Escrow controls where the money sits. It does not guarantee that the building gets built.

Project registration and the escrow account — what it protects, and what it does not

Off-plan selling in both Dubai and Abu Dhabi is permitted only once the project has been registered with the emirate's regulator and a dedicated trust account opened with an approved bank. Instalments are paid into that account rather than to the developer, and release is conditional rather than automatic.

That architecture solves one problem well. It prevents the cross-subsidy pattern behind most of the losses in earlier development cycles, where money collected for a tower that had not started was used to finish one that had been oversold. It also creates a documentary trail held by the regulator and the trustee bank.

For purchasers, the checks are narrow. Confirm the project is registered and the escrow account named in the sale contract, confirm the details on the payment schedule match that trust account rather than a corporate account of the developer or an agent, and then pay into it only. Instalments paid elsewhere — to a broker, a related company, or in cash against a receipt — are the single most damaging error a purchaser can make, because the protection is defined by where the money went, not by what the receipt says.

For developers, the discipline runs the other way. Booking amounts, agency commissions and reservation fees collected outside the account create regulatory exposure and, in a contested cancellation, a reconciliation problem the developer cannot win on paper.

What escrow does not do bears stating plainly. It does not underwrite the developer's balance sheet, and does not respond if the contractor fails, if construction cost moves against a fixed sale price, or if the project is abandoned with the account largely drawn.

Developer drawdown against construction milestones

Money leaves the escrow account against verified physical progress, certified by an appointed engineer or consultant and processed by the trustee bank. A retention is held back to fund completion and defect rectification, so the account is not drawn to zero before the project is finished.

Two features drive most of the disputes. The first is that certification is an opinion about physical progress, and opinions can be wrong or generous. A drawdown certified against a milestone not genuinely achieved converts the protection into a paper exercise. Where a project stalls, reconstructing what was actually built at the date of each release is the heart of the case, and it is done from certificates, site records, progress photographs and the bank's release ledger.

The second is timing mismatch. A purchaser on a construction-linked plan pays when a milestone is certified; a purchaser on a date-linked plan pays whether or not anything has been built.

Abu Dhabi restricts what escrowed money may fund. Under Law No. 3 of 2015, as amended by Law No. 2 of 2025 (in force 2 August 2025), escrow funds may not be applied to land acquisition or to broker fees, and no drawdown is available until at least 20 per cent of the project is complete. Early instalments therefore sit in the account longer, and the two costs a developer most wants funded at the outset must come from its own resources. This is the Abu Dhabi position; Dubai's drawdown regime is unchanged by the amendment, and a Dubai payment structure should not be assumed to transfer.

For purchasers, a construction-linked plan is materially safer: it aligns exposure with progress and signals early that the project is behind. Where a date-linked plan cannot be avoided, evidence of actual site progress becomes correspondingly more valuable. For developers, the discipline is documentary — certification files, as-built records and consultant appointments that will survive scrutiny years later.

The interim register — why registering the sale contract is not a formality

An off-plan unit has no completed title to transfer, so each emirate maintains an interim record of off-plan sales. In Dubai this is the interim real estate register kept by the Land Department, and the entry made against a registered sale is commonly known by the name of that record. Abu Dhabi operates its own equivalent.

Registration matters for reasons unconnected to administrative tidiness. It puts the purchaser's interest on a public record rather than in the developer's internal sales system, and substantially reduces the risk of the same unit being sold twice. It gives the purchaser a recognised position when a project is restructured, transferred to a replacement developer, or placed into a cancellation process, where entitlement is worked out from the register. And it is normally a precondition to dealing with the unit at all.

The failure pattern is consistent. A purchaser signs, pays a deposit and the first instalments, and registration is never completed — sometimes because the developer did not lodge it, sometimes because the fee was never paid, often because both sides treated it as a step for later. The purchaser then holds a contract enforceable against one counterparty and nothing against the unit.

For purchasers, treat registration as a condition of paying the second instalment, and obtain proof of it. For developers, prompt registration is protective rather than burdensome: it forecloses the double-sale allegation, and a clean interim register is among the first things a regulator examines when a project comes under scrutiny.

Developer delay and what the purchaser can actually do

Delay is the commonest off-plan complaint and the one where expectations diverge most sharply from outcomes. Most sale agreements state an anticipated completion date and then attach a grace period, an extension mechanism for defined causes, and a definition of completion — usually a regulatory certificate rather than a finished, occupiable unit. A purchaser who reads only the headline date is measuring against a date the contract does not actually promise.

Where delay exceeds what the contract permits, the routes run in ascending order of severity: compensation while the project continues; a negotiated variation, such as a discount, an upgraded specification or a substituted unit in a completed phase; suspension of instalments, which is risky if done unilaterally; and termination with recovery of sums paid. Termination is the remedy purchasers ask for first and obtain least often, because it requires the delay to be established as the developer's, the extension mechanism to be exhausted, and the purchaser's own payment record to be clean.

A purchaser asserting developer-caused delay needs the contractual completion date, the extension notices actually served, evidence of the site's physical state over time, and a clean payment record. Developers rely on the extension mechanism, on approvals outside their control, and — with mixed success — on force majeure, which fails when advanced retrospectively to cover ordinary commercial difficulty.

For purchasers: do not stop paying without advice. A purchaser in default has almost no leverage on delay. For developers: serve extension notices contemporaneously and in the contractual form. An extension right never exercised in writing is often treated as not exercised at all.

Purchaser default and the graduated cancellation process

A developer facing a purchaser who has stopped paying cannot simply terminate and keep the money. Both emirates require a regulated process, and the entitlement to retain any part of the instalments is calibrated to how much of the project has actually been built.

The shape is consistent even where the detail differs. The developer notifies the regulator, which issues or procures a formal notice giving the purchaser a period to remedy. If the default is not cured, the regulator certifies the position, including the percentage of construction completed, and the developer's remedy follows that percentage — the further advanced the project, the more the developer may retain or recover; the less advanced, the more must be returned. At the most advanced end, the route may be a claim against the purchaser or a forced sale of the unit rather than a retention.

Three points follow. Self-help forfeiture clauses do not displace the regulated process, and a developer that acts on them is exposed. The completion percentage is certified rather than asserted, which is why construction records matter as much in a default file as in a delay file. And the process takes months.

Abu Dhabi after the 2025 amendment. Law No. 2 of 2025 requires a developer to follow a formal escalation procedure before terminating a purchaser's contract for non-payment; a missed instalment does not permit immediate termination. A developer may remove a defaulting purchaser from its records, but that step can be challenged through the courts or through arbitration. Developers should expect the written record of each escalation step to decide the outcome. Dubai's regulated default process is unaffected by the amendment.

For purchasers, payment difficulty is far better addressed before default than after. Developers routinely agree rescheduled plans, deferred instalments or a supervised resale where the purchaser engages early, and have little reason to negotiate once the notice has issued and the completion percentage favours them.

Project cancellation, liquidation and what happens to the escrow funds

Cancellation is the point at which the regulator concludes that a registered project will not be delivered. It may follow developer insolvency, prolonged inactivity on site, failure to meet regulatory conditions, or an application by the developer itself. It is an administrative determination about the project, not a judgment about individual purchasers' entitlements.

Once a project is cancelled, the escrow account is closed to further drawdown and the remaining funds become the subject of a distribution exercise. Dubai operates a dedicated committee mechanism for the liquidation of cancelled projects, with authority to determine purchaser claims and direct distribution — a specialist route outside the ordinary courts, with its own enforcement pathway. Abu Dhabi addresses cancellation within its own framework.

The uncomfortable arithmetic is that the sum remaining at cancellation is frequently far less than the aggregate of what purchasers paid, because releases were made against certified progress over the project's life. Recovery then depends on what is left, what can be realised from the land and partially completed works, and what can be recovered from the developer, its guarantors and, in some cases, those who certified progress that did not exist. Purchasers who assume cancellation triggers an automatic full refund from a full account are usually disappointed.

The comparison below sets out the shape of each emirate's approach. Regulatory practice and venue allocation move, and we confirm the current position before advising on any step.

Assignment and resale before completion

A large share of off-plan purchases are made with the intention of selling before handover. The terms governing that exit are among the most commercially significant in the contract, and the least negotiated.

Assignment generally requires the developer's consent, a transfer fee, satisfaction of a minimum-payment threshold under the payment plan, and re-registration in the assignee's name. That percentage-paid threshold governs whether an exit is available at all during the period when a purchaser is most likely to want one.

The recurring dispute is the informal assignment. A purchaser sells the position by side agreement, takes the price, and the transfer is never registered. The original purchaser remains the party the developer recognises and the party on the register; the buyer holds a claim against a person who may be outside the jurisdiction. If the project is cancelled, distribution follows the register. If the original purchaser defaults, the informal buyer's remedies run against the seller alone.

For purchasers buying a resale position: confirm what has actually been paid, obtain written consent and complete the re-registration before releasing the price. Check also whether any incentive attaching to the original sale — a fee waiver, a post-handover plan, a guaranteed return — survives assignment, because many do not. For developers: a consent regime that is clear, transparently priced and promptly administered reduces unregistered side deals, which become the developer's problem when the project is later restructured.

Handover — area variance, specification changes, snagging and defects

Area variance. The delivered unit rarely matches the sold area exactly. Most contracts set a tolerance band within which no adjustment is made and a price adjustment above it. Two questions decide these disputes: which measurement standard applies — gross, net, internal, or one including a share of common areas — and whether the tolerance operates symmetrically. A clause that adjusts the price upward when the unit is larger but is silent when it is smaller is one-sided, common, and worth striking at signature.

Specification changes. Developers ordinarily reserve a right to substitute materials, finishes and equipment for items of equivalent or better quality, which is legitimate over a multi-year build. The dispute is about equivalence, and it is decided on the sale documentation. A purchaser who relied on renders and a show apartment, and never obtained a written specification schedule, has no baseline against which to test the substitution.

Snagging. The inspection window is short, and in most contracts acceptance of the unit — or taking possession without recording defects — narrows the purchaser's position considerably. Inspect before accepting, use an independent inspector rather than the developer's list, record defects with dated photographs, and accept subject to that schedule rather than unconditionally. Where keys are released only against unconditional acceptance, that is a point to take before signing, not at the door.

Defects after handover. UAE law imposes an extended liability on contractors and design consultants for defects affecting a building's structural integrity or safety, and a shorter warranty period for installations, both running from delivery. Those periods sit alongside, not instead of, the developer's contractual obligations. Defects in shared parts of the building follow a different route, addressed on our common-area defects page.

Where this goes wrong — and the record that decides it

The files that reach us cluster around a small number of avoidable failures.

1. Money paid outside the escrow account. Deposits and instalments paid to an agent, a related company or a general corporate account. Protection is defined by the destination of the funds.
2. The sale never registered in the interim register. The purchaser holds a contract and no recorded interest, and discovers it at the moment it matters — a double sale, a restructuring, or a cancellation distribution.
3. Unilateral suspension of payments. A purchaser with a genuine delay claim stops paying without advice, converting a claim into a defence against a regulated cancellation.
4. Extension rights never exercised in writing. A developer arguing years later, from silence, for an extension it never invoked contemporaneously.
5. Informal assignment. The position sold by side letter, the register unchanged. The developer recognises the original purchaser, and so does the distribution.
6. No written specification schedule. Reliance on renders and a show apartment, with nothing annexed to measure the delivered unit against.
7. Unconditional acceptance at handover. Keys taken, acceptance signed, defects raised afterwards, and the position weaker than it was an hour earlier.
8. Assuming Dubai practice applies in Abu Dhabi. Thresholds, procedures, regulator and venue all differ.

The record a purchaser should keep from day one. Almost every off-plan dispute is decided on documents that either exist or do not: the sale agreement with every annexure, including the payment, specification and floor plan schedules; proof of project registration and the escrow account details; every receipt and transfer confirmation showing the destination account; the interim registration certificate; all developer correspondence, including delay and extension notices as served; the marketing material relied on at purchase; dated photographs of site progress; and the handover inspection report with its defect schedule. Assembling this contemporaneously, rather than reconstructing it two years later, usually decides whether a claim is worth bringing.

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