A Guidebook of Knowing Off-Plan Property Laws of Ras Al Khaimah
Ras Al Khaimah (RAK) has turned into a mass property investment area worldwide and regionally. Efforts by the emirate to ensure transparency, accountability, and protection of investors have seen it come up with innovative off-plan property legislations. The guidebook unravels the most crucial aspects of RAK’s off-plan property law in order to furnish information to developers, investors, and stakeholders.
Introduction of Off-Plan Property Legislation in RAK
RAK introduced Law No. 12 of 2023 in August 2023, which provided an effective set of laws of property development. The legislation is attempting to govern off-plan property sales in such a manner that all stakeholders are protected and the real estate sector is effective and transparent.
Most Significant Key Provisions of Law No. 12 of 2023
- Setting up of Regulator Bodies
The law provides for setting up a Real Estate Development Committee to regulate real estate developments. Real Estate Regulatory Administration of the RAK Municipality shall also enforce and implement provisions of the laws for safeguarding the interests of developers and buyers of properties.
- Registration of Developer and Project
Developers wishing to be involved in real estate activities are required to be registered under RERA. Registration is achieved through the submission of mandatory documents, and title deeds and project plans are among the mandatory documents. The registered developers can continue to conduct real estate development activities in the emirate alone.
- Licensing Requirements
Developers are required to obtain a permit from regulatory agencies before running any real estate development business. The permit guarantees developers are competent and comply with standards as determined by regulatory agencies.
Regulations on Off-Plan Property Sales
- Permits for Sale
Before selling off-plan properties, a developer will have to obtain a permit of sale issued by RERA. A permit of sale shall be given on registering the project, maintaining an escrow account, and all documents approved for sale.
- Advertising rules
The developers must approach RERA ahead of time for pre-approval to sell off-plan units. The promotional materials must be generic project details like location, plot number, and unit parameters so that potential buyers receive proper information.
- Registration of sales
Off-plan transactions and all off-plan transactions will be registered in the first land register. They have to be registered by buyers within five working days from exchange of the agreement of sale executed on behalf of buyers. Buyers will not be eligible to approach RERA for completion of registration in any other case.
Financial Guarantees for Investors
- Escrow Accounts
Developers need to open an escrow account for every property development project. An escrow account in the form of an escrow account trustee guarantees funds from buyers to be utilized for developing only the specified project. Developers must present a monthly statement of all transactions processed through the escrow account.
- Maintenance Reserve
For addressing defined maintenance needs after the project is completed, at least 5% of the total cost of the project shall be kept in trust with an escrow fund for twelve months from the date of project completion. This kind of fund facilitates repair of defects or immediate maintenance.
- Financing Rules
Developers are required to give a cash flow plan in which they specify the way at least 20% of project cost will be financed from their own resources. Developers are also allowed to mortgage property to raise finance only when over 50% of construction is done and the entire loan amount is placed in an escrow account.
Project Completion and Transfer of Title
Upon successful project completion, the following is required of the developers:
- Take full-paid buyers title of sold units within thirty days at maximum.
- Take title of unsold units in their name on paying all the registration charges.
Such clauses enable buyers to get their legal title to property in time and enable developers to honor their obligations.
Project Cancellation Provisions
The Act further lays down a few grounds for cancellation of a real estate project, i.e., unwarranted delay in the commencement of the project. The cancellation can be done only after the refund of the entire amount paid by the buyers and settlement of all the outstanding dues towards the contractors, consultants, and other parties. This ensures the protection of the buyers and other parties from the unreasonable impact of project cancellation.
Management Systems for Developments
The promoters before sales of the units shall create a Master Community Management System for the entire development, which shall be RERA-approved. Sub-developers shall also form and obtain RERA approval for a Building Management System for the scheme or the phase and shall incorporate a modification of the aforestated systems subject to obtaining prior RERA approval.
Fees and Penalties
The buyers and the developers remit the required registration charges of the off-plan realty transactions. The law stipulates a schedule of fines and a schedule of fees for breach with the aim to facilitate responsibility and financial transparency in the market for properties.
Frequently Asked Questions (FAQs)
Q1: What are the procedures involved in registering an off-plan property in RAK?
To register off-plan property in RAK, go to RAK Municipality’s website, click on RERA tab and option ‘Off-Plan Sale Registration Service.’ Upload the documents and pay the fee.
Q2: Which documents should be uploaded for off-plan property registration?
You will have to present a copy of passport, Emirates ID, and Sales and Purchase Agreement (SPA) that must contain the details of property, payment plan, and escrow account details. In case of a new development, an undertaking form is also required.
Q3: What is the role of RERA in RAK?
The RAK Real Estate Regulatory Authority (RERA) oversees and governs the real estate transactions in the emirate. RERA facilitates all the real estate transactions to be transparent and according to the law in order to secure the interest of all the parties.
With strict compliance with Law No. 12 of 2023, Ras Al Khaimah aims to have a secure, transparent real estate industry that would increase investor confidence and sustainable emirate development.