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Qatar has issued Law No. 6 of 2014 in relation to governing real estate developments in Qatar (New Law). The New Law was published on 7 April 20141 and will come into force in October 2014.
Real estate developments are defined in the New Law as “the construction of multi-storey buildings or complexes for residential or commercial purposes with the intention of selling the unit off plan” (Development).
For the purposes of this article, any person who carries out such an activity will be revered to as a developer (Developer).
We have summarised the key provisions of the New Law in relation to corporate Developers below.
The New Law prescribes that all Developers will be required to obtain a licence (Licence) from the Ministry of Economy & Commerce (MoEC). The Licence will be valid for a period of 3 years and can be granted on notice. The minimum criteria to be eligible for a licence will differ depending on the applicant.
The minimum criteria for a corporate Qatari Developer to qualify for a licence are:
For non-Qatari corporate Developers, the minimum qualification criteria are similar but contain some notable additions, as follows:
The New Law seeks to protect purchasers and end users in the early stages by requiring Developers to obtain the prior consent of the MoEC ahead of selling any of the units off-plan.
The request for consent will require a number of additional documents for the MoEC’s consideration, and these may include evidence of the opening of an Escrow Account (see below), a copy of the sale and purchase agreement, a certified budget for the completion of the Development and projected revenues, and details of the strata title register (see below).
The Developer will be required to open an escrow account for each project it undertakes. The escrow account will be used to hold any proceeds from purchasers and any finance obtained for the project.
Withdrawals are only permitted when 20% of the project has been completed and subject to achieving construction milestones based on a schedule approved by the Ministry of Municipality and Urban Planning.
Initial withdrawals from the escrow account are restricted to the payments relating to the project such as construction and marketing.
In addition, the bank holding the escrow account will be required to maintain funds equivalent to 10% of the overall value of the project (or alternatively provide an acceptable bank guarantee).
The New Law also provides for further transparency whereby subject to the approval of the MoEC, details of the relevant escrow account and financial statements may be disclosed to third parties with an interest in the project.
Detailed information of each off-plan unit and the development must be submitted to the Ministry of Justice (MOJ).
The MOJ will establish and maintain an interim register with the relevant information which will include details of the owner, sale price, mortgages, and judgements.
The MOJ will also issue an interim strata title deed for each off-plan unit which can be used for evidencing ownership, providing collateral, and other transactions.
The New Law will impose strict financial and criminal penalties on Developers for non-compliance. These include:
The MoEC will establish a committee for the resolution of real estate development disputes arising under the New Law (Committee).The Committee will manage disputes on an urgent basis and all judgements will be immediately enforceable.
This article was written by Reem Al Mahroos.