How to Transfer an Escrow Account Through Dubai Land Department (DLD)

Buying Property in Dubai? Let Escrow Protect Your Funds

When dealing with escrow accounts in Dubai, especially for off-plan projects, it’s crucial to understand the role the Dubai Land Department (DLD) plays in regulating these accounts. An escrow account in Dubai is essential for ensuring that the financial transactions between property developers and buyers remain transparent and secure. If developers need to transfer their escrow accounts—whether due to project delays or to finance the project directly—DLD provides a clear procedure for doing so.

In this blog, we will walk you through the escrow account transfer application in Dubai, explain the process, outline key requirements, and discuss the benefits of escrow accounts. Let’s explore what is escrow and how to initiate the transfer with the DLD.

What is an Escrow Account, and How Does It Work?

An escrow account is a secure financial account where buyers deposit instalments for off-plan property purchases. Governed by the Real Estate Regulation Authority (RERA), escrow accounts in the Dubai real estate sector ensure that funds are managed correctly until the property project is completed and handed over. It is one of the many legal procedures to buy a property in Dubai. These accounts add benefits and transparency in real estate transactions, protecting buyers from misuse of their payments by developers.

For developers, transferring an escrow account to Dubai may be necessary if they want to restructure the project financing or manage any delays. The transfer process requires adherence to strict procedures and conditions, ensuring transparency at every step.

Benefits and Transparency in Real Estate Transactions

One of the main purposes of using an escrow account in Dubai is to ensure that all financial transactions between developers and buyers are secure and transparent. Here are a few ways these accounts enhance the real estate sector:

• Buyer Protection: Funds are only released to developers upon the achievement of project milestones.
• Transparency: Both buyers and authorities can monitor the flow of funds through the escrow system.
• Accountability: Developers are held accountable for the progress of the project.
• Reduced Risk: Buyers can cancel the purchase agreement and receive their money if the developer fails to meet obligations.

Escrow Account for a Mortgage in Dubai

In Dubai, escrow accounts also play a significant role in property mortgages. Buyers opting for a mortgage for off-plan properties deposit their payments into a dedicated escrow account for a mortgage in Dubai. This ensures that the funds are securely managed until the project is complete, providing further protection for buyers and lenders alike.

How to Open an Escrow Account in Dubai with DLD?

Applying for an escrow account transfer application in Dubai involves a systematic online process through the Oqood portal. Here is a step-by-step guide:

Step I: Log in to the Oqood Portal

Access the Oqood system and select the “escrow account” option.
Choose the escrow account transfer service and submit your application.

Step II: Approval by Current Account Trustee

The application will be sent to the trustee managing the current escrow account for approval.
Once approved, the request will be forwarded to the DLD for review.

Step III: Application Audit

The DLD will conduct an audit to ensure compliance with the project’s financing and milestones.
Based on the audit, the application will be approved or rejected.

Step IV: Data Entry for New Escrow Account

If approved, the trustee of the new account will receive the request.
The new trustee must input all financial data and account details into the system.

Step V: System Update and Final Approval

Upon successful transfer, the Oqood system will update the records to reflect the new escrow account.
Developers can now manage project payments through the new account.

How Do I Set Up an Escrow Account in Dubai?

If you’re a developer wondering how to open an escrow account in Dubai, here’s the process you can follow:

Understand the Regulatory Framework

Before initiating the process, developers must familiarize themselves with Dubai’s Escrow Account Law (Law No. 8 of 2007). This law mandates that every real estate project must have an escrow account in Dubai to ensure buyer funds are safeguarded. Compliance with this regulation is crucial to obtaining project approvals and maintaining investor confidence.

Choose a Licensed Escrow Agent

Developers are required to select an escrow agent licensed by the Dubai Land Department (DLD). The chosen agent will oversee financial transactions and ensure adherence to legal requirements. Selecting an experienced and reputable professional is essential for the smooth operation of escrow accounts in Dubai real estate projects.

Compile the Required Documentation

To open an escrow account, developers must gather essential documents, including:

• A valid trade license
• Project approval from the Real Estate Regulatory Agency (RERA)
• A detailed project plan and financial budget
• Identification documents of authorized representatives
• A legally binding escrow account agreement

Open the Escrow Account

Once all necessary documentation is prepared, developers can submit their application to the selected escrow agent. The agent will review the details, and upon approval, the escrow account Dubai will be officially opened in the project’s name.

Deposit the Initial Capital

As a compliance measure, developers must deposit an initial amount into the escrow account. This deposit, typically a percentage of the project’s total cost, acts as a financial guarantee, ensuring that the developer has adequate funding to commence construction.

Manage Funds Through the Escrow Account

All payments from buyers must be deposited into the escrow account. These funds will only be released in stages based on project completion milestones, as certified by an independent engineer and approved by RERA. Proper fund management ensures that escrow accounts in Dubai real estate developments remain compliant with financial regulations.

Maintain Compliance and Reporting

Regular communication with the escrow agent is necessary to ensure that transactions align with the escrow agreement. Developers must also submit financial statements and progress reports to RERA, demonstrating compliance with the law and the project’s advancement.

Closing the Escrow Account

Once the project is completed and all financial obligations are met, the escrow account can be closed. Any remaining balance, after settling all dues, may be transferred to the developer. Proper closure of the escrow account Dubai ensures that all regulatory requirements have been fulfilled.

By adhering to these structured steps, developers can establish legally compliant escrow accounts, providing financial security for both investors and real estate buyers in Dubai.

Can I Use an Escrow Account for Online Real Estate Transactions in Dubai?

Escrow accounts offer a secure payment method for online transactions in Dubai, particularly in e-commerce and service-based agreements. By holding funds until all contractual obligations are fulfilled, escrow accounts provide assurance to both buyers and sellers. Here’s how to utilize them effectively:

Select a Licensed Escrow Service Provider

Begin by choosing an escrow service provider that is officially licensed and recognized in Dubai. This provider acts as an impartial third party, safeguarding funds until transaction terms are met. Ensure the provider complies with UAE financial regulations and offers seamless online integration for e-commerce platforms.

Establish an Escrow Agreement

Both the buyer and seller must define the transaction’s terms, including product or service specifications, payment details, and delivery timelines. These conditions are documented in a formal escrow agreement, which dictates how and when the funds will be released.

Deposit Funds into the Escrow Account

Once the agreement is in place, the buyer transfers the payment into the escrow account. The escrow service provider verifies the deposit and informs both parties, ensuring transparency and security before the transaction proceeds.

Fulfill the Agreed Terms

The seller then delivers the goods or services as outlined in the agreement. The buyer must inspect the delivered items or services to confirm they meet the agreed-upon standards.

Authorize the Release of Funds

Upon the buyer’s confirmation of satisfactory completion, the escrow provider releases the payment to the seller. If the buyer raises concerns, the funds remain in escrow until an appropriate resolution is reached.

Resolve Disputes if Necessary

If a dispute arises, the escrow service provider acts as a mediator, holding the funds until the issue is resolved. This may involve renegotiation between parties or legal intervention if required.

Finalize and Close the Transaction

Once the funds are released, the transaction is officially completed, and the escrow account is closed. Both parties receive confirmation of the successful transaction, ensuring a transparent and secure process.

By leveraging escrow accounts for online transactions in Dubai, businesses and consumers can minimize financial risks, enhance trust, and facilitate smooth, secure transactions.

Terms and Conditions for Escrow Account Transfer in Dubai

Developers must meet specific criteria when applying for an escrow account transfer application in Dubai. The following are the key terms and conditions to follow:

1. Active Project Status: The project must be under development and have an active status with RERA.
2. Recent Technical Report: A technical report from the DLD must be provided, and it should not be older than four months.
3. Project Milestone Compliance: There should be no red flags related to the project’s progress and achieved milestones.
4. Purpose of Transfer: The transfer must aim to directly finance the project through the new account.
5. Provision Approval: A written provision approval for financing must be obtained.
6. NOC from the Trustee: A No-Objection Certificate (NOC) must be submitted to open the new account.
7. Account Maintenance: An undertaking must be signed stating the new account will remain open for at least three months and not more than one year.
8. Fund Transfer: Developers must transfer all collected funds from the old escrow account to the new trustee.
9. Inactive Old Account: The old escrow account must remain inactive until all transactions and fund transfers are completed.
10. Complete Transfer: All assets must be moved from the old account to the new one within three business days.
11. RERA Approval: RERA must approve the new escrow account for the transfer to be valid.