Off-Plan Property Sales in Saudi Arabia: A Legal Guide for Real Estate Developers
Off-plan property sales are an important model of real estate development in Saudi Arabia, allowing developers to sell property units before the project has been completed, subject to applicable licences and regulatory requirements.
However, developing an off-plan property project involves more than preparing architectural plans or signing agreements with purchasers. It also involves licensing, land ownership, development agreements, escrow accounts, construction obligations, delivery requirements, and purchaser protection.
A real estate developer must verify the applicable registration, project licence, and authorised scope of activity before marketing or undertaking off-plan sales under the relevant Saudi regulations.
Atyar Advocates & Legal Consultants provides legal services concerning real estate investment and development structures, contract drafting, contractual responsibilities, and legal risk assessment.
What Are Off-Plan Property Sales in Saudi Arabia?
Off-plan property sales involve selling real estate units or developed land within a project before the relevant development has been completed, according to agreed plans, designs, and specifications.
The activity is governed by Saudi Arabia's Law of Selling and Leasing Off-Plan Real Estate Projects and its Implementing Regulations, under the supervision of the Real Estate General Authority.
Off-Plan Property Sales vs Completed Property Sales
Buying a Completed Property
The property already exists and can generally be inspected before the transaction, allowing the purchaser to assess its current condition and specifications.
Buying Property Off-Plan
The purchaser relies on approved plans, property specifications, the construction schedule, and the developer's future delivery obligations.
This makes contractual disclosures, payment arrangements, change procedures, warranties, and completion dates especially important.
Which Law Governs Off-Plan Property Sales in Saudi Arabia?
The Law of Selling and Leasing Off-Plan Real Estate Projects and its Implementing Regulations govern the relevant activity.
The Real Estate General Authority supervises licensing, regulation, and compliance within its statutory powers.
- Developer registration and qualification.
- Project licensing.
- Marketing and advertising controls.
- Land ownership and development documentation.
- Separate project escrow accounts.
- Payment and fund withdrawal controls.
- Technical and financial supervision.
- Construction and delivery obligations.
- Delay and violation-related provisions.
- Reporting and regulatory compliance.
Can Developers Advertise an Off-Plan Project Before Licensing?
Article 3 of the Law establishes developer registration requirements and restricts advertising, promoting, or exhibiting off-plan projects without the relevant project licence.
The Real Estate General Authority provides a marketing licence route, which has a different scope and requirements from a complete off-plan sales or leasing licence.
What Are the Requirements for an Off-Plan Sales Licence?
Licensing documentation and conditions differ according to the project and the applicable procedure. Common areas of review include:
1. Developer Registration and Commercial Activity
Verify the required developer registration, qualification, and commercial authorisation to undertake the proposed activity.
2. Land and Title Documentation
Review the property's title deed, ownership, relevant rights, restrictions, and the developer's authority.
3. Building Permit and Project Plans
Prepare the engineering documentation, approved designs, building permits, and other required approvals for the particular project.
4. Development Agreement Where Applicable
Regulate the developer's relationship with the landowner or holder of relevant development rights.
5. Financial Arrangements and Escrow
Satisfy project-specific financial requirements and the applicable escrow account conditions.
6. Professional Supervision Requirements
Address requirements concerning the engineering consultant, certified accountant, and other professionals involved in project oversight.
Why Are Land Ownership and Development Agreements Important?
Developers should verify the legal details of the property, including title, ownership, relevant rights, and restrictions affecting development or disposition of the land.
Where the developer is not the landowner, an appropriate agreement should regulate the parties' authority, funding commitments, permits, development duties, returns, and liabilities.
Land Title
Review the legal description of the property, ownership documents, relevant rights, and restrictions.
Development Agreement
Define the development scope, financial contributions, project phases, guarantees, default provisions, and termination consequences.
What Is an Escrow Account for Off-Plan Property Projects?
An escrow account is a bank account specifically established for a real estate project, into which relevant funds from purchasers, lessees, or financing sources are deposited according to the regulations.
The Law requires separate escrow arrangements for each covered project. The use and withdrawal of project funds are subject to applicable controls.
How Do Purchaser Payments Work in Off-Plan Projects?
The Real Estate General Authority explains that payments for off-plan units are associated with the project's escrow account, engineering completion percentages, and the agreed payment schedule.
The sales contract should specify the amounts, payment dates or milestones, and the relevant financial obligations of the purchaser.
What Clauses Should an Off-Plan Sales Contract Include?
Property Identification
Identify the unit location, number, area, plans, specifications, and associated rights.
Price and Payment Schedule
Address the purchase price, payment obligations, authorised account, and applicable payment mechanism.
Completion and Delivery
Define completion dates, handover procedures, notices, and consequences of delay.
Changes and Specifications
Regulate modifications to design, area, or specifications under the applicable contract and law.
Warranties and Defects
Address construction quality, warranty obligations, defect rectification, and post-delivery responsibilities.
Default and Dispute Resolution
Regulate breach, termination, contractual remedies, and the appropriate dispute-resolution process.
What Are a Developer's Obligations During Project Construction?
A developer's obligations extend beyond executing off-plan sales contracts. They also concern project construction, financial administration, supervision, and delivery.
- Execute the project according to approved plans and licences.
- Manage contractual relationships with contractors and consultants.
- Comply with escrow account controls.
- Monitor construction progress and completion percentages.
- Maintain the necessary project records and reports.
- Document variations and approvals.
- Record project delays and their causes.
- Manage required purchaser communications.
- Complete project handover requirements.
- Address relevant defects and delivery obligations.
What Happens if an Off-Plan Developer Delays Property Delivery?
Article 20 of Saudi Arabia's Law of Selling and Leasing Off-Plan Real Estate Projects addresses the obligation to complete the project by the specified date and the relevant consequences of delayed delivery.
The Law distinguishes between developed land and residential units for purposes of relevant compensation provisions.
What Are the Main Legal Risks for Off-Plan Developers?
Licensing Risks
Advertising or selling without appropriate authorisation, or undertaking activities outside the licensed scope.
Ownership Risks
Unclear title records, development rights, property restrictions, or developer authority.
Financial Risks
Noncompliance with project escrow rules, payment arrangements, or financial obligations.
Contractual Risks
Incomplete provisions concerning specifications, payments, project changes, and warranties.
Construction Risks
Project delays, weak coordination between contractors and consultants, and disputed changes.
Handover and Dispute Risks
Disagreements concerning unit areas, delivery, defects, compensation, termination, or refunds.
Pre-Launch Legal Checklist for Off-Plan Real Estate Developers
| Review Area | Key Question |
|---|---|
| Developer Qualification | Have the required registration and qualification conditions been met? |
| Project Licensing | Does the project licence authorise the proposed activity? |
| Land Ownership | Have title, relevant rights, and restrictions been examined? |
| Development Agreement | Are the responsibilities and authority of the landowner and developer clear? |
| Escrow Account | Have the applicable account and withdrawal requirements been satisfied? |
| Purchaser Contracts | Do the contracts address the required terms and approved conditions? |
| Construction Programme | Are construction milestones and delivery requirements documented? |
| Risk Management | Are there procedures to address changes and delays? |
| Purchaser Protection | Are disclosures, payments, and warranties clearly addressed? |
| Dispute Resolution | Have the appropriate remedies and procedures been considered? |
Atyar's Experience in Real Estate Investment and Development Agreements
Atyar Advocates & Legal Consultants has published experience advising on high-value real estate investment and development contracts involving substantial financial and contractual obligations.
Real Estate Investment and Development Agreement Exceeding SAR 4 Billion in Riyadh
Atyar provided legal advice to a private client concerning the acquisition, development, and investment of a property located north of Al-Takhassusi Road in Riyadh.
The legal work included reviewing the transaction structure, acquisition and transfer-of-title requirements, development stages, financial arrangements, licensing provisions, contractual guarantees, and allocation of responsibilities and risks.
More than SAR 4 billion.
North of Al-Takhassusi Road, Riyadh.
Legal advice, comprehensive study, and investment agreement drafting.
The engagement addressed how the parties' rights and obligations would be regulated throughout acquisition, financing, development, implementation, and potential default or termination.
Additional Atyar Real Estate Development Experience in Makkah
Real Estate Development Agreement Exceeding SAR 1 Billion
Atyar provided legal advice, a comprehensive legal study, and drafted an investment agreement concerning the purchase and development of real estate in Makkah.
The legal services included examining ownership records and title information, structuring the property acquisition and title transfer, and regulating development phases, financing, licences, and guarantees.
Real Estate Development Agreement Exceeding SAR 800 Million
Atyar advised on and drafted an investment and development agreement in Makkah involving a property investment exceeding SAR 800 million.
The scope addressed property acquisition, implementation stages, project costs and financing, contractual risks, guarantees, default, termination, and dispute resolution.
Atyar's Legal Services for Real Estate Developers
Atyar Advocates & Legal Consultants provides legal services relating to real estate investment, development transactions, contract drafting, contractual obligations, risk assessment, and real estate disputes.
- Reviewing real estate investment and development structures.
- Assessing property ownership and relevant rights.
- Drafting development and partnership agreements.
- Reviewing contractual and regulatory obligations.
- Assessing property unit sale agreements.
- Structuring contractual guarantees and responsibilities.
- Analysing delivery and construction delay risks.
- Preparing legal opinions and studies.
- Assessing claims and real estate disputes.
- Negotiation, settlement, and representation where appropriate.
Related Real Estate Development Case Studies
These published Atyar matters demonstrate the firm's experience in property acquisition, development agreements, investment structuring, financing, and legal safeguards.
Frequently Asked Questions About Off-Plan Property Sales in Saudi Arabia
What are off-plan property sales in Saudi Arabia?
They involve selling units or developed land in a project before completion, subject to the relevant licensing and regulatory requirements.
Does a developer need a licence before selling off-plan units?
Yes. The activity is subject to developer registration and project licensing requirements under the Law and its Implementing Regulations.
Can an off-plan project be advertised before full sales licensing?
Marketing requires the appropriate authorisation under the relevant licensing route and conditions established by REGA.
Does every off-plan project require a separate escrow account?
The Law establishes separate escrow account arrangements for every project covered by the relevant requirements.
Can purchasers' payments be used for another project?
Project funds are subject to escrow account rules and cannot be used for unrelated purposes contrary to the regulations.
Can a developer collect reservation fees during the marketing stage?
Collection may be permitted under specified conditions concerning the amount, disclosure requirements, and deposit into the designated escrow account.
What happens if a developer delays delivering an off-plan unit?
Article 20 of the Law, the contract, the cause of delay, and the relevant circumstances should be assessed to determine applicable obligations and potential compensation.
Is every real estate development project an off-plan sales project?
No. Purchasing land, developing a property, or investing in real estate does not automatically mean selling or leasing units off-plan.
