Saudi Off-Plan Sales Law: Developer Obligations Before Project Launch
Launching an off-plan property development in Saudi Arabia marks the transition from project planning, design, and financing to marketing, reservations, and purchaser agreements.
Before advertising units or accepting reservations, the developer must consider the applicable registration, project licensing, land ownership, construction plans, development agreements, financing, and escrow requirements.
Owning land, preparing architectural drawings, or holding a commercial registration does not automatically authorise a developer to sell property off-plan. The relevant regulatory approvals must be obtained for the intended activity.
Atyar Advocates & Legal Consultants provides legal services involving real estate investment and development structures, property ownership review, agreement drafting, and assessment of legal and contractual risks before binding commitments are made.
What Must a Developer Do Before Launching an Off-Plan Project?
A real estate developer's obligations begin before the first property advertisement, reservation, or sales agreement.
Important areas of review include developer registration, project authorisation, land and development rights, project documentation, financing, escrow, and purchaser-related obligations.
- Complete developer registration requirements.
- Identify the correct project licence.
- Obtain appropriate marketing authorisation.
- Review land ownership and development rights.
- Prepare development agreements where necessary.
- Complete required plans, approvals, and studies.
- Arrange project financing and escrow.
- Review purchaser contracts and payment terms.
- Organise contractor and consultant responsibilities.
- Plan completion, delivery, and regulatory monitoring.
Obligation 1: Complete Developer Registration Before Undertaking Off-Plan Activities
Article 3 of Saudi Arabia's Law of Selling and Leasing Off-Plan Real Estate Projects regulates registration of developers before undertaking the relevant off-plan activities.
A developer should confirm that the required registration and qualification requirements are satisfied and that the intended activities are compatible with the relevant regulatory permissions.
Obligation 2: Identify the Correct Marketing and Sales Licences
Developers should distinguish between authorisation to market a proposed real estate project and the licence required to undertake full off-plan sales or leasing activities.
Project Marketing Licence
This permits specified marketing activities under its conditions before the complete off-plan project licensing process has been finalised.
Full Sales or Leasing Licence
This authorises the relevant off-plan project activities after the applicable project, technical, and financial requirements have been satisfied.
Obligation 3: Review Advertising Compliance Before Launching Marketing Campaigns
The regulatory framework applies to marketing an off-plan project, including advertising through websites, digital platforms, real estate brokers, and property exhibitions.
Before publishing advertisements, the developer should review project descriptions, unit details, drawings, specifications, pricing, delivery information, and reservation conditions.
- Review property listing pages.
- Examine digital advertising campaigns.
- Verify the accuracy of project information.
- Review broker and exhibition materials.
- Check published reservation terms.
- Confirm the permitted licence scope.
Obligation 4: Review Land Ownership and Development Rights
The legal status of the development site is an important element of project readiness.
The review should address title information, land description, area, relevant rights and restrictions, and the developer's legal authority to undertake the intended works.
Land Title Review
Examine the title records, boundaries, property area, ownership details, and rights or restrictions that could affect development.
Development Agreement
Where the developer does not own the land, regulate the parties' development authority, funding obligations, project phases, approvals, returns, and contractual responsibilities.
Obligation 5: Prepare Engineering Plans, Approvals, and Financial Studies
Developers should prepare the technical, financial, and regulatory documents required for the relevant project licensing procedure.
1. Architectural and Engineering Plans
Define the project, property units, design specifications, and relevant approved drawings.
2. Building Permits and Approvals
Review the permits, project authorisations, and construction requirements applicable to the development.
3. Project Feasibility Study
Address financial, construction, and marketing projections, expected costs, funding sources, and delivery timing.
4. Construction and Delivery Programme
Establish planned project phases, milestones, resources, responsibilities, and completion targets.
Obligation 6: Establish Project Escrow and Financial Controls
Saudi off-plan real estate legislation establishes project-specific escrow arrangements for real estate developments covered by the relevant provisions.
Developers should review the account's establishment, its relationship to the licensed project, purchaser payment deposits, permitted withdrawals, financial supervision, and reporting obligations.
- Establish the required project-specific account.
- Organise purchaser payment deposits.
- Review withdrawal and payment controls.
- Connect permitted spending to project needs.
- Maintain financial reports.
- Preserve accounting and transaction records.
Obligation 7: Comply With Reservation Payment Rules
Article 10 of the Implementing Regulations addresses the conditions for receiving reservation fees during a project marketing licence period.
Reservation Fee Limit
Where reservation payments are permitted during the marketing licence stage, the collected amount must not exceed 5% of the relevant unit's value.
Disclosure and Escrow
The developer must satisfy the relevant disclosure conditions and deposit the collected reservation amounts into the designated escrow account.
The Regulations also address repayment of reservation amounts where the marketing licence expires without the required project licence being obtained.
Obligation 8: Review Purchaser Contracts Before Offering Units
Purchaser agreements should be reviewed before being offered to prospective buyers, taking into account approved forms, licensing conditions, and applicable Saudi law.
Property Unit Details
Location, area, drawings, specifications, identification details, and associated rights.
Price and Instalments
Purchase price, payment milestones, payment methods, and the authorised account.
Completion and Handover
Delivery dates, handover procedures, required notices, and delay consequences.
Project Modifications
Changes affecting designs, areas, specifications, and applicable approvals.
Warranties and Defects
Construction quality, warranty responsibilities, and defect rectification after handover.
Default and Disputes
Contractual breaches, termination, compensation, and appropriate dispute-resolution procedures.
Obligation 9: Organise Contractor and Consultant Agreements
The developer's ability to satisfy its commitments to purchasers depends partly on well-defined construction and supervision agreements.
These agreements should regulate construction scope, completion schedules, design responsibilities, instructions, variations, payments, quality standards, delay, and contractual remedies.
- Define the contractor's scope of works.
- Document the construction programme.
- Allocate design and construction responsibilities.
- Regulate variation instructions.
- Review payment certificates and completion records.
- Establish quality and acceptance standards.
- Regulate delays and extensions of time.
- Define guarantees and defect obligations.
Obligation 10: Establish a Realistic Completion and Delivery Strategy
Article 20 of Saudi Arabia's Law of Selling and Leasing Off-Plan Real Estate Projects addresses the developer's obligation to complete the project by the specified date and relevant consequences of delayed delivery.
The Law distinguishes between developed land and residential units in certain compensation provisions.
Marketing Licence vs Full Off-Plan Sales Licence
| Issue | Marketing Licence | Full Project Licence |
|---|---|---|
| Purpose | Marketing within the authorised scope. | Undertaking licensed off-plan sales or leasing activities. |
| Requirements | Specified ownership, marketing, development, and design documentation. | Wider financial, technical, and project requirements. |
| Reservations | May be accepted under special conditions and limits. | Contracts and payments are subject to the applicable full-project framework. |
| Duration | Subject to the Regulations and licence conditions. | Subject to project approval and governing requirements. |
| Permitted Activities | Specified marketing activities. | Activities authorised under the complete project licence. |
Legal Pre-Launch Checklist for Off-Plan Property Developers
| Review Area | Required Check |
|---|---|
| Developer Registration | Confirm the relevant registration and qualification requirements. |
| Marketing Licence | Verify authorisation before advertising. |
| Sales Licence | Obtain the appropriate licence before the activities requiring it. |
| Land Ownership | Review title, rights, restrictions, and development authority. |
| Development Agreement | Establish the responsibilities of the landowner and developer. |
| Project Plans | Review engineering and regulatory documentation. |
| Financial Study | Examine funding, costs, feasibility, and delivery assumptions. |
| Escrow Account | Organise deposits, withdrawals, oversight, and records. |
| Purchaser Contracts | Review specifications, payment terms, delivery, and warranties. |
| Contractor and Consultant | Define responsibilities, quality, milestones, and project supervision. |
| Delay Management | Establish monitoring and documentation procedures. |
| Governance | Allocate responsibilities and maintain required records. |
What Are the Risks of Launching Without Proper Compliance?
Risks may arise from unlicensed advertising, accepting money without the appropriate authorisation, inaccurate project information, or misuse of project escrow funds.
The Law establishes provisions relating to specified violations, penalties, and regulatory measures, depending on the nature of the conduct and surrounding circumstances.
Licensing Risks
Undertaking regulated activities without appropriate approval or outside its scope.
Contractual Risks
Entering commitments inconsistent with the project's authorisation, documentation, or readiness.
Financial Risks
Breaching reservation, purchaser payment, or project escrow rules.
Commercial Readiness vs Legal Readiness
Commercial Readiness
Marketing designs, property pricing, sales forecasts, project websites, and advertising campaigns are prepared.
Legal Readiness
The relevant licences, property rights, development documents, purchaser contracts, escrow arrangements, and regulatory obligations have been addressed.
Atyar's Experience in Real Estate Investment and Development Agreements
Atyar Advocates & Legal Consultants has published experience preparing legal studies and drafting major real estate investment and development agreements.
Real Estate Investment and Development Agreement Exceeding SAR 4 Billion in Riyadh
Atyar provided legal advice concerning the acquisition, development, and investment of a property located north of Al-Takhassusi Road in Riyadh.
The scope of work included examining the transaction structure, property acquisition, development responsibilities, financing, regulatory approvals, contractual guarantees, and allocation of risks.
More than SAR 4 billion.
North of Al-Takhassusi Road, Riyadh.
Legal assessment and investment agreement drafting.
This matter demonstrates the importance of defining land ownership, financing, development authority, contractual obligations, and remedies before major project commitments commence.
Additional Real Estate Development Experience in Makkah
Real Estate Development Agreement Exceeding SAR 1 Billion
Atyar provided legal advice, a specialised legal assessment, and drafted an investment and development agreement concerning a major real estate transaction in Makkah.
The engagement addressed property title, acquisition arrangements, transfer of ownership, development phases, financing, regulatory approvals, and contractual protections.
Real Estate Development Agreement Exceeding SAR 800 Million
Atyar advised on and drafted an investment and development agreement involving a Makkah real estate project exceeding SAR 800 million.
The work included development responsibilities, funding and expenditure, contractual risks, guarantees, delay, default, and termination.
Atyar's Legal Services for Developers Before Project Launch
Atyar Advocates & Legal Consultants provides legal services relating to real estate investment structures, property ownership, development agreements, contractual responsibilities, and project risk assessment.
- Reviewing land title and property rights.
- Drafting development and partnership agreements.
- Assessing real estate investment structures.
- Reviewing contractual and regulatory responsibilities.
- Examining purchaser-related contractual terms.
- Structuring guarantees and legal safeguards.
- Assessing construction and handover risks.
- Reviewing project-related contracts and documentation.
- Preparing legal studies and memoranda.
- Analysing disputes and settlement options.
Related Real Estate Investment and Development Case Studies
The following published matters illustrate Atyar's experience structuring ownership, financing, contractual safeguards, and development responsibilities in major real estate projects.
Frequently Asked Questions About Developer Obligations Before an Off-Plan Launch
Is a commercial registration sufficient to launch an off-plan project?
No. Applicable developer registration and project licensing requirements must also be satisfied.
Can a developer advertise before obtaining the full sales licence?
The developer may seek the appropriate marketing licence, with activities limited to the authorisation and conditions granted.
Can reservation fees be collected during the marketing stage?
They may be collected under the specified conditions, including the 5% limit, required disclosure, and deposit into the designated escrow account.
Must land title be verified before project launch?
Title records, ownership, relevant property rights, restrictions, and development authority should be examined during project preparation.
Does an off-plan project require a separate escrow account?
The governing legislation establishes separate escrow arrangements for projects covered by its provisions.
Does a developer need an agreement when it does not own the land?
The developer's relationship with the landowner should be reviewed and documented appropriately, including development authority, responsibilities, and rights.
Why should purchaser contracts be reviewed before launch?
To address unit specifications, price, payment arrangements, delivery, warranties, purchaser rights, and contractual remedies under applicable requirements.
What happens if an off-plan project is sold without the required licence?
Regulatory measures and penalties may apply under the Law, depending on the conduct and circumstances.
