Both buyers and developers sometimes seek to exit an off-plan sale and purchase agreement before completion. The legal consequences depend entirely on who is walking away, at what stage, and for what reason. This article explains the framework that governs those decisions under Dubai law and the UAE Civil Code.
Part 1 of 3 | UAE SPA Exit Series: Part 1: Off-Plan Residential · Part 2: Commercial, DIFC & ADGM · Part 3: Resale (Secondary Market)
The Exit Question
An off-plan sale and purchase agreement (SPA) is a binding contract from the moment it is signed. Neither party has an automatic right to walk away simply because circumstances have changed or the transaction has become less attractive. Yet buyers and developers do sometimes seek to exit — and the legal consequences of doing so differ significantly depending on which party is seeking to leave, how far construction has progressed, and whether the exit is voluntary or driven by the other party’s default.
This is the first in a three-part series examining exit rights under UAE sale and purchase agreements. Part 2 covers commercial, DIFC, and ADGM property SPAs. Part 3 addresses secondary market (resale) transactions.
This article focuses on Dubai’s off-plan residential market, which has the most developed and most frequently litigated legal framework in the UAE. It also addresses the position under the UAE Civil Code — the federal law that applies across all Emirates — and notes where Abu Dhabi’s regulatory framework differs in material respects.
In practical terms, parties seeking to exit an off-plan SPA typically have only three viable pathways: (i) buyer default under the statutory forfeiture regime; (ii) termination arising from developer breach; or (iii) a negotiated mutual rescission. The availability and financial consequences of each pathway depend primarily on timing, construction progress, and the parties’ relative commercial leverage.
This Article is a Part of our Legal & Regulatory Framework in UAE Real Estate Blogpost.
Dubai’s Off-Plan Legal Framework
There is no single, unified federal law governing off-plan property sales across the UAE. Each Emirate has developed its own regulatory framework, with Dubai having by far the most comprehensive and most frequently tested body of law.
The four key instruments are as follows. Law No. 13 of 2008 (as subsequently amended) established the Interim Real Property Register in the Emirate of Dubai and made registration of all off-plan sales with the Dubai Land Department (DLD) mandatory. Any sale not so registered is, as a matter of law, liable to be treated as void and unenforceable, although the precise legal consequences may depend on the specific facts and the manner in which the transaction is presented before the courts.1 Law No. 8 of 2007 requires every developer selling off-plan to open a dedicated, DLD-registered escrow account for each project, into which all buyer payments must be deposited. Those funds may only be used for the construction of that specific project and are protected from the developer’s creditors.2 Law No. 19 of 2017 amended Article 11 of Law No. 13 of 2008 to set out in precise detail the procedures a developer must follow where a buyer defaults, the forfeiture percentages applicable at each construction stage, and the timelines for refunding any excess to the buyer. These procedures are expressly designated as matters of public policy and cannot be contracted around.3 Executive Council Resolution No. 6 of 2010 provides the implementing regulations, including developer handover obligations and the DLD’s mediation function.4
Oversight of the sector sits with RERA — the Real Estate Regulatory Agency, which operates as a division of the DLD. RERA registers developers, monitors construction progress, approves escrow account withdrawals at each construction milestone, and has the authority to cancel an entire project by formal decision.
It is important to note that this framework operates not merely as a contractual regime, but as a regulated administrative system. Once triggered, key aspects of enforcement, particularly under Article 11, are overseen by the DLD and RERA, reducing the need for immediate court intervention.
When the Buyer Wants to Exit
A buyer who decides, for whatever reason, that they no longer wish to proceed faces a straightforward but often unwelcome legal position: the SPA is binding. Geopolitical uncertainty, financing difficulties, or a change of personal circumstances do not, of themselves, give a buyer a contractual or statutory right to exit without penalty. As a matter of risk allocation, UAE law treats market fluctuations, financing constraints, and changes in personal circumstances as commercial risks borne by the buyer, rather than legal grounds for exit.
The forfeiture framework. If a buyer stops making payments, the developer triggers the Article 11 process. The DLD notifies the buyer and allows a 30-day grace period to remedy the default or reach a settlement. If no settlement is reached, the DLD issues an official document confirming the developer’s compliance and the RERA-verified construction completion percentage. The developer may then terminate the SPA and retain the applicable forfeiture amount, without obtaining a court order.5 In practice, disputes rarely arise as to the existence of default, but rather as to the RERA-certified construction completion percentage, which directly determines the applicable forfeiture tier and is therefore frequently contested.
The forfeiture percentages set out in Law No. 19 of 2017 are maximums, not fixed penalties. A developer may agree to retain less than the statutory maximum, particularly where the buyer approaches them proactively, and the unit can be resold quickly. The developer has no legal obligation to do so, however.
The table below summarises the forfeiture tiers as they currently apply in Dubai.
| Construction Stage (RERA-verified) | Developer’s Maximum Forfeiture | Refund Timeline |
|---|---|---|
| Project cancelled by RERA | Nil — full refund of all payments | Per Law No. 8 of 2007 escrow procedures |
| Construction not commenced (no developer fault) | Up to 30% of amounts paid by buyer | Within 60 days of termination |
| Construction commenced; unit <60% complete | Up to 25% of the contract price | Within 1 year of termination, or 60 days after resale |
| Unit 60–80% complete | Up to 40% of the contract price | Within 1 year of termination, or 60 days after resale |
| Unit >80% complete | Retain all paid amounts + claim balance; or retain up to 40% and refund excess | Within 1 year of termination, or 60 days after resale |
While the statutory percentages represent maximum forfeiture thresholds, market practice indicates that developers may accept reduced retention where the unit can be readily resold, particularly if the buyer engages proactively prior to formal default.
Voluntary exit by negotiation. A buyer who genuinely wishes to exit an SPA has the strongest position where: the developer is cooperative; the unit can be resold at or above the original price; and the buyer approaches the developer before formally defaulting on a payment. In such circumstances, a negotiated mutual rescission — documented as a DLD-approved addendum to the SPA — is possible and avoids the formal Article 11 process entirely. The terms of any negotiated exit are a matter for the parties, subject to the DLD’s registration requirements. From a strategic perspective, early engagement, before the Article 11 process is triggered, would significantly improve the likelihood of achieving a commercially favourable outcome.
Challenging an aggressive termination. Article 11(4)(f) of Law No. 19 of 2017 expressly preserves a buyer’s right to approach the courts or arbitration if the developer has abused the termination process — for example, by fabricating or inflating the construction completion percentage to trigger a higher forfeiture tier. Such challenges are relatively rare but have succeeded where there is clear evidence of bad faith.6 Although such challenges are not common, courts and tribunals have shown a willingness to intervene where there is clear evidence that the statutory process has been misapplied or exercised in bad faith.
In addition to termination or rescission, buyers may, in some cases, explore assignment of the SPA to a third party prior to completion, subject to developer consent and applicable transfer fees. This may provide a commercial exit route without triggering the statutory forfeiture regime.
When the Developer Fails to Deliver
A buyer’s legal position changes materially where the developer — rather than the buyer — is in breach. The most common forms of developer default are failure to complete construction by the agreed date, significant delay beyond any grace period in the SPA, and abandonment or suspension of the project. In contrast to buyer default scenarios, a developer’s failure to perform materially alters the risk allocation, often shifting leverage in favour of the buyer, particularly where delay or non-performance is clearly evidenced.
Contractual remedies. Most standard Dubai SPAs include a 6 to 12-month grace period beyond the anticipated completion date before cancellation rights arise. If the property remains incomplete beyond that period, the buyer is typically entitled to cancel the SPA and claim a refund of all amounts paid, sometimes with interest. The precise entitlement depends on the wording of the individual SPA. Even otherwise, the SPA stipulates the percentage of work completed or anticipated to be completed within a specific period of time; if that percentage is not achieved within the specific period as mentioned in the SPA, the buyer may consider their available recourses.
DLD complaint and mediation. A buyer may file a formal complaint with the DLD at any stage. The DLD’s dispute resolution function, established under Executive Council Resolution No. 6 of 2010, gives it the authority to investigate developer delays, seek an amicable settlement, and refer the matter to the courts or RERA where mediation fails.7 In practice, the DLD complaint mechanism serves not only as a dispute resolution forum but also as a regulatory pressure tool that can incentivise developers to engage in settlement.
RERA project cancellation. Where RERA cancels an entire project — typically where construction has stalled, the developer is in financial difficulty, or regulatory violations have occurred — the legal consequence is the strongest available to buyers: a full refund of all payments made, funded from the project’s escrow account. This pathway bypasses the forfeiture tiers entirely.8 Disputes arising from cancelled projects are heard exclusively by the Special Tribunal for the Liquidation of Cancelled Real Property Projects in Dubai, established under Decree No. 33 of 2020, which has jurisdiction over all related claims and is exempt from court fees. This represents the most favourable outcome available to buyers, as it enables full recovery of amounts paid without exposure to the statutory forfeiture regime.
Force majeure by the developer. A developer may seek to invoke force majeure to excuse delay. Under the UAE Civil Code (Article 273), true force majeure requires that performance has become impossible — not merely more difficult or expensive. If established, it terminates the relevant contractual obligation rather than suspending it. Courts and arbitral tribunals have applied this test strictly; supply chain delays, cost increases, and general market conditions have not, of themselves, satisfied the impossibility threshold.9 It should also be noted that, under Article 273(2), where performance is only partially impossible, the corresponding obligation may be extinguished only to that extent, rather than resulting in full termination of the contract.
Can Geopolitical Uncertainty Change the Analysis?
Regional geopolitical tensions in early 2026 have prompted buyers — particularly those purchasing for investment rather than end-use — to ask whether changed external circumstances provide a legal basis for exiting their SPAs. UAE law does not make this easy, and the analysis is more nuanced than it might first appear.
Article 273 — Impossibility. A buyer who argues that geopolitical events have made performance of the SPA legally impossible faces a very high bar. Physical impossibility — for example, if the property itself had been destroyed — would satisfy Article 273. A buyer’s assessment that the investment has become less attractive, or that financing has become harder to obtain, does not constitute impossibility. This distinction is well established in UAE jurisprudence. 10
Article 249 — Hardship. The doctrine of hardship under Article 249 of the UAE Civil Code is more relevant in theory. It applies where exceptional circumstances of a public and unforeseeable nature occur that make performance of a contract oppressive — not impossible — for one of the parties. Where established, a court may adjust the parties’ obligations to restore balance; it does not terminate the contract.11
Two limitations significantly constrain the utility of Article 249 for a buyer seeking to exit an off-plan SPA. First, the supervening event must be truly exceptional, public in nature, and unforeseeable at the time the contract was signed. A buyer who signed a Dubai off-plan SPA in 2024 or 2025, during a period of well-documented regional geopolitical tension, faces a difficult argument that regional instability was unforeseeable. Second, even if Article 249 applies, the remedy is judicial adjustment of obligations — not termination. A court might extend the payment timeline or reduce a penalty. It is unlikely to release a buyer from the contract entirely unless the circumstances are extreme, or it is proven to the court that the buyer cannot continue with the transaction.
UAE courts have historically applied Article 249 conservatively, and successful reliance on this provision requires clear evidence of exceptional and unforeseeable circumstances meeting a high evidentiary threshold.
The practical position. For most buyers seeking to exit, the legal analysis under Articles 249 and 273 is less useful than the practical alternatives: negotiating a voluntary exit with the developer, or identifying a genuine default by the developer that triggers the buyer’s contractual termination rights. A buyer with concerns about their SPA should obtain legal advice specific to the wording of their agreement before making any decisions. Accordingly, geopolitical developments will rarely, in themselves, provide a standalone legal basis for exit, absent circumstances that meet the strict thresholds under Articles 249 or 273.
Mutual Rescission
The cleanest exit, where it is available, is mutual rescission — an agreement by both parties to dissolve the SPA on agreed terms. UAE law permits this. Under Article 258 of the UAE Civil Code, the parties to a binding contract may agree to dissolve it by mutual consent, which operates as a rescission between themselves and as a new contract as against third parties.
In practice, mutual rescission of an off-plan SPA in Dubai must be documented and registered with the DLD to be effective. An agreement reached privately between buyer and developer, without DLD registration, does not legally discharge the SPA. The registration requirement is a condition of legal effect, not a formality.
The commercial terms of a mutual rescission are a matter for negotiation. The forfeiture tiers in Article 11 of Law No. 19 of 2017 are framed around buyer default, not voluntary mutual exit, so they do not impose a minimum refund obligation on the developer. In practice, the outcome depends on market conditions, the developer’s confidence in reselling the unit, and the buyer’s negotiating leverage.
Importantly, the statutory forfeiture framework under Article 11 applies to default scenarios and does not impose mandatory outcomes in the context of mutual rescission, leaving the commercial terms to be agreed between the parties.
Abu Dhabi: A Note on the Regulatory Framework
Abu Dhabi’s off-plan property framework is administered by the Department of Municipalities and Transport (DMT) through the Abu Dhabi Real Estate Centre (ADREC) and the DARI digital platform, which registers off-plan transactions and escrow accounts. The DMT oversees developer registration, construction monitoring, and the standardised SPA terms that apply to off-plan sales in the emirate.12
Abu Dhabi does not have a direct equivalent to Dubai’s Law No. 19 of 2017 in terms of the specificity of the forfeiture tiers and the public-policy Article 11 procedure. The applicable framework is less prescriptive, which means that SPA terms carry more contractual weight and that the outcome of a dispute will depend more heavily on the specific wording of the agreement. Buyers in Abu Dhabi should review their individual SPAs with particular care.
In both emirates, the UAE Civil Code provisions on rescission, hardship (Article 249), and force majeure (Article 273) apply as a matter of federal law, providing the backstop framework for situations not specifically addressed by the local regulatory regime.
As a result, the allocation of risk in Abu Dhabi off-plan transactions is more heavily dependent on the contractual terms of the SPA, and less on a prescriptive statutory framework equivalent to Dubai’s Article 11 regime.
Practical Steps
In assessing an exit strategy, parties should consider four key variables: (i) which party is in breach; (ii) the stage of construction; (iii) whether the statutory default process has been triggered; and (iv) the commercial viability of resale.
The following practical steps may assist parties in evaluating their position:
Practical Checklist
- Read the SPA in full. The specific wording of your agreement governs. Identify the anticipated completion date, any grace period, cancellation triggers, forfeiture percentages, and refund timelines. Do not assume standard terms apply.
- Verify RERA registration and escrow status. Confirm that the project and your unit are registered on the Interim Real Property Register via the DLD’s Oqood portal (Dubai) or DARI (Abu Dhabi). Verify the escrow account is active and that your payments have been deposited correctly.
- Check RERA-verified construction progress. Construction completion is measured by RERA, not by the developer’s own assessment. The official DLD completion certificate, not marketing materials, determines which forfeiture tier applies.
- If you are a buyer considering an exit, approach the developer before defaulting. Proactive engagement before the Article 11 process is triggered preserves the possibility of a negotiated exit on better terms than the statutory forfeiture tiers.
- If the developer is in delay, document everything. Record the original handover date, any extensions agreed or communicated, and the actual state of construction. Contemporaneous documentation supports a DLD complaint and any future claim.
- Do not rely on informal agreements. Any amendment to an SPA — including a rescission or extension — must be documented as a DLD-registered addendum to be legally effective.
- Obtain legal advice specific to your SPA. The legal consequences of exiting an off-plan contract depend entirely on the wording of the specific agreement, the construction stage, and the circumstances of the exit. General frameworks are a starting point, not a substitute for advice on the individual contract.
Conclusion
An off-plan SPA is not easily undone. Dubai law provides a detailed and mandatory framework that protects both parties, but it is not a framework designed to make exit easy for a buyer who has simply changed their mind. The forfeiture tiers under Law No. 19 of 2017 represent the maximum a developer may retain; the developer may agree to less, but is not obliged to do so.
Where the developer is in default, the buyer’s position is considerably stronger: the DLD complaint and mediation pathway, the prospect of RERA project cancellation and full escrow refund, and the contractual termination rights in most SPAs provide a structured route to recovery.
In practical terms, buyer-led exits are typically structured as controlled financial exposure under the statutory regime, whereas developer default scenarios provide a clearer pathway to recovery. Negotiated outcomes remain the most efficient route where commercially achievable.
The UAE Civil Code hardship provisions (Article 249) and force majeure (Article 273) are available but impose a demanding test. Geopolitical uncertainty, market movements, and financing difficulties do not, without more, satisfy either standard. They may, however, be relevant where a developer seeks to justify a delay, and understanding their scope is important for buyers assessing their options.
Related Articles
UAE SPA Exit Series: Part 1: Off-Plan Residential (this article) · Part 2: Commercial, DIFC & ADGM · Part 3: Resale (Secondary Market)
Other ATB Legal articles: Force Majeure in UAE and DIFC/ADGM Contracts · Strait of Hormuz: Shipping and Energy Contracts
Footnotes
- Law No. 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai, Article 3: all off-plan sales must be registered with the Dubai Land Department. Any disposition not so registered is void. The law was subsequently amended by Law No. 9 of 2009, Law No. 19 of 2017, and Law No. 19 of 2020. Full text available at: dlp.dubai.gov.ae.
- Law No. 8 of 2007 Concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai. Escrow account funds may only be used for the specific project for which they were collected and are insulated from the developer’s creditors. Withdrawal at each construction milestone requires RERA approval: see BSA Law, ‘Rights of UAE Buyers Regarding Off-Plan Property Delays’, available at: bsalaw.com.
- Law No. 19 of 2017 amending Article 11 of Law No. 13 of 2008. Issued on 18 October 2017; applies retrospectively to all off-plan SPAs regardless of when they were signed. Procedures are matters of public policy. The most recent amendment is Law No. 19 of 2020, available at: dlp.dubai.gov.ae. For detailed commentary: Al Tamimi & Company, ‘Developers in Dubai Can Terminate Without Court Order’, available at: tamimi.com; HFW, ‘New Procedures for Enforcing Property Developers’ Rights in Dubai’ (February 2018), available at: hfw.com.
- Executive Council Resolution No. 6 of 2010 issuing the Implementing Regulations of Law No. 13 of 2008. Full text available at: dlp.dubai.gov.ae. Articles 15 and 16 set out completion-percentage thresholds and the DLD’s mediation obligations. Article 14 establishes the DLD’s mediation function for off-plan disputes.
- Article 11, Law No. 19 of 2020 (as amended), ibid (notes 1 and 3). The DLD notice period is 30 days. If no settlement is reached, the DLD issues an official document confirming both the developer’s procedural compliance and the RERA-verified construction completion percentage. The developer may then terminate without further court or arbitral process. See the DLD’s published Explanatory Notes on Article 11, available at: dlp.dubai.gov.ae.
- Article 11(4)(f), Law No. 19 of 2017: ‘The purchaser may approach the courts or arbitration procedures if there is any abuse of power by the developer in carrying out the procedures set out in Article 11.’ See Al Tamimi & Company, ibid (note 3); and Chambers and Partners, ‘Changes to Law Allowing Developers to Terminate Off-Plan Sales Contracts’, available at: chambers.com.
- Executive Council Resolution No. 6 of 2010, Article 14: the DLD must exert adequate efforts to enable the parties to reach an amicable settlement. Any settlement reached must be attached as a DLD-registered addendum to the SPA.
- Article 11(b), Law No. 19 of 2020: where a project is cancelled under a reasoned RERA decision, the developer must refund all payments made by buyers in accordance with Law No. 8 of 2007 escrow procedures. Disputes arising from cancelled projects fall within the exclusive jurisdiction of the Special Tribunal for the Liquidation of Cancelled Real Property Projects in Dubai (Decree No. 33 of 2020). Applications to the Tribunal attract no court fees.
- UAE Civil Code (Federal Law No. 5 of 1985), Article 273: if a force majeure event supervenes that renders performance impossible, all contractual obligations cease and the contract is automatically cancelled. Under Article 273(2), where only part of performance is rendered impossible, only that part is extinguished. The standard requires absolute impossibility, not merely increased difficulty or cost: see K&L Gates, ‘Force Majeure in the United Arab Emirates’ (2020), available at: klgates.com. See also ATB Legal Consultancy, ‘Force Majeure in UAE and DIFC/ADGM Contracts’, available at: atblegal.com.
- Dubai courts have confirmed that market downturns, property price reductions, and loss of profitability do not constitute force majeure or impossibility under Article 273: see Fakher & Co, ‘Force Majeure in UAE Contracts’, available at: fakhernco.com. The determination of impossibility is within the court’s discretion, assessed by reference to the effect on performance, not merely the nature of the supervening event.
- UAE Civil Code, Article 249: ‘If exceptional circumstances of a public nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge, in accordance with the circumstances and after weighing up the interests of each party, to reduce the oppressive obligation to a reasonable level if justice so requires. Any agreement to the contrary shall be void.’ The supervening event must be exceptional, public in nature, and unforeseeable. Article 249 does not terminate the contract — it allows judicial adjustment of obligations: see Chambers and Partners, ‘Commercial Contracts 2025 — UAE’, available at: practiceguides.chambers.com; K&L Gates, ibid (note 9).
- Abu Dhabi off-plan property transactions are registered through the Department of Municipalities and Transport (DMT) via the Abu Dhabi Real Estate Centre (ADREC) and the DARI digital platform: see dari.ae. The platform enables buyers to verify project and escrow registration, track construction progress, and access standardised SPA terms.
