What is Dubai's Sales & Purchase Agreement (SPA)?

A Sales & Purchase Agreement (SPA) is an essential legal contract binding the buyer and seller in Dubai's real estate market. Whether purchasing a secondary market property or an off-plan apartment, the SPA protects the rights of both sides and lays out all key terms.

What is an SPA?

As a legally enforceable contract, a sales and purchase agreement (SPA) details the terms and conditions of a real estate sale between a buyer and a seller. It specifies both sides' obligations, handover date, payment terms, and price.

When is SPA Used in Dubai?

• Off-plan property sales: An SPA is signed between the developer and the buyer for properties still under construction. It clearly details the payment plan, expected completion date, and construction milestones.
• Secondary market transactions: After drawing up a Memorandum of Understanding (MoU), the SPA is signed in resale transactions of ready properties; usually after the No Objection Certificate (NOC) is acquired from the developer.

Why is SPA Crucial in Dubai Real Estate?

An SPA is crucial when conducting a real estate transaction for several reasons:

• It offers legal protection under UAE real estate laws.
• It clearly specifies terms of payments, handover, maintenance, and other legal obligations.
• It reduces legal conflicts or misunderstandings post-sale and helps prevent disputes.

Key Components of a Sales & Purchase Agreement

For a SPA to fulfil its legal purpose and offer protection to both parties, it must include certain key components.

Parties Involved

It contains comprehensive information about the buyer and seller, or the developer for off-plan properties, in addition to passport copies or Emirates ID and signatures.

Property Details

The details of the property in question must be included, such as the title deed number, plot number, location, floor, and unit size.

Price and Payment Terms

The agreement must outline the full purchase price, deposit, instalment schedule (for off-plan), and handover dates.

Conditions Precedent

Any requirements—such as securing a mortgage, developer's NOC, or DLD clearance—that have to be met before the agreement is finalised must also be included in the SPA.

Responsibilities of Both Parties

The buyer's obligation to pay on schedule and the seller's responsibility to deliver the promised property on time should also be clearly stated.

Completion and Handover

The Sales and Purchase Agreement must highlight the expected handover date, the date of the last payment, and the transfer of ownership procedure.

Amenities and Facilities

To avoid ambiguity and future conflict, it is beneficial to include specifics of what the buyer is entitled to use including community amenities, parking, gym access, swimming pool and other.

Cancellation and Penalty Clauses

Terms must specify the circumstances under which the SPA may be revoked and any penalties that might ensue (e.g., the developer may keep a percentage of the payments made in case an off-plan transaction is canceled).

Dubai Land Department’s (DLD) Role in SPA Transactions

Legal Registration of SPA

All SPAs, especially for off-plan project transactions, must be registered with the DLD using either Dubai REST or the Oqood platform.

DLD Fee Structure

The DLD fee, amounting to 4% of the purchase price, is usually paid by the buyer or sometimes split between buyer and seller. Additional fees include the administrative fee amounting to AED 580 or extra fees for mortgage registration (if applicable) and trustee office services.

Required Documents for SPA Registration

Below are the documents that you need to present upon registering your SPA:

• Signed SPA
• Passport copies / Emirates ID
• NOC from the developer (for secondary properties)

• Title deed (for resale properties)
• Payment receipts

Step-by-Step Process of Drafting and Executing an SPA

Initial Negotiations

As a first step, the buyer and seller agree on terms of the agreement either verbally or draw up a Memorandum of Understanding.

SPA Drafting

A draft SPA is put together either by the developer, a legal advisor, or a real estate agency, ensuring all crucial details are included.

Review and Approval

Both sides go over the SPA to ensure it covers all the legal requirements. Parties are often advised by a legal expert.

Signing the SPA

Both parties sign the finalized SPA in the presence of a trustee officer or a real estate agent.

Payment Execution and Handover

The buyer pays either the full price in a lump sum or the instalment stipulated in the payment schedule, while the seller makes sure the property is ready for handover.

Final Property Registration with DLD

Ownership of the property in question is transferred to the buyer via the Dubai Land Department (DLD) or a DLD-approved trustee office.

Tips for Buyers and Sellers for a Smooth SPA Process

As is the case in any legal document, one must always pay attention to details to ensure their legal responsibilities and rights are clearly outlined. Here are a few tips to keep in mind when drawing up an SPA.

For Buyers

As a buyer, make sure to always review the SPA with a legal advisor; their knowledge of the law will ensure you are legally protected. Check with RERA that the developer is registered and that their project is approved. Pay attention to handover timelines and any penalties that you are entitled to in case of delays.

For Sellers

The seller must ensure their property is free from any encumbrances and then obtain a valid No Objection Certificate from the developer or DLD. To ensure monetary requirements are met on time, the seller needs to clearly define payment terms and timelines.

Common Misunderstandings About SPA in Dubai

To help you have a clearer idea of what an SPA entails, we’ve compiled a few common misconceptions and misunderstandings about these legally binding documents.

Some believe that the MoU is the contract that finalises the sale. In reality, it is not; the SPA serves that purpose. Assuming that any verbal agreement you reach with the other party is enforceable; they are not unless clearly stated in the SPA. Some believe that off-plan SPAs can be easily cancelled. This is not the case, penalties usually apply to any cancellation.

SPA vs Other Real Estate Contracts in Dubai

In real estate, there are many types of contacts: SPAs (Sales and Purchase Agreements), MOUs (Memorandums of Understanding), Reservation Agreements, and Tenancy Contracts are a few examples. Here’s a table that details the main difference between these legal documents.

Conclusion

A Sales & Purchase Agreement in Dubai is not merely a formality. This important legal document ensures transparency, trust, and fairness in real estate transactions. Whether you’re a buyer or seller, understanding the SPA process is crucial for protecting your rights and interests.

Frequently Asked Questions

1. Who prepares the SPA for a property deal in Dubai?

Usually, the SPA is prepared by the developer—for off-plan—or by a real estate broker or lawyer—for resale. Both sides, the buyer and the seller have to review it.

2. Can a buyer cancel the SPA after signing?

Yes, they can. However, depending on the contract terms, especially in off-plan purchases, a cancellation might result in a loss of deposit or penalty fees.

3. What happens if one party breaches the SPA terms?

The non-breaching party could request compensation or undertake legal action. Usually, the SPA includes clauses specifying breach penalties.

4. Do I need a lawyer to review the SPA in Dubai?

Though not legally required, it is highly advised especially for complicated or high-value transactions.