Abu Dhabi’s New Escrow And Off-plan Sales Regime: From Momentum To Regulated Delivery

Part 1 set the scene: a market moving at pace, with the Abu Dhabi Real Estate Centre (ADREC) now sitting at its center. This week, we follow the money, specifically, the funds paid by off-plan purchasers before a unit is built. How those funds are held, released, and protected is the subject of Abu Dhabi's new escrow and off-plan sales regime.

Abu Dhabi's growth has increased the importance of rules that protect purchaser funds, support project delivery, and reduce disputes. The scale of that segment is striking; according to ADREC, off-plan transactions accounted for 89% of residential sales value and 82% of total residential deals in the first half of 2026.

Administrative decisions issued by the DMT during 2025 sharpen that focus, particularly through escrow controls, purchaser default, cancellation, and refund mechanics. The important point for transaction parties is that off-plan regulation is no longer only about whether units can be sold; it now affects how purchaser money is held, when it can be used, how cancellation is managed, and how project delivery risk is allocated.

Previously, no withdrawals were permitted from a project escrow account until at least 20% of construction had been completed, as verified by approved engineering consultants. That threshold was a hard statutory bar, with no route to earlier access regardless of a developer's track record or financial standing.

Administrative Decision No. 24 of 2025 changes that position by creating a conditional exception. Developers and lenders should treat it as particularly important: it now allows ADREC-approved early withdrawals from project escrow accounts before the 20% completion threshold, provided the developer meets specific eligibility criteria and submits an unconditional, irrevocable bank guarantee of no less than 20% of the total cost of the project's construction works, together with an approved engineering cost report issued no more than 30 days before the application date.

That said, the guarantee gives qualifying developers a route to earlier liquidity that did not previously exist, but the cash-flow benefit needs to be assessed realistically. A bank issuing the guarantee will typically require the developer to hold funds or collateral equivalent to the guaranteed amount, which means the restriction may move from the escrow account to the guaranteeing bank's balance sheet rather than being removed entirely.

For developers and their funders, the practical question is how much additional liquidity the guarantee route actually unlocks once the bank's own requirements are factored in. Access before the 20% threshold now depends on satisfying both the guarantee and the eligibility conditions, and purchaser receipts sitting in escrow should not be treated as automatically available to fund early-stage construction, marketing costs, or working capital.

Where a project business plan assumes access to purchaser proceeds before 20% completion, the developer and its funders should verify whether the bank guarantee and cost estimate requirements can be met, and whether the developer satisfies the eligibility criteria, including:

• at least four years' registration in Abu Dhabi
• a track record of at least three completed and delivered projects within their scheduled timeframes (unless delay was due to reasons beyond the developer's control) and
• no legal violations or administrative penalties within the 12 months before the application date.

Facility agreements and drawdown conditions should be checked against the escrow withdrawal requirements, rather than assuming purchaser receipts can be treated as freely available project cash. For lenders, the question is not only whether sales are being achieved, but whether the project has a compliant route to disburse those sales receipts for permitted project uses.

The escrow regime governs how money is held. The next question is what happens when a deal falls apart. Before Administrative Decision No. 165 of 2025, Law No. 3 of 2015 allowed a developer or purchaser to rescind an off-plan sale contract for substantial breach, but it did not set out standardized compensation ratios or refund timelines for units that are cancelled. That gap left developers and purchasers to navigate purchaser defaults without a consistent statutory framework, creating uncertainty and increasing the potential for disputes.

Administrative Decision No. 165 of 2025 changes that position. Where a purchaser defaults and the unit is cancelled, the developer may deduct a percentage of the sale contract value from the amounts the purchaser has deposited, with the balance refunded to the purchaser. The applicable percentage depends on the stage of construction completion at the time of cancellation, as assessed by ADREC or its approved consultants, as set out in the table below:

Note: ADREC retains discretion to determine the applicable percentage on a case-by-case basis where the purchaser has paid 60% or more of the unit value.

The practical consequence is a defined timeline: once a cancellation is processed, each party's share is released separately. The escrow trustee must pay the developer's permitted deduction within 15 business days of the developer's request (accompanied by the prescribed ADREC form), and the purchaser's balance within 15 business days of the purchaser's request (accompanied by a no-objection letter from any mortgagee creditor).

Separately, any amount collected by the developer outside the escrow account (which the law treats as a breach in itself) must be refunded to the purchaser in full within 30 days of ADREC's cancellation notification, and the developer may not draw any further amounts from escrow until that refund is made.

Default and cancellation provisions are no longer just private contractual remedies; they now need to work with this statutory process for cancellation, resale, compensation, and refund timing, reducing both parties' reliance on litigation to resolve these scenarios.

Off-plan sale and purchase agreements, reservation forms, default notices, cancellation processes, and refund mechanics should therefore be reviewed together against the new compensation ratios and timelines.

Developers should check whether template contracts and internal processes reflect the revised statutory pathway, including when a purchaser is in default, what notices must be given, how compensation is calculated, how cancellation is implemented, and how any resale proceeds are treated.

Purchasers should focus on whether the contract clearly explains the consequences of default, the applicable compensation ratio at each stage of completion, the timing of any refund, and the route for recovering amounts due if the unit is cancelled and resold.

Lenders should consider whether enforcement, step-in, escrow, and cash-control provisions remain workable if the project depends on statutory cancellation or refund mechanics.

What this means for your next transaction

Off-plan deals now need to be diligenced as funding and compliance structures, not just sales contracts. Developers and lenders should map purchaser payment flows, escrow withdrawals, bank guarantee requirements, approved cost estimates, the four-tier compensation schedule, refund timelines, and cancellation rights at term sheet stage, or as soon as possible. 

Purchasers should ensure default and refund protections are reflected in the sale and purchase agreement and not left to statutory fallbacks. The commercial question is now whether the project documents, funding assumptions, and statutory process all move in the same direction before the first purchaser payment is made.

Next week: the building is delivered, the owners move in, and then what?