The escrow account is a third-party account in which funds are held before they are transferred to the ultimate recipient. Especially with high asset values and dispute-prone sectors like Real Estate, it offers protection against scams and frauds.
Escrow-based payments have been around for years and are nothing new. However, most of them have been restricted to large transactions, such as mergers and acquisitions, cross-border deals, etc. According to industry experts, with the advancement of technology and the growth of the internet-based economy, stakeholders from several sectors use this instrument to conduct safe and secure transactions. An escrow account is a financial instrument in which an asset or escrow money is held by a third party on behalf of two other parties that are completing a transaction. Money, securities, funds, and other assets can be held in escrow accounts.
Even though setting up an escrow account is a complicated process, technologically advanced escrow service providers of today provide easy-to-access platforms, democratizing the escrow service as a safe and secure payment method.
An escrow account is a third-party account where funds are held until they are transferred to the ultimate beneficiary. Especially with high asset values and dispute-prone sectors like Real Estate, it offers protection against scams and frauds.
Dubai introduced escrow accounts in 2007. The government had long waited for this moment to establish the emirate as a reliable real estate market. Escrow law is monitored by the Real Estate Regulatory Agency (RERA), which operates under Dubai Land Development (DLD). The RERA and escrow laws work together to make it easier for people to trade properties in Dubai.
● All funds received by developers on property must be escrowed.
● The certified account trustees or escrow agents are reputable banks and financial institutions, including Standard Chartered, HSBC Bank Middle East, Tamweel, and Amlak.
● RERA monitors issues related to real estate developments, like delays caused by a lack of funds, through escrow accounts
● According to RERA, registered developers can be canceled if they don't perform well
● When Escrow approval is granted, investors gain the security that the vision of their dream building will not be altered during the construction process.
● Investors can hold back 5% of the account's total value, for a period of one year to cover any defects arising in the property during that time
● Developers need Dubai Land Development's approval before they register for an escrow account
● A developer without a RERA license and escrow account may be subject to heavy fines and imprisonment
● Unlicensed real estate projects cannot be advertised by media outlets
● Exhibiting their off-plan properties is not permitted for unregistered developers
● Upon failing to commence a project after receiving the DLD approval for more than 6 months, any developer may be de-registered according to the RERA law
● Escrow accounts are managed and evaluated by a dedicated team in each bank approved for the program
● Creditors of land developers are not permitted to seize any escrow account funds
● To register for RERA, developers must open an account in an accredited bank in the UAE; the account must only be used for that particular project
● Buyers should escrow payments to the developer's escrow account by using their unique reference numbers
To open an escrow account, your project must be active. A complete project file must be available, which is maintained by the Department of Real Estate, Escrow Accounts. To open an escrow account in Dubai, you will need the following documents:
● A copy of a recent technical report issued by the Land Department
● Obtain a copy of the past financial report
● The escrow agent's letter confirming the opening of sub-accounts for all real estate projects in the name of the investor
● To open an Escrow Account, both the client and beneficiary must submit a Request/Application Letter.
● In this letter, the purpose and terms of the transaction and escrow will be explained. The bank's role is clearly defined, as are the fees it will charge for the escrow service.
● Account opening fees and annual fees can be included in the latter. Escrow agents are neutral parties who coordinate between parties and resolve disputes when necessary.
● In the event of a rejection of goods or services, for example, both parties may be given a period for arbitration, after which the payment will be released by the escrow agent following the outcome of the dispute resolution.
● Escrow accounts allow buyers and sellers to track their merchandise
● The transaction is protected
● An escrow account offers a high level of security for a person's assets or funds
● Escrow streamlines lengthy sales procedures and saves time
An escrow account is essentially a third-party account. Funds are held in this account before they are transferred to the recipients. In sectors that have high asset values and that are prone to disputes, escrow accounts protect businesses from scams and frauds.
Yes. It requires a clear understanding of the rules and requirements and submission of the correct documents to open an escrow account.
In Dubai, the escrow accounts and related laws are monitored by the Real Estate Regulatory Agency (RERA), which operates under Dubai Land Development (DLD). The RERA and escrow laws enable people to trade properties in Dubai with confidence and offer protection from fraudulent dealings.
Yes, the Dubai escrow stipulates that real estate funds need to be put in escrow accounts.
The documents required include a copy of a recent technical report from the Land Department, a copy of the latest financial report, and a confirmation letter from an escrow agent regarding the opening of sub-accounts for real estate projects in the name of the investor.
