A Complete Guide to Terminating a Sales and Purchase Agreement

An SPA (Sales and Purchase Agreement) is a law-binding contract that is registered between a seller and a buyer when purchasing and selling an off-plan property in Dubai. However, any delays in handover or court orders allow you to terminate the sales and purchase agreement in Dubai.  

The termination process involves a deep understanding of Dubai laws, including cancellation terms, compensation, and the reasoning behind its cancellation. Here, we aim to make the entire process smoother to avoid any confusion when terminating the sales and purchase contract. 

• Dubai Sales and Purchase Agreement
• FAQs

Dubai Sales And Purchase Agreement 

The Sales and Purchase Agreement (SPA) is defined as a contract that is signed between a developer and a buyer. Its main aim is to outline the legalities of property purchases so that both parties are aware of the binding terms. 

Moreover, an SPA is crucial if one is buying an off-plan property or a property that is still under construction in Dubai. Once you sign the SPA, the terms are set in stone and cannot be redacted under any circumstances. 

The Sales and Purchase agreement is protected under Dubai law and requires the property layout, down payment details, payment plans and cancellation terms.

• Cancellation terms: These are required for both parties i.e. the developer and buyer to protect the rights of each party. 
• Compensation: This is also a requirement on an event of unfulfillment of contract terms. 

Why SPA Termination Occurs 

Either developer or buyer can terminate sales and purchase agreements based on four binding terms that legally decide the final cancellation. Here are the terms listed below: 

Court Order 

Termination by court order is protected under Article 272 of the Civil Transactions Law and the terms are listed as follows: 

• Bilateral Contracts: If either party fails to perform their contractual obligations, the other party (upon request) can follow with the termination of the SPA.
  • Requirements: A formal notification should be sent out to the debtor. 
• Judge Grant: Upon the judge’s decision, he/she may order the debtor to immediately perform the contract or grant him extra time if required. 

Iqala 

This termination process involves the cancellation via the process of Iqala. Also, it is an official termination agreed mutually between the parties. Under Article 268 under Civil Transactions Law, the terms are as follows:

• Mutual Agreement: Under the mutual agreement, either or both parties are granted permission to follow through with their SPA termination. 
• Legally Binding: The process is legally binding, meaning it cannot be overridden once the termination process is successful. 

External Factor Termination 

The termination of SPA can also take place due to external factors. Its terms are fully protected under Article 273 under the Civil Transactions Law. This involves the automatic cancellation of the contract. Its terms are listed here: 

• Bilateral Contracts: In these contracts, if a greater force arises which makes the obligation of the performance impossible, the contract automatically ends. 
• Partial Impossibility: If the possibility remains partial, the consideration for the impossibility is rescinded. This also applies to provisional impossibility for continuous contracts. 

Termination Agreement Beforehand 

Under Article 271 in the Civil Transactions Law, the parties can agree to make a contract ipso facto without permission from the court. However: 

• Formal Notification: While the parties can rescind the contract without a court order, they are still required to serve a formal notification, unless agreed otherwise. 

Dubai Land Department Termination Process 

The Dubai Land Department (DLD) brings awareness to all contract processes including SPA and carefully considers the Dubai termination laws. DLD offers the request for termination of initial registration.

The service permits the developer to apply for deregistration of the provisional registration which is for investors that breach their obligations listed in a contract. 

Issuing a Notice to Deregistration of Provisional Sale (Phase 1) 

The required documents for Phase 1 are listed as follows: 

• Copy of real estate contract
• Real estate developer’s warning (copy) 
• Warning letter copy 
• Copy of proof of purchaser’s receipt 
• For individuals: Passport or Emirates ID 
• For companies: Trade license copy 
• Technical report for villas 
• Copy of notification to the purchase of payment of due money
• The receipt is attached for proof of payment of registration fees

Completing The Provisional Deregistration Application (Phase 2) 

The documents required for phase 2 are here below: 

• Copy of deregistration notice by the Legal Affairs Department 
• Notice dispatch copy 
• Purchase receipt copy 
• Publication notice copy
• No objection certificate copy

Service Terms 

As far as the service terms are concerned, they are listed here below: 

• A sale needs to be made before the completion of a project. 
• The customer needs to either receive or refuse to receive the developer’s warning within 30 days. 
• The amount listed in the developer’s warning needs to be identical to the amount in the department’s notice. 
• If any amount has been refined according to Law No. 13 of 2008, a manager’s check needs to be deposited to the Legal Support Department. 
• The developer’s warning should not include any fines, service, or registration fees. 
• If the numbers for the real-estate units are changed, you must also submit proof of new approved numbers. 

Service Time And Other Procedures 

It takes an average of 8 hours and 30 minutes for the request for termination of initial registration to be fulfilled, lest there are external changes. 

• Issued Documents: You will receive a procedure validation document via email. 
• Fees: AED 600, AED 10 Knowledge Fees, and AED 10 Innovation Fees. 

Cancellation Terms for Buyers and Developers 

There are certain terms that both buyers and developers must adhere to if they want to terminate the sales purchase agreement. 

Buyer’s Cancellation Terms 

Buyers need to understand these terms and conditions to terminate the sales purchase agreement in Dubai: 

• Termination: A buyer has the permission to terminate a SPA in case the developers do not hand over properties by ACD (Anticipated Completion Date). 
• Refund: Buyers can get a refund if the final anticipated completion date exceeds 6-12 months. 
• RERA Laws: As stated by the RERA laws, the buyer can get back the payments from the developer originally in case of cancellation. Law No. 8 of 2007 protects this right.

Developer’s Cancellation Terms 

In case of developers terminating the sales and purchase agreement, they must follow these terms: 

• Protected under Law No. (19) of 2020, a developer can cancel an SPA if the buyer refuses to meet the proper requirements. 

The compensation for the developer in case the buyer doesn’t fulfill the contract is the following: 

• Before Construction: The developer receives 30% of the total buying price. 
• 60% or Less Completed: The developer gets 20% of the total buying price. 
• 60% or More Completed: developers receive 40% of the total buying price.

FAQs

That’s all there is to know about how to terminate the sales purchase agreement in Dubai. Knowing the cancellation terms can streamline the entire termination process for both the buyer and the developer. 

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