Exploring the Role of SPA in Off-Plan Property Purchases in Dubai

The property market in Dubai offers attractive opportunities for investors and homebuyers, but it's essential to conduct thorough research and understand the legal aspects before making your decision.

SPAs play a crucial role in safeguarding the interests of both parties in off-plan property acquisitions. They outline the obligations and responsibilities of both the buyer and the seller and ensure a clear understanding of what is being acquired and what is not. 

Let’s delve into the definition and importance of SPAs in the Dubai real estate landscape. We will discuss key components, DLD registration, common pitfalls to avoid, and all other information about the agreement. This valuable knowledge will help readers navigate Dubai's dynamic real estate market confidently.

SPA Explained

SPA stands for Sales and Purchase Agreement, a legal contract that outlines the terms and conditions under which a seller agrees to sell and a buyer agrees to buy a property. They are usually used to purchase off-plan properties in Dubai.

This sales agreement contract typically includes details such as the purchase price, payment terms, delivery conditions, warranties, and any other relevant terms negotiated between the parties. It is usually signed after the initial negotiations and after both parties agree on the terms.

After signing the purchase agreement, the property becomes officially contracted. However, several additional steps must be completed before moving out of your old house. These steps entail making an earnest money deposit, arranging a home inspection, and finalizing your new house's closing process.
Moreover, if you need further understanding of SPA, you can talk to an expert. At Provident, we offer quality conveyancing services to our clients, making it easier to change property ownership from one owner to another.

Key Components of SPA

Here is what a Sales and Purchase Agreement (SPA) in Dubai typically contains:

Identification of Parties: Identify the buyer and seller involved in the transaction.
Description of Property: Provide a detailed description of the property for purchase in Dubai, including its location, size, boundaries, and relevant features or amenities.
Purchase Price and Payment Terms: Specify the agreed-upon purchase price for the property, including the currency for the payment. Also, outline the deposit amount, the schedule for making installment payments, and the payment method.
Completion / Handover Date: Specify the completion date, also known as the transfer of ownership. This is typically when the final payment is made, and the property keys are handed over to the buyer.
Conditions: Include any conditions that must be met before the sale can proceed, such as obtaining financing, securing necessary approvals from authorities, or conducting satisfactory due diligence on the property.
Obligations of Parties: Clearly define the obligations and responsibilities of both the buyer and seller throughout the transaction process.
Default and Remedies: Specify the consequences of either party's default, including any remedies available to the non-defaulting party, such as termination of the agreement or legal action for damages.
Governing Law and Jurisdiction: Identify the governing law that will apply to the agreement and specify the jurisdiction where any disputes arising from the agreement will be resolved.
Signatures: Both parties must sign the contract to indicate their acceptance and agreement to the terms and conditions outlined in the SPA.

How do I register SPA with DLD?

The signed property purchase agreement, which includes the Sale Agreement or SPA, must be registered with the DLD to transfer property ownership. It is a legal requirement for DLD registration.

Let's delve into the detailed process of registering a Sale and Purchase Agreement (SPA) with the Dubai Land Department (DLD):

• Log in to the Oqood portal and select the provisional sale registration service.
• Choose the property for registration.
• Fill in your details.
• Attach the required documents.
• Select the preferred payment method.
• Apply online.
• Receive the output receipt via email.

Documents Required

Different sets of documents are needed for individuals and companies. Here’s the list:

For Individuals:

• Copy of the sale and purchase contract
• Copy of valid UAE ID
• Copy of valid passport for non-residents

For Sole Proprietorship Companies:

• Copy of valid trade license
• Copy of the UAE ID or passport of the license holder
• Power of attorney (if applicable)

For Limited Liability Companies:

• Copy of a valid trade license
• Copy of the UAE ID or passport of the license holder
• Power of attorney (if applicable)
• Copy of translated company’s Memorandum of Association and annexes (legally translated into Arabic)
• Copy of the shareholder certificate

For Foreign Companies:

• Copy of a valid trade license
• Copy of national ID or passport of the license holder
• Power of attorney (if applicable)
• Copy of translated company’s Memorandum of Association and annexes (legally translated into Arabic and ratified by the Ministry of Foreign Affairs)
• NOC (no objection letter) from the free zones
• Copy of the shareholder certificate

For GCC Companies:

• Copy of a valid trade license
• Copy of the national ID or passport of the license holder
• Power of attorney (if applicable)
• Copy of translated company’s Memorandum of Association and annexes (legally translated into Arabic and ratified by the Ministry of Foreign Affairs)
• Copy of the shareholder certificate

Registration Fee

The registration fees for SPA with DLD are as follows:

• 2% of the total sale value for both seller and purchaser
• AED 10 for knowledge fees
• AED 10 for innovation fees
• AED 1,000 for self-registration for developers

Cancellation of SPA

Can a buyer cancel a sale? Yes. After signing a purchase agreement, both buyer and seller can cancel the agreement to buy or sell a property. Should one party breach the agreement, the non-breaching party may opt to terminate the deal, pursue legal action to compel performance, or seek damages for non-compliance.
In Dubai, a buyer can terminate a Sales and Purchase Agreement (SPA) if the developer fails to deliver the property unit by the Anticipated Completion Date (ACD). Moreover, the buyer can request a refund if the ACD extends beyond six to 12 months without the property being handed over. If a sale and purchase agreement is terminated in Dubai, the party affected by the termination must issue a notice of termination of the Sale and Purchase Agreement to the defaulting party, allowing 30 days for reconciliation. The agreement will be deemed terminated once this grace period expires.
According to Law No. 8 of 2007, which governs Escrow Accounts for Real Estate Development in Dubai, the developer must refund all payments the buyer makes if the Real Estate Regulation Agency (RERA) cancels a real estate project. This law safeguards buyers by ensuring full refunds during project cancellations. Additionally, developers have the authority to terminate a SPA if the buyer fails to meet contractual obligations, as per Law No. 19 of 2020, and Amending Law No. 13 of 2008 regarding the Interim Real Property Register in Dubai.

Common Pitfalls to Avoid

Here are some pitfalls to avoid when dealing with Sales and Purchase Agreements (SPAs) in Dubai: 

• Ensure that the SPA clearly states all included amenities and services and includes a clause preventing developers from altering or removing any amenities. 
• To prevent disputes, ensure that the SPA includes detailed furniture specifications for furnished properties. 
• When understanding the property layout, ensure dimensions are included in the SPA to avoid surprises.
• Clarify the handover date in the SPA rather than relying solely on the completion date. This ensures you know when to expect possession of your property and when service charges will commence.
• Include clauses in the SPA that protect buyers in case of developer defaults or significant delays in project delivery. This could involve clear cancellation clauses or penalties for late delivery.
• Include clear clauses in the SPA to prevent developers from changing the property's intended usage. 
• Ensure the SPA does not include non-disclosure clauses restricting you from sharing its terms on social media or other platforms.
• Be aware of developers' rights, such as delivering properties with a variance of up to 5% in size and possibly up to 12 months late in handover.
• Include clauses in the SPA to prevent developers from imposing new terms overriding the original SPA terms upon handover.
• If unsatisfied with the SPA terms, consider purchasing a ready property to avoid potential issues. Once you comprehend the affection plan, ensure that you incorporate a provision in the SPA allowing for the cancellation of the purchase in case of any alterations.