An SPA (Sales and Purchase Agreement) is a law-binding contract that is registered between a seller and a buyer when purchasing and selling an off-plan property in Dubai. However, any delays in handover or court orders allow you to terminate the sales and purchase agreement in Dubai.
The termination process involves a deep understanding of Dubai laws, including cancellation terms, compensation, and the reasoning behind its cancellation. Here, we aim to make the entire process smoother to avoid any confusion when terminating the sales and purchase contract.
- Dubai Sales and Purchase Agreement
- Why SPA Termination Occurs
- Dubai Land Department Termination Process
- Cancellation Terms for Buyers and Developers
- FAQs
Dubai Sales And Purchase Agreement
The Sales and Purchase Agreement (SPA) is defined as a contract that is signed between a developer and a buyer. Its main aim is to outline the legalities of property purchases so that both parties are aware of the binding terms.
Moreover, an SPA is crucial if one is buying an off-plan property or a property that is still under construction in Dubai. Once you sign the SPA, the terms are set in stone and cannot be redacted under any circumstances.
The Sales and Purchase agreement is protected under Dubai law and requires the property layout, down payment details, payment plans and cancellation terms.
- Cancellation terms: These are required for both parties i.e. the developer and buyer to protect the rights of each party.
- Compensation: This is also a requirement on an event of unfulfillment of contract terms.
Why SPA Termination Occurs
Either developer or buyer can terminate sales and purchase agreements based on four binding terms that legally decide the final cancellation. Here are the terms listed below:
Court Order
Termination by court order is protected under Article 272 of the Civil Transactions Law and the terms are listed as follows:
- Bilateral Contracts: If either party fails to perform their contractual obligations, the other party (upon request) can follow with the termination of the SPA.
- Requirements: A formal notification should be sent out to the debtor.
- Judge Grant: Upon the judge’s decision, he/she may order the debtor to immediately perform the contract or grant him extra time if required.
Iqala
This termination process involves the cancellation via the process of Iqala. Also, it is an official termination agreed mutually between the parties. Under Article 268 under Civil Transactions Law, the terms are as follows:
- Mutual Agreement: Under the mutual agreement, either or both parties are granted permission to follow through with their SPA termination.
- Legally Binding: The process is legally binding, meaning it cannot be overridden once the termination process is successful.
External Factor Termination
The termination of SPA can also take place due to external factors. Its terms are fully protected under Article 273 under the Civil Transactions Law. This involves the automatic cancellation of the contract. Its terms are listed here:
- Bilateral Contracts: In these contracts, if a greater force arises which makes the obligation of the performance impossible, the contract automatically ends.
- Partial Impossibility: If the possibility remains partial, the consideration for the impossibility is rescinded. This also applies to provisional impossibility for continuous contracts.
Termination Agreement Beforehand
Under Article 271 in the Civil Transactions Law, the parties can agree to make a contract ipso facto without permission from the court. However:
- Formal Notification: While the parties can rescind the contract without a court order, they are still required to serve a formal notification, unless agreed otherwise.
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Dubai Land Department Termination Process
The Dubai Land Department (DLD) brings awareness to all contract processes including SPA and carefully considers the Dubai termination laws. DLD offers the request for termination of initial registration.
The service permits the developer to apply for deregistration of the provisional registration which is for investors that breach their obligations listed in a contract.
Issuing a Notice to Deregistration of Provisional Sale (Phase 1)
The required documents for Phase 1 are listed as follows:
- Copy of real estate contract
- Real estate developer’s warning (copy)
- Warning letter copy
- Copy of proof of purchaser’s receipt
- For individuals: Passport or Emirates ID
- For companies: Trade license copy
- Technical report for villas
- Copy of notification to the purchase of payment of due money
- The receipt is attached for proof of payment of registration fees
Completing The Provisional Deregistration Application (Phase 2)
The documents required for phase 2 are here below:
- Copy of deregistration notice by the Legal Affairs Department
- Notice dispatch copy
- Purchase receipt copy
- Publication notice copy
- No objection certificate copy
Service Terms
As far as the service terms are concerned, they are listed here below:
- A sale needs to be made before the completion of a project.
- The customer needs to either receive or refuse to receive the developer’s warning within 30 days.
- The amount listed in the developer’s warning needs to be identical to the amount in the department’s notice.
- If any amount has been refined according to Law No. 13 of 2008, a manager’s check needs to be deposited to the Legal Support Department.
- The developer’s warning should not include any fines, service, or registration fees.
- If the numbers for the real-estate units are changed, you must also submit proof of new approved numbers.
DLD Termination Steps
- Step 1 – 30-Day Notice
The developer must issue a formal notice to the buyer through the DLD’s Legal Affairs Department, giving the buyer 30 days to settle outstanding payments or obligations. - Step 2 – Termination Request
If the buyer does not respond within this period, the developer can request the cancellation of the provisional (interim) sale registration through DLD Smart Services. The request must include the warning letter, proof of notification, and the relevant SPA and Oqood documents. - Step 3 – Settlement and Retention
If the buyer still fails to comply, the DLD may approve the termination and allow the developer to retain up to 30% of the purchase price for projects below 60% completion, or up to 40% for projects between 60% and 80% or already completed. - All settlements are handled through the DLD’s official procedures, and fees and timelines are displayed within the Smart Services portal at the time of submission.
Service Time And Other Procedures
It takes an average of 8 hours and 30 minutes for the request for termination of initial registration to be fulfilled, lest there are external changes.
- Issued Documents: You will receive a procedure validation document via email.
- Fees: AED 600, AED 10 Knowledge Fees, and AED 10 Innovation Fees.
Cancellation Terms for Buyers and Developers
There are certain terms that both buyers and developers must adhere to if they want to terminate the sales purchase agreement.
Buyer’s Cancellation Terms
Buyers need to understand these terms and conditions to terminate the sales purchase agreement in Dubai:
- Termination: A buyer has the permission to terminate a SPA in case the developers do not hand over properties by ACD (Anticipated Completion Date).
- Refund: Buyers can get a refund if the final anticipated completion date exceeds 6-12 months.
- RERA Laws: As stated by the RERA laws, the buyer can get back the payments from the developer originally in case of cancellation. Law No. 8 of 2007 protects this right.
Developer’s Cancellation Terms
In case of developers terminating the sales and purchase agreement, they must follow these terms:
- Protected under Law No. (19) of 2020, a developer can cancel an SPA if the buyer refuses to meet the proper requirements.
The compensation for the developer in case the buyer doesn’t fulfill the contract is the following:
- Before Construction: The developer receives 30% of the total buying price.
- 60% or Less Completed: The developer gets 20% of the total buying price.
- 60% or More Completed: developers receive 40% of the total buying price.
FAQs
Before you terminate the sales purchase agreement in Dubai, keep these outcomes in mind:
– You can get compensation in case of non-fulfillment of SPA obligations
– If the contract gets cancelled, then the developer and buyer can get back to it as they were before the contract was made
If there are any queries regarding the terms of a sales and purchase agreement, A lawyer can provide the right answers, including issues such as:
– Cancellation terms
– Procedures
– Fees
– Reasonings For Termination
The RERA forms cover Form F or the Purchase Agreement Contract. It also states the property, terms, and conditions of the real estate properties that are intended for purchase.
That’s all there is to know about how to terminate the sales purchase agreement in Dubai. Knowing the cancellation terms can streamline the entire termination process for both the buyer and the developer.
