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Developers: licensing under the New Law, what you need to know

Developers: licensing under the New Law, what you need to know

Developers: licensing under the New Law, what you need to know

In this legal update, the third in our series on the new real estate law, Law Number 27 of 2017 (the New Law), we focus on what developers need to know to ensure their business and developments are compliant when the New Law takes effect next year. This update will focus on developers licensing requirements under the New Law. However and notwithstanding the fact that the establishment of escrow accounts forms a large and important part of this, the topic of our next update will be dedicated solely to a discussion on the subject of escrow and its treatment under the New Law.

Licensing of Off-Plan Projects

The licensing of developers introduced by Law Number 28 of 2014 (the Old Law) has been retained in the New Law but with some notable differences. Under Article 13(a), real estate development may only be carried out if the developer is licensed. The licensing of developers will be in accordance with the provisions and rules determined by a decision of the board of directors (the Board) of the new real estate regulator (the Regulator).

In addition to the need to obtain a licence before a developer may sell units off plan, Article 18 states that every development must be registered in the Off-Plan Sales Projects Register (a register established and maintained by the Regulator). Any developer who raises funds in violation of Article 18 must refund the funds to purchasers within 6 months.

A key point to note is the Old Law grouped all developments together applying the same compliance requirements to all, regardless of their size. The New Law recognises that small developments may be treated differently and the Board may issue further regulations for small off-plan sale projects. Until they do so, however, the provisions of the New Law will apply to off-plan developments of all sizes.

Detail is given in the New Law as to what developers need to provide and do in order to obtain their licence. These are largely similar to those provided under the Old Law. Frustratingly however, (and as mentioned in our previous updates) the information provided under the New Law is not fully complete. There are a large number of references to unknown additional resolutions and decisions to be issued by the Board, making it impossible for developers to fully understand what is expected of them in this area. It is very much hoped that the Board and Regulator will prioritise the issuance of these decisions and regulations sooner rather than later so as to mitigate the inevitable consequences that uncertainty brings to any market.


A licence is required (as well as the development being registered in the Off-Plan Sales Projects Register) before a developer is permitted to advertise its development. The New Law's provisions in this regard are largely the same as those of the Old Law. However, under the New Law the Board may decide that certain market research activities will not be subject to the registration and licence conditions.

Sales Contracts

In relation to off plan sale contracts, the New Law contains similar stipulations as the Old Law. However, the terms for inclusion in the sale agreement under the New Law go into further detail than the Old Law. The contract terms are to include: the terms and conditions of concluding the contract; mutual obligations; time limits for opting out of the contract; date of completion; and the circumstances that allow the buyer or developer to revoke the contract. These are very much the basic things we would ordinarily draft into any off-plan sale agreement. Again, more stipulations may be added by an order from the Board, so developers will need to watch closely as and when new orders are published.

The New Law also provides that the Board may issue a form of model sale contract for certain types of off-plan projects. There is no detail given as to what types of off-plan projects these model contracts might relate to. What is also important to note in respect to this part of the New Law is that developers subject to this provision will be restricted from amending the terms of such model sale contracts.

As mentioned above and in our earlier updates, more decisions and regulations are needed to put the meat on the bones of the New Law. We will issue further updates and bulletins as new decisions and regulations are issued by the Board and the Regulator. The escrow obligations under the New Law will need to be considered by developers when assessing what steps should be followed in order to obtain a developer licence. Escrow will be the subject matter of our next legal update. Stay tuned!