TL;DR
- Developers can now terminate off-plan SPAs without court approval.
- Buyers must be in material default for cancellation to begin.
- A 60-day notice and DMT-mediated settlement process is mandatory.
- Refunds may be given based on construction progress and payment balance.
Understanding Off-Plan Properties in Abu Dhabi : Benefits and Risks
In Abu Dhabi, off-plan properties are real estate units sold before or during construction, with buyers committing based on architectural plans, 3D renderings, or models rather than completed homes. These properties are especially popular due to their lower entry prices, flexible installment-based payment plans, and the potential for value appreciation by the time construction is finished. Many buyers are also drawn to the option of customizing elements of their future home during the build. However, off-plan purchases come with important risks, such as construction delays, differences between promised and delivered features, and market value fluctuations. Additionally, the outcome often depends on the developer’s track record, making it essential for buyers to research thoroughly before committing. To safeguard buyers and ensure transparency, all off-plan transactions in the Emirate are regulated by the Department of Municipalities and Transport (DMT), which oversees payment protections and developer obligations through a strict legal and escrow framework.In light of these complexities, Abu Dhabi has introduced a major legal change that directly affects how off-plan property contracts can be handled, especially when things go wrong. Developers are now allowed to cancel off-plan sale and purchase agreements (SPAs) without needing to go to court. But this right comes with strict conditions and procedures designed to protect buyers and keep the real estate market fair, stable, and transparent.The new legal provision outlines the specific circumstances under which a developer may terminate an off-plan contract, the procedures that must be followed, and the safeguards in place to protect buyer rights throughout the process.
What Does the New Law Say?
The newly enacted Abu Dhabi Law No. (2) of 2025, specifically Article 3, introduces a new process that allows developers to unilaterally terminate an off-plan Sale and Purchase Agreement (SPA), without first going to court or arbitration.However, this can only happen if the buyer is in “material default,”meaning they have seriously failed to meet their contractual obligations, such as not making agreed payments.This is a significant shift in how real estate contracts are enforced in Abu Dhabi. Traditionally, developers had to go through time-consuming legal processes to terminate contracts. Now, if a buyer defaults and doesn’t fix it in time, the developer can cancel the deal directly, but only after following a detailed and tightly controlled process.
When Can a Developer Cancel a Contract?
A developer can only terminate an off-plan SPA under the following specific circumstances:
- The buyer has materially defaulted on their obligations (e.g., missed key payments).
- The developer strictly follows a multi-step process that includes formal notices, reports, and potential mediation.
This isn’t a free pass to cancel any deal. The law is designed to balance developer efficiency and buyer protection.
Step-by-Step: How a Developer Can Terminate a Contract
Here’s a simplified breakdown of the full procedure developers must follow:
Step 1: Send Formal Notice to Buyer
- The developer must send a formal, notarised notice or one via registered mail with acknowledgment of receipt.
- It must be sent to the buyer’s official address mentioned in the SPA.
- This starts a 60-day period where the buyer is given a chance to fix the problem (called a “cure period”).
Step 2: Notify Authorities
15 days after sending the notice, the developer must:
- Inform the Abu Dhabi Department of Municipalities and Transport (DMT) about the default.
- Submit evidence: The original notice and a certificate from the escrow account trustee proving the buyer is still in default.
This creates a public record and allows authorities to monitor the situation. The escrow trustee acts as an independent verifier to confirm the default is real.
Step 3: Mediation Attempt
The DMT will now try to organise an amicable settlement between the buyer and developer before the 60-day cure period ends. This mediation could lead to:
- Payment rescheduling
- Partial payment waivers
- Other negotiated solutions
- If a deal is reached, it’s added as an official addendum to the SPA, and the contract continues.
Step 4: Contract Termination
If the buyer doesn’t resolve the issue and the 60 days pass without a settlement, the developer can proceed with terminating the SPA. After termination:
- The DMT can remove the buyer’s name from the unit’s official registry.
- The developer must wait an additional 30 days before reselling the unit.
This 30-day “cooling-off” period gives the buyer one last chance to react and allows the DMT to ensure the developer is still on track with the construction timeline.
What Happens to the Buyer’s Money?
Termination doesn’t mean the developer keeps all the buyer’s money. The law introduces fair financial safeguards:
- Money from any resale must go into the project’s escrow account.
- The developer can only withdraw a portion of it, based on:
- The severity of the buyer’s default
- How much of the project is actually completed
- If the buyer has already paid more than what the developer has spent on construction, they may be entitled to a partial refund.
A government decision is expected soon to define how much can be deducted and how the refund process will work.
Buyers Can Still Go to Court
Even though developers can now terminate off-plan contracts without filing a case first, buyers still have legal rights:
- Buyers can still take the matter to Abu Dhabi Courts or arbitration, depending on what the SPA says.
- A judge can later validate or cancel the termination, based on whether all the legal steps were followed.
This ensures that developers must still comply with every rule, and buyers are not left unprotected.
Why This Law Was Introduced
The real estate market in Abu Dhabi relies heavily on off-plan sales, where buyers pay in instalments before the property is built. But if buyers stop paying, developers might struggle to finish the project. This law aims to:
- Keep projects moving without delays.
- Avoid unnecessary lawsuits and court backlog.
- Ensure fair treatment for buyers.
- Maintain investor trust in Abu Dhabi’s property market.
It’s also a major step in modernising real estate laws and making the Emirate more attractive to global investors.
Other Real Estate Reforms You Should Know
This update is part of a larger legal reform package aimed at making Abu Dhabi a more transparent and investor-friendly real estate hub. Other key changes include:
Unified Legal Framework
- Covers all real estate activities, from sales and registration to property valuation and management.
- Brings unregulated professions under proper supervision.
- Improves transparency, sector quality, and consumer protection.
New Structure for Community Management
- Replaces Owners’ Associations with Owners’ Committees.
- These committees will have advisory and oversight roles, rather than full control.
- They’ll operate under rules issued by the Chairman of the DMT.
What Should Buyers and Developers Do Now?
For Developers:
Strictly follow each step in the termination process. Keep records of:
- Notices
- Escrow certifications
- DMT interactions
- Construction progress
For Buyers:
- Make sure your contact details are up to date in your SPA.
- Keep an eye on your escrow payments and obligations.
- If you face difficulties, respond promptly and engage with the DMT for mediation.
- Ignoring default notices could result in contract cancellation and loss of part of your money.
FAQs:
Q. Can developers cancel off-plan contracts anytime?No, only if the buyer seriously defaults on their obligations.Q. Is there a warning before termination?Yes, a formal notice is required, followed by a 60-day cure period.Q. Who oversees the process?The Department of Municipalities and Transport (DMT) supervises all steps.Q. Can buyers lose all their money?Not always, refunds are based on project progress and payments made.Q. Can buyers still go to court?Yes, buyers can challenge the termination in court or through arbitration.
