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THE ESCROW LAW IN DUBAI REAL ESTATE MARKET

The Escrow Law in Dubai Real Estate Market 4

THEESCROW LAW IN DUBAI REAL ESTATE MARKET

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TheEscrow Law in Dubai Real Estate Market

Backgroundto theEscrow law

TheEscrow Law wasissuedby thegovernmentof Dubai to regulateandsafeguard purchasers’moneyin relationto off-plan assets procurementin thecountry.Thelawappliesto investors in propertydevelopmentwhoputup unitsfor sale,regardlessof whetherthepropertydevelopmentis in theplanningorconstructionstage,andwhoreceivepaymentsfrom financiersorbuyersbefore thecompletionof theproperty development(Ditcham, 2007). Theescrow lawappliesto allpropertydevelopers in Dubai whosellpropertiesoff –plan in Dubai andinresponsecollect paymentsfrom purchasers’orfinanciers(Government of Dubai, 2007).

Detailson Escrow Accounts forReal Estate

UnitedArab Emirates has witnesseda boominthe propertymarketsince 2003 andtheGovernment of Dubai soughtto safeguard theinterestof bothdevelopers andbuyersof propertyin thecountry,itimplementedtheEscrow Law in 2007. In orderto dothis,developersshall submitspecificdocumentssuchas tradelicense, titledeed, architecturallayoutsanddesignsanda letterof approvalfrom themasterdeveloper. Succinctly thefollowingare thedetailson Escrow Law.

  • Demands that developers open one escrow account for every project

  • Confines property developers from using financiers or purchasers funds for the purpose other than the project

  • It contains provision to control, regulate and limit start up property developers.

  • Stipulate penalties for non-compliant developers, which encompasses deregistration ad criminal liability.

ImplicationsforDevelopers andBenefitsforInvestors

Properadministrationof Escrow lawhas thepotential of safeguarding investors’ fundsto theextentthattheir moneyis usedonlyforthepurposethat wasintended.Thelawdoesnot permitpropertydevelopers to usefundsobtainedfrom financers andotherinvestors foranyotherpurposeapartfrom developmentof theproject.Investors fundsare,therefore, secureto theextentthatthefundsremainin theescrow accounts.Nonethelessifthefundsare depletedtheinvestors willbecomeunsecured creditorsto thepropertydevelopers (Sayed, 2010). Ifa situationoccurssuchthata propertydeveloper is incapableof completinga givenproject,Escrow trustee(a bankapprovedby theReal Estate Regulatory Authority) with consultationwith theDepartment of Land in Dubai has theauthorityto replacethedeveloper in orderto facilitatethecompletionof theproject.

Conclusion

Overthelastone decade,numerouslegislationshavebeenpassedin Dubai to safeguard theinterestof investors andprotectdevelopers in realestate development.Thishas beena moveby theDubai governmentto encouragepropertydevelopmentwithin thecountry.TheEscrow Law issuedin 2007 wasdesignedprimarilyfortheaforesaidpurpose.EventhoughEscrow Law doesnot providetotalsecurityof investors’ fundsorcompletionof propertydevelopment,itwillgoa longwayinmaintainingtherightsof thefinancersanduseof resourcesfortheintendedpurpose.Consequently thepropertydevelopmentbusinessis likelyto continuegrowingas fraudulentactivitiesandmisuseof fundhas beensignificantly curtailed.

ReferenceList

Ditcham,R 2007.Dubaiissues escrow account law for property sector.Retrieved fromhttp://gulfnews.com/business/property/dubai-issues-escrow-account-law-for-property-sector-1.132404

Governmentof Dubai 2007, Lawsad Regulation Draft Law No.8 of 2007 Concerning Real EstateDevelopment Trust Accounts in the Emirates of Dubai.Land Department

Sayed,A 2010, HasDubai’s Escrow Law Succeeded in Securing Purchasers’ Money.Retrieved fromhttp://www.hadefpartners.com/News/pageid/120-137/default.aspx?mediaid=115