Bahrain: An Update On The Development Law

Last Updated: 1 July 2015
Article by Reem Al Mahroos

The Government of Bahrain issued Law No 28 of 2014 (Development Law) in August 2014. Whilst we are awaiting for the regulatory and administrative systems to be put in place, the Implementation Regulations together with a number of supporting Ministerial Orders (Relevant Laws and Regulations) were recently issued to further flesh out the provisions of the Development Law. We have set out below a summary of some of the main provisions of the Relevant Laws and Regulations and do not at this point intend to provide an in depth analysis until further points have been made clear.

Unless defined elsewhere in this article, any defined terms will have the meanings set out in our Development Law article.

DEVELOPERS' LICENCE

The Development Law requires that each developer, as defined in the Development Law, must obtain a licence (Developers' Licence) in order to undertake real estate development in Bahrain. The Implementation Regulations sets out that the following criteria must be met by a developer in order to obtain the licence:

  • The developer must be fully competent;
  • The developer must have a good reputation in the market;
  • The developer must not have been convicted of a crime involving moral turpitude or dishonesty;
  • The developer must be registered in the commercial register; and
  • If the developer is a foreign 'national' then the guidelines and rules governing the ownership of real estate and land by non-Bahrainis and the provisions regulating their activities within Bahrain must be considered when granting a licence.

As such, it appears as though all developers seeking to obtain a Developers' Licence must be corporate entities. In addition, the Implementation Regulations indicate that an electronic application process will be available and it also confirms that the Developers' Licence will be valid for a period of 5 years and capable of renewal.

However, it should be noted that the Implementation Regulations provide that the appointed authority, the Ministry of Municipalities and Urban Planning (Authority), will have 60 days to determine whether or not an application is successful. If a decision is not made within this period then the application will be deemed as implicitly rejected. This position differs slightly from the wording included in both the Development Law and Implementation Regulations in respect to assessing licences for individual developments (Development Licence). Both the Implementation Regulations and Development Law set out that, in relation to assessing applications for Development Licences, if the period of 60 days has passed and a decision has not been made or communicated, then the Development Licence will be deemed to be granted.

PAYMENT MILESTONES

Unless the developer and purchaser agree otherwise, the Implementation Regulations will assume that all payments in respect of an off-plan development purchase will be made in accordance with the following milestones:

As indicated above, the payment plan included in the Implementation Regulations will apply where an agreement is silent on payment plans but provides developers with the flexibility to include other arrangements which may be more suitable for the developers and / or the purchasers.

FAILURE TO COMPLETE A PROJECT

The Development Law included mechanisms for resolving situations where a development has either 'temporarily' or 'finally' stopped. These include empowering the Authority to take any 'necessary measures' to protect the purchasers' / depositors' rights, returning funds paid, or where a project is deemed to have 'finally' stopped to request the appointed Disputes Committee to require the said developer to complete the project using their own funds or sell the project and distribute the sale proceeds to the purchasers / depositors. The Implementation Regulations provides a definition of 'temporary' and 'final' in relation to projects which have stopped.

A project will be deemed to have 'temporarily' stopped if it has stopped progress for a period of up to 1 year from the date it commenced. On the other hand, a project will be deemed to have 'finally' stopped if the project has not progressed for a period exceeding 1 year from the date it commenced and the Authority has taken all necessary actions / arrangement to allow the project to continue.

OFF-PLAN REGISTER

Ministerial Order No 7 of 2015 (OPR Regulations) reiterates the requirements set out in the Development Law and includes further details of the information which will be included in the off-plan register (OPR) which will be maintained by the Survey and Land Registration Bureau (SLRB). These will include:

  • The name of the developer and sub-developer (if applicable);
  • The development activities and / or project which have been licensed pursuant to the Development Law
  • The location of the property and its area;
  • The number of strata units and their designations;
  • Details of all common areas, service media and facilities; and
  • Any other information which the SLRB deems necessary.

The OPR Regulations also sets out that the following items must be submitted to the SLRB (either electronically or in hard copies) in order to be registered onto the OPR:

  • The title deed or instrument relating to the development which evidences that it is free of any rights in-kind or benefits from the approval of the title holders to develop and sell the development;
  • Copy of the memorandum of association or articles of association of the developer and details of the authorised signatories;
  • Copy of the final Development Licence;
  • Confirmation that the developer has deposited 20% of the estimated value of the project in the Escrow Account;
  • The engineering, architectural and cadastral plans;
  • Plans or detailed models showing the area and form of the project as a whole as well as all plots and strata units together with their designations. This information will need to be certified by the Authority; and
  • Confirmation that the relevant fees have been paid.

The application for the OPR will not be fulfilled unless all the required documentation is provided within 15 days from the date the application was made. This deadline may be extended by a further 15 days by the SLRB when there is a legitimate reason.

In addition, a copy of the relevant unit sale agreement must be submitted to the OPR either electronically or in hard copy format by either the developer or the buyer. Buyers of such units can obtain a certificate from the SLRB which will confirm the unit's area, common parts, details of the payment plans, the completion date as well as any other information available which relates to the particular unit. The certificate will be issued within 25 days from the date the application is made.

ESCROW ACCOUNT

Ministerial Order No. 28 of 2015 (Escrow Regulations) confirms the requirements set out in the Development Law and provides that the Escrow Agent must meet the following criteria:

  • It must have a retail banking licence from the Central Bank of Bahrain; and
  • The Escrow Account will be managed by the Escrow Bank's office in Bahrain and by qualified staff with minimum experience of 3 years in the management of bank accounts

In addition, the Escrow Regulations restrict the Escrow Bank from providing other financial services to the relevant development and the Escrow Bank cannot mortgage the Escrow Account for any reason.

The Escrow Regulations place further restrictions on Escrow Banks which includes that the Escrow Bank must not assign or transfer its responsibilities to a third party for the duration of the project. It must not provide access or disclose any data or information to any party (subject to any court order or the request of a public prosecutor) other than the depositors themselves and this information is limited to the data and information specific to each depositor. In addition, the Escrow Bank is required to provide the Municipality One Stop Shop (which is the department responsible for issuing the relevant licences) with regular statements of the revenues and disbursements of the Escrow Account.

As indicated in our earlier article, Developers are required to deposit 20% of the estimated value of the project including the value of land into the Escrow Account. Both the Implementation Regulations and the Escrow Regulations clarify that in calculating the 20% figure referred to above, each phase of the project will be considered as a 'separate' project. As such, our understanding is that Developers will only be required to deposit 20% of the estimated value of each phase at the relevant phase commencement date.

Finally, the Escrow Regulations places a restriction which limits any withdrawals from the Escrow Account unless they have been approved by the project's engineering consultant.

We have set out above the latest provisions in relation to the Development Law. Whilst the Relevant Laws and Regulations build upon the legal framework put in place by the Development Law, further legislation as well as applicable administrative and regulatory systems and / or guidance by the Authority is still required to provide the required certainty in relation to key areas.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions