and design approvals all still being finalised. The operational delay very quickly changes from becoming a default of the Law to an actual default deed or component.
The Law, on the other hand, comes to balance the scales. As a result of the buyer knowingly delaying or simply refusing to sign the contract of sale without good reason, the purchaser's right to keep the property at the reservation terms may be rescinded and the deposit forfeited. Thus, the idea of both parties agreeing to the same thing that off plan hospitality sales require the exercise of diligent behavior, and not simply the giving of benefit of the doubt or supposition when no communication has been had.
Which of these is probably what the Law sides with and is behind in any case is both their being all about deferring from the positive collaborative behaviors that should have been agreed by the two less most probably through conversation or some other mode of communicating and certainly not merely conjecture (for the sake of argument) on the part of both? Trust is what binds everything together.
In hospitality developments, the trust is like a very fragile chain of reliance which goes as follows: Buyers put their trust in developers; developers then depend on operators; operators through assessing financial certainty set the stage for financiers; and financiers through depending on regulatory compliance supply the leverage necessary in the chain. The consequence of just one link breaking is not simply the disconnection in one part of the chain alone but a spreading of the loss throughout the chain as a whole (the latter is often seen in practice).
The Law has tried to achieve a number of different things. On the one hand, it tries to foster (or remove the obstacles to) hospitality development. On the other, it tries to bring (or make) it stable. The Law, by controlling everything, who can sell and when they can sell, how they may advertise, how the money is managed, and how reservations are handled, protects the hospitality's life giving element without which it cannot exist anyway.
Because in hospitality real estate, the act of selling units ahead of their completion also means selling a promise. And a promise, once broken before the opening day, is much more difficult to mend than any structure on site.
