Is Escrow Legal in Uae

DLD continues to use modern and advanced electronic means to strengthen its governance, regulatory and supervisory function and to increase client satisfaction with the services provided. The innovative system met the demand of several local banks. Since its launch, RERA has signed escrow management agreements for JOP management companies with nine local banks, namely Abu Dhabi Islamic Bank, United Bank Limited, Commercial Bank of Dubai, Abu Dhabi Commercial Bank, Arab Bank for Investment & Foreign Trade (Al Masraf), Dubai Islamic Bank, Emirates NBD, First Abu Dhabi Bank and Mashreq Bank. In addition, the agreement confirms the need for the account trustee to comply with laws and regulations relating to the ownership of JOP in Dubai, as well as the implementing rules and circulars issued by DLD and RERA. The agent shall also provide RERA with periodic financial statements on the movement of accounts or, upon request, a monthly financial audit report issued by the Project Escrow Manager to the Bank, requesting a copy of all supply contracts, maintenance contracts, services and the like from the Management Company and verifying them prior to payment of payments due to suppliers by the Account Secretary. according to the applicable system or as specified by RERA. The management company must obtain approval from RERA to withdraw an amount from the reserve account, stating the reasons, and the account trustee must agree not to withdraw any amount from the reserve account without RRSP`s consent. In addition to the increased protection it provides to buyers and investors, as noted above, an escrow account can be beneficial in many ways. An escrow account is a legal account in which an asset or financial instrument is held by a third party – a natural or legal person – on behalf of two other parties who are in the process of carrying out a business transaction. The trustee holds the fund or assets until the final obligation is satisfied. An escrow account can contain securities, funds, money or other assets. When it comes to the UAE real estate market, an escrow account performs a very specific function. Developers of different projects must open different escrow accounts for each project, in accordance with the UAE Escrow Account Law.

An escrow account is one that acts as a third-party financing vehicle where the merchant has access to the money transferred (by the buyer) once an escrow agreement has been concluded. If the contract is not fulfilled by the merchant, the fund will be returned to the buyer. The agreement also stipulates that the Account Trustee must keep an up-to-date register of the names and signatures of the authorised persons of each management company. They should also ensure that powers of attorney granted to representatives to sign on behalf of the management company have been granted on the basis of official documents duly certified and registered by RERA. They should not allow persons who are not duly authorised or registered by RERA to trade only on escrow accounts. The Account Trustee does not own a real estate project when the management company managing the facilities of that project applies to open an account with the Account Trustee in order to avoid a conflict of interest. The agent is also required to keep an accurate and up-to-date record of the Management Corporation`s account and to allow RERA to examine these records and make copies if necessary. Once the escrow opening is complete, the Dubai Land Department will periodically request a statement of escrow income and expenditure. The Dubai Land Department will request from the Bank all information it needs regarding the escrow account and may request the assistance of a third party if it deems it appropriate to verify the statements and information received. It is important to note that applicants can access and keep copies of their own statements.

The bank that maintains and maintains the escrow account must retain the 5% of the total funds held in trust for a period of one year after the completion of the development project in order to remedy any defects or contingencies that arise in the property during that period. In accordance with the Agreement, the Account Trustee is obligated not to change, cancel or modify the terms of account creation without the prior written consent of RRSP, except for changing fees for account services. You also agree not to deposit, transfer or execute funds in the Accounts except in accordance with the approved authorization duly processed and signed or with the written authorization of RRSP. The account trustee must obtain a copy of the written or electronic RRSP approval, indicating the approved budget and service and maintenance fees, and explaining the suppliers` contracts. You must also not authorize payments or cash withdrawals from the escrow account if they exceed the limits of the amount authorized for a particular service provider or service, unless RERA has given its consent. The account trustee is required to inform RERA in writing and without undue delay upon presentation of proof that he or she has received all requests relating to the escrow account of a corporation other than the management company registered with RERA. Any developer considering staging a commercial or residential project must apply for an escrow account with DLD (Dubai Land Department). Mario Volpi is Director of Sales and Leasing at Engel & Volkers. He has worked in the real estate industry in London and Dubai for over 35 years. The opinions expressed do not constitute legal advice and are provided for informational purposes only. Please send your questions to mario.volpi@engelvoelkers.com Dubai, United Arab Emirates, on March 23, 2021: In 2019, the Dubai Land Department`s (DLD) Real Estate Regulatory Agency (RERA) introduced and activated the Community Real Estate Bank Trust Facility (JOPs) with the Mollak electronic system, which represents a quantum leap to help JOP owners easily manage and execute their projects.

It also helped enforce their rights by offering a direct deposit service to their bank accounts without the project proponent having any relationship with those accounts, thereby enhancing their trust and transparency.