Escrow in the UAE - the things you NEED to know

Escrow in the UAE - the things you NEED to know
21 February 2013

CONFUSING terms are the bread and butter of any legal document or bill of sale. All manner of sins can be hidden within long-winded jargon and ‘small print’. That’s why we’re busting the terms that are often a little vague and giving you the facts you should be armed with as an ambassador of financial empowerment. First up? ‘In escrow’.

WHAT DOES ‘IN ESCROW’ MEAN? When a property is ‘in escrow’, traditionally, this means a process of sale has begun between a buyer and seller via a solicitor. The process works as follows:

1. You (the buyer) provide money to a solicitor for the purchase of a property

2. The solicitor holds the money in a bank account called 'client' or 'escrow' account, which is operated by the solicitor him/herself

3. The vendor gets confirmation and peace of mind that the solicitor is holding the money

4. The vendor transfers the title deeds to you, via the solicitor, safe in the knowledge that the money for the sale is deposited

5. When the solicitor gets the deeds to the property, they send the money from the escrow account to the vendor's bank account

WHY DOES THIS NEED TO HAPPEN? Keeping an impartial party involved to handle both the financial and legal sides of buying a house ensures that no one is short-changed in the transaction, that the sale is legally binding, and that no technicalities can rear their ugly heads later on down the line!

WHAT ARE THE ESCROW LAWS IN DUBAI? Slightly different to the escrow process illustrated above – alright, a LOT different. Due to the volume of developers and new builds in Dubai, escrow laws have been designed to allow developers to hold your money in an escrow account of their own, cutting out the ‘middle man’ of a solicitor or lawyer with the developer’s own legal team.

WHY IS THAT THE CASE? The escrow laws in the UAE are designed to facilitate developers’ needs. When a development can’t get outside funding, it can use the escrow accounts of its buyers (your money) to fund the completion and construction of a project. Nakheel, Emaar and other big name developers in the UAE all operate this policy.

WHAT ABOUT DEVELOPMENTS IN THE UAE THAT HAVE BEEN HALTED BY LACK OF FUNDING? This is a ‘grey area’ that no one seems to want to talk much about. The widespread belief is that during the property ‘bubble’ of ’07, developers were using the money in escrow accounts of pre-existing projects to fund the development of new projects. When the recession hit in 2008 and investors were no longer buying into the new project, the money stopped being available to developers to continue their project. Having spent the money in their active escrow accounts, developers were left without the money to finish construction on pre-existing projects, or start construction on their new ones. It is thought that the now-halted Dubailand was one such case.

WHAT HAPPENED TO THE BUYERS WHOSE MONEY WAS HELD IN ESCROW? As recently as September of last year, cases were still being reported of investors who were seeking refunds from developers as part of their contract dictates that until the deeds are presented to the buyer, they can withdraw the money from their escrow account. The story with many of these cases, however, is that the developers simply don’t have the money to pay back.

WHY DOESN’T DUBAI LAW ENSURE MORE PROTECTION FOR BUYERS? The escrow law itself, as it stands, does offer protection in that a developer can only use the money held in escrow accounts to pay for the construction and completion of the assigned project. However it is thought during the ‘bubble’ that many developers sought ways around this law and designed their own loopholes in order to facilitate their plans for future projects.


Essentially, you must take on the responsibility of knowing your rights from the get-go when purchasing property in the UAE. You are only as protected as you make yourself. Part of financial empowerment is taking the action to arm yourself with knowledge – and we’re here to help! Post a question for one of our industry experts to answer today or get in touch with us at @cashyME or in the comments below.

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ARE YOU considering buying property in the UAE? Were you one of the buyers burned by over-zealous development companies when the recession hit? Tell cashy below!


  • tamirahamam

    Following on from this was a really interesting article from KippReport as Nakheel seek to extend the deadline on their loan repayments - will this borrowing cycle ever end?

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