Abu Dhabi Enacts Significant Real Estate Reform: A New Legal Framework for a Growing Market

In an important legislative development aimed at reinforcing Abu Dhabi’s position in the real estate investment, Law No. (2) of 2025 has been issued pursuant to the directives of His Highness Sheikh Mohamed bin Zayed Al Nahyan, Ruler of Abu Dhabi. This new law amends Law No. (3) of 2015 governing the real estate sector and will come into force on 02 August 2025.

The reform introduces a comprehensive and forward-looking legal framework intended to enhance investor confidence, strengthen regulatory oversight, and accelerate the delivery of real estate projects, particularly in the off-plan segment.

Key Features of the New Law:

1. Expanded Scope of Regulated Activities

The law broadens the definition of “real estate activities” to include surveying, valuation, registration, brokerage, property management, and operations. All such activities now fall under the regulatory purview, requiring developers and service providers to obtain the appropriate licences before engaging in real estate-related business.

2. Real Estate Development Register

A new Real Estate Development Register is established, mandating that all developers register their projects and obtain prior approvals before commencing any marketing or sales activities. This aims to promote transparency and ensure that only qualified, compliant entities operate in the market.

3. Off-Plan Sales: Enhanced Legal Safeguards

The law introduces a balanced legal mechanism allowing developers to take corrective action in the event of purchaser default, including the removal of the purchaser’s name from official records, being the Interim Real Estate Register. At the same time, purchasers retain the right to challenge such actions through court or arbitration proceedings. This dual framework seeks to minimise project delays while upholding fair process.

4. Jointly Owned Property Management

The previous concept of an “Owners’ Union” is replaced with a more clearly defined “Owners’ Committee.” The law sets out its roles, responsibilities, and governance procedures, providing a structured system for the management of common areas and shared property.

5. Enforcement of Service Charge Obligations

To improve compliance, the law strengthens the mechanisms for collecting service charges. Property owners who fail to settle their dues may face administrative restrictions, including the inability to dispose of the property. Additionally, violations of the law or its regulations may attract fines of up to AED 2,000,000.

6. Escrow Account Restrictions

In a significant shift, funds in escrow accounts can no longer be used for land acquisition or brokerage fees. Moreover, developers are prohibited from accessing escrowed funds until a minimum of 20% of the project has been completed, reinforcing financial accountability and protecting purchasers’ interests.

7. Mortgage and Project Transfer Protections

Where a development is transferred due to a developer’s default, the acquiring party is now legally obligated to honour all existing sales agreements and complete the project. This provision safeguards purchasers’ rights while balancing the interests of secured creditors.

This legislative reform signals a major shift in how Abu Dhabi intends to regulate and grow its real estate sector. It offers a clearer, more secure legal environment for all market participants such as developers, investors, purchasers, and financiers alike. By aligning legal protections with international best practices, the law positions Abu Dhabi as a competitive, investment-friendly jurisdiction for real estate development.

For further information on the new legal developments, please contact Areen Jayousi or Rowan Noor at Horizons & Co.