Off-plan sales run through a registered developer and an escrow account, and the registration comes first.

A residential scheme in a Gulf state is sold before it is built. Buyers sign and pay instalments against construction, the developer builds with the instalments and a construction facility, and the buyers take title at completion. The state regulates the arrangement because buyers have been left with paid instalments and no building, and the regulation is a regime: the developer must be registered with the state's authority before it sells; the project must be registered before the first instalment is collected; the instalments must be paid into an escrow account at a bank the authority approves; the escrow bank releases to the developer against construction milestones the authority's rules fix and an engineer certifies; and a sale outside the regime is void or unenforceable and a breach the authority penalises. The regime is the structure of a residential programme. The developer must hold the registration before the first sale. The project must be registered before the first instalment. The escrow bank's release conditions decide the developer's cash flow, and therefore the construction facility's drawdowns, and therefore the programme. A platform that assumed the buyers' money would fund the build on the developer's timetable has assumed something the escrow bank does not permit, and a platform whose developer sold before it was registered has a scheme with buyers who have paid and a developer who cannot be paid.

This note sets out why the regime exists and what it protects, the developer's registration and who may hold it, the project's registration and its conditions, the escrow account and the bank, the release profile and the milestones, the buyers' rights and the register of buyers, the developer's cash flow under the regime, the construction facility sized to the release profile, the control matrix and the platform's approvals, the exit with a register of buyers, the developer's default and the authority's powers, the onshore interface per state, a comparison, a worked scheme as a type, cases, what each party holds, the sequence, questions, terms and what to read.

Why the regime exists

Off-plan sales fund construction with buyers' money, and before the regimes the money was the developer's to use: on that project, on another, or not on construction at all. Schemes stalled with instalments spent, and buyers held contracts for apartments in buildings that stopped at the podium. The regimes were written to separate the buyers' money from the developer's: the money goes to an account the developer does not control, is released only as the building rises, and is applied only to that building. The regime protects the buyer, and in doing so it fixes the developer's cash flow and the programme's financing, which is why it is the platform's concern and not only the developer's.

The developer's registration

The state's authority registers developers: a company licensed for development in the state, with the capital, the record, the technical capacity and the standing the authority requires, on an application with the authority's period. The registration is the developer's and not the project's, and it is held before any sale of any project. A foreign developer, or a joint venture company formed for one project, is registered on its own standing or is not, and a joint venture formed by a platform with a developer is registered as the developer of that project, which means the joint venture company meets the authority's requirements or the registered developer acts for it under an arrangement the authority accepts. The registration is the first item in the residential programme's sequence, and a developer that cannot register cannot sell.

The project's registration

Each project is registered separately: the parcel, the title, the approved plans and permit, the developer's registration, the escrow account and bank, the construction contract and contractor, the engineer, the sales plan and the buyers' contract in the authority's form. The authority registers the project on its conditions and issues a registration the developer quotes in every sale. No instalment may be collected before the project's registration, and a deposit taken before it is an instalment collected outside the regime. The registration's conditions include the construction's commencement within a period and the developer's own contribution to the project before the escrow funds are released.

Why the registration comes first

The registration comes first because the regime makes every later step depend on it: the project cannot be registered without a registered developer, the escrow account cannot be opened without a registered project, no instalment can be collected without the account, and no sale is within the regime without the instalment going there. A developer that sells first and registers afterward has sold outside the regime, and the authority's answer is not to register the sales retrospectively but to require them unwound. The order is the regime's, and the programme's sequence begins where the regime does. A platform that drafts its sequence from the sales launch backward arrives at the registration as the first line; one that drafts from the construction start forward may never arrive at it.

The joint venture and the registered developer

The joint venture company formed for the project is the project's owner, and the regime's developer is whoever holds the registration and sells: the joint venture company itself, if it is registered, or the registered developer acting as the project's developer under an agreement with the joint venture that the authority accepts. The second is the usual arrangement where the developer partner holds the registration and the joint venture holds the parcel, and the authority's rules on who may be the registered developer of a project owned by another say whether it works and on what terms. Counsel in the state confirms the arrangement before the joint venture is formed, because a joint venture that cannot be the registered developer and whose partner's registration does not extend to it has a project nobody may sell.

The engineer

The engineer certifies the milestones the bank releases against, and its appointment is the authority's requirement and the platform's approval. The engineer is independent of the developer and the contractor, and its certificate is the release's condition; an engineer that certifies ahead of progress releases the buyers' money ahead of the building, which the authority penalises and the platform's committee reads. The platform appoints or approves the engineer in the control matrix, reads its certificates with the escrow reporting, and treats the engineer as the regime's valuer of progress.

The escrow account and the bank

The escrow account is opened at a bank the authority approves, in the project's name, with the developer as the account holder under the authority's rules and the bank as the escrow agent. Every instalment goes into it, from the buyer directly, and the bank records each against the buyer's contract. The bank releases only against the authority's release conditions, on the engineer's certificate of construction progress, to the contractor or the developer as the rules permit, and it retains a proportion after completion for the defects period. The developer cannot withdraw otherwise, the bank cannot release otherwise, and the account cannot be charged to the developer's lenders except as the rules permit. The account is the regime's instrument, and its terms are the authority's and not the developer's.

The release profile and the milestones

The authority's rules fix the milestones at which the bank releases and the proportion of collected funds released at each: a proportion on the foundation, a proportion on the structure, a proportion on the envelope, a proportion on the services and the finishes, the balance on completion less the retention. The profile is a cash flow the developer receives as it builds, behind its spend, and the gap between the developer's spend and the bank's release is the developer's working capital or the construction facility's. The profile is the regime's arithmetic and it differs by state, and a programme modelled on sales collected rather than on funds released is a programme with a cash flow the escrow bank will not deliver.

The buyers' contract's commercial terms

Within the authority's form the developer sets the commercial terms: the price, the instalment schedule against milestones, the completion date and the grace period, the delay compensation the regime fixes or the contract improves, the specification, the handover conditions and the service charge. The platform approves them in the control matrix, because the instalment schedule is the escrow's inflow and the completion date is the delay compensation's trigger, and a contract with a completion date the programme cannot meet is a contract that pays the buyers from the platform's margin. The form is the authority's and the terms are the platform's approval, and the two together are the scheme's revenue.

The buyers' rights and the register

Each buyer holds a contract in the authority's form, registered with the authority against the project, with rights the regime fixes: to the apartment at completion, to the instalments' protection in escrow, to compensation for delay beyond the contract's period, to termination and refund on the developer's default, and to a record at the authority that binds the project's successors. The register of buyers is a register of contractual and, in some states, registrable rights against the project, and a purchaser of the scheme or of the parcel company takes the project with the buyers and their rights. The register is an asset, because the buyers' contracts are the scheme's revenue, and a liability, because the buyers' rights are the scheme's obligations.

The developer's cash flow under the regime

The developer's cash flow is: its own contribution to the project before the first release, the construction facility's drawdowns, the escrow releases at the milestones, and the retention after completion. Its spend is the construction contract's certified amounts, its own costs and its financing costs, in advance of the releases. The gap is funded by the facility and the developer's equity, and a developer whose equity is thin and whose facility is sized on sales rather than on releases runs out between milestones. The platform, as the joint venture's majority holder, reads the developer's cash flow under the regime's profile before it reads the sales launch.

The construction facility sized to the release profile

The construction lender lends against the project's costs and is repaid from the escrow releases and the completion proceeds, and it sizes its facility on the release profile: the gap between certified spend and released funds at each milestone, plus the developer's contribution, plus contingency. It takes the security the regime permits, which excludes the escrow account's funds, and it reads the escrow agreement and the authority's rules before it commits. A facility sized on the sales launch lends against money the bank holds for the buyers, and the lender's counsel that reads the regime resizes it.

The control matrix and the platform's approvals

In the joint venture between the platform and the developer, the control matrix places the sales under the regime: the developer holds the registration and runs the sales under the authority's rules; the platform approves the sales plan, sets the price floor and the pace, approves the buyers' contract's commercial terms within the authority's form, and approves the escrow bank and the engineer. The escrow position, the funds collected, released and retained, is reported to the platform monthly and the platform's approval is required for any application to the authority that changes the project's registration. The developer's registration is in the developer's file before the joint venture is formed, and its loss is a default under the joint venture agreement.

The exit with a register of buyers

A scheme sold off-plan and exited before completion is sold with its register of buyers: the purchaser of the scheme, or of the parcel company, takes the project's registration, the escrow account, the buyers' contracts and the obligations under them, and the authority's consent to the change of developer or of the project's ownership. The purchaser prices the buyers' contracts as revenue at their prices and the obligations as the completion cost and the delay risk, and the authority's consent is a condition precedent. A scheme exited after completion has no register of buyers except for unsold units, and the retention in escrow runs off. The exposure statement's exit routes say whether the platform exits residential schemes before or after completion, because the two are different transactions.

The developer's default and the authority's powers

A developer that stalls, breaches the regime or becomes insolvent is subject to the authority's powers: to suspend the registration, to appoint a replacement developer, to direct the escrow bank, to apply the escrow funds to completion, and in some states to take the project over. The buyers' rights are protected by the authority's intervention and the platform's position is read by the authority as the project's owner with obligations to the buyers. The joint venture agreement provides for the developer's replacement under the authority's rules, with a replacement developer registered and the authority's consent, and the platform's ability to effect the replacement is its protection against the developer's failure.

The onshore interface per state

Each state's regime differs: which authority registers, what the developer's registration requires, which banks may hold escrow, what the release milestones and proportions are, what the buyers' contract must contain, how the buyers' rights are recorded, what the retention is and for how long, and what the authority does on default. Counsel in each state writes the column, and the joint venture agreement, the construction facility and the programme are drafted to it. A platform that applies one state's regime to another's scheme has a programme that the second state's bank will not fund.

By element · by effect	What the regime fixes	What it does to the programme	Who holds it
Developer's registration	Who may sell	The first item in the sequence	The developer, in its file before the joint venture
Project's registration	When instalments may be collected	The sales launch's earliest date	The developer, with the platform's approval
Escrow account and bank	Where the money goes	The developer's cash is the bank's releases	The bank under the authority's rules
Release profile	When the money comes	The construction facility's size	The authority's rules, the engineer's certificates
Buyers' contract and register	The buyers' rights	The scheme's revenue and obligations	The authority's form, the register
Retention	The defects period's security	The last release	The bank
Authority's powers on default	The buyers' protection	The developer's replacement	The authority, with the joint venture's provisions

A scheme, as a type

A platform forms a joint venture with a registered developer for a residential scheme in a Gulf state. The developer's registration is in its file before the joint venture is formed. The project is registered with the authority on the approved plans, the escrow account is opened at an approved bank, the engineer is appointed, and the buyers' contract is in the authority's form with the platform's commercial terms. The construction lender sizes its facility on the authority's release profile against the construction contract's cash flow, with the developer's contribution as the first money, and reads the escrow agreement before committing. The control matrix gives the platform the sales plan, the price floor, the pace and the escrow reporting. Sales launch after the project's registration; instalments go to escrow; the bank releases at the milestones on the engineer's certificates; the facility funds the gap. The scheme completes, the buyers take title, the retention runs off, and the unsold units are sold by the parcel company under the statement's exit routes. The first item in the sequence was the registration, and everything else followed it.

The structure paper's page

The structure paper carries a page per state on off-plan sales: the authority, the developer's registration requirements, the arrangement for a joint venture's project, the project's registration conditions, the approved banks, the release profile, the buyers' contract form and the register, the retention, the authority's powers on default, the scope of the regime, and the exit's treatment of the register of buyers. The page is written before the joint venture's design and is the page the construction lender's counsel reads with the escrow agreement.

The second platform's reading

A manager's second platform is read against the first platform's residential schemes: whether the registrations came first, whether the facilities were sized on the profiles, whether the escrow reporting reached the committee monthly, and whether a developer was ever replaced under the authority's rules. A first platform whose schemes ran within the regime is a platform whose investors accept the second's residential programme; one whose launch took deposits outside it is a platform whose investors ask to see the registration before the joint venture. The regime's sequence is the land door's discipline on residential schemes, and the first platform's record is whether the discipline held.

Four cases, as types

A developer launches sales and takes reservation deposits before its registration issues. The authority refuses to register the project until the deposits are returned, the escrow bank will not open the account, and the buyers hold receipts for money paid outside the regime against a developer the authority has noted.

A construction facility is sized on the sales launch's collections. The escrow bank releases a proportion at the foundation milestone and the developer's spend has reached the structure; the gap is the lender's to fund or nobody's; the lender resizes at its price and the programme slips a quarter.

A joint venture agreement is silent on the developer's replacement. The developer stalls at the envelope, the authority suspends its registration, and the platform, as the project's owner, has obligations to the buyers and no contractual route to a replacement developer the authority will register.

A platform reads the state's column, puts the registration first, registers the project before the first instalment, sizes the facility on the release profile, writes the control matrix to the regime, and provides for the developer's replacement. The buyers' money funded the build at the bank's pace, and the programme was written to it.

What each party holds

The developer holds its registration, the project's registration, the escrow account under the authority's rules and the sales under the regime.

The platform holds the approvals in the control matrix, the escrow reporting and the replacement provision.

The escrow bank holds the funds and releases on the authority's conditions.

The engineer holds the milestone certificates.

The construction lender holds its facility sized on the release profile and its security outside the escrow.

The authority holds the registrations, the rules, the register of buyers and the powers on default.

Where it surfaces

It surfaces at the developer's file, when the registration is asked for. It surfaces at the sales launch, when the reservation deposits are taken. It surfaces at the escrow bank's account opening. It surfaces at the first milestone, when the release is a proportion and the spend is more. It surfaces at the construction lender's sizing. It surfaces at the developer's stall, when the authority's powers are read. And it surfaces at exit before completion, when the purchaser reads the register of buyers and the authority's consent.

The cost of getting it wrong

A sale before the registration costs the deposits' return, the authority's note against the developer, the launch's delay and the buyers' trust. A facility sized on sales costs the gap between milestones at the lender's price. A joint venture without a replacement provision costs the platform its project when the developer stalls, with the buyers' rights against it. The cost of reading the state's column is counsel's week, and the cost of the sequence that begins with the registration is nothing but the order.

The committee's reading

The committee reads, before the joint venture is formed, the developer's registration and the arrangement by which the joint venture's project will be sold under it; before the sales launch, the project's registration, the escrow agreement, the engineer and the buyers' contract; before the facility, its sizing on the release profile; and monthly, the escrow reporting of funds collected, released and retained against the engineer's certificates and the construction's progress. It reads the replacement provision once and hopes not to use it.

A timeline, as a type

At the joint venture's design, counsel writes the state's column and confirms the developer's registration and the arrangement for the joint venture's project. In month one the joint venture is formed and the parcel transfers. In month four the plans are approved and the project is registered, the escrow account opened, the engineer appointed, and the buyers' contract settled in the authority's form. In month five the construction facility is committed on the release profile. In month six sales launch; instalments go to escrow. In month nine the foundation milestone is certified and the first release funds the contractor beside the facility. In year two the structure and envelope milestones follow. In year three the scheme completes, the buyers take title, the final release less retention is made, and the retention runs off in year four. The unsold units are sold by the parcel company under the statement's exit routes, and the register of buyers closes.

The sequence

1. The developer's registration is confirmed in the developer's file before the joint venture is formed.
2. The project is registered with the authority on the approved plans, with the escrow account, the bank, the engineer and the buyers' contract.
3. The construction facility is sized on the authority's release profile, with the developer's contribution first.
4. The control matrix gives the platform the sales plan, the price floor, the pace, the escrow reporting and the approvals.
5. Sales launch after the project's registration and every instalment goes to escrow.
6. The joint venture provides for the developer's replacement under the authority's rules, and the exit route is chosen for before or after completion.

Questions a manager asks

Can the platform's own vehicle be the registered developer. If it meets the authority's requirements for capital, record and capacity; most platforms hold through a registered developer in the joint venture because the requirements are a developer's.

What about a pre-launch expression of interest. Permitted in some states without payment; a payment of any kind before the project's registration is an instalment outside the regime.

How much does the developer contribute before the first release. The authority's rule fixes a proportion of the project's cost, and the construction lender and the platform read it as the first money.

Can the escrow account secure the construction facility. Not the buyers' funds; the rules permit a charge over the developer's entitlement to releases in some states, and the lender's counsel reads what the state permits.

What if a buyer defaults on an instalment. The buyers' contract and the regime fix the developer's remedies: notice, a period, termination and resale with a deduction; the escrow bank records the termination.

Does the regime apply to commercial schemes. In most states it applies to residential and to some mixed-use; counsel reads the scope, and a commercial scheme sold off-plan outside the regime is sold on the contract alone.

Terms used

Off-plan sale: the sale of a unit before the building is complete, against instalments.

Developer's registration: the state's authority's registration of a developer as permitted to sell off-plan.

Project's registration: the registration of a specific scheme before instalments may be collected.

Escrow account: the project's account at an approved bank holding the buyers' instalments under the authority's rules.

Release profile: the milestones and proportions at which the bank releases funds to construction.

Register of buyers: the authority's record of buyers' contracts against the project, which a purchaser of the scheme takes with it.

What to read

The state's off-plan sales and escrow law and the authority's rules; the developer's registration; the project's registration and its conditions; the escrow agreement; the authority's release profile; the buyers' contract in the authority's form; the joint venture's control matrix and replacement provisions; the construction facility's sizing. On this site, the developer, access and worked rooms under Land.