How Binding is an ‘Off the Plan’ Reservation Agreement in the UAE?
min readWhat is a Reservation Agreement?
Across the UAE, and particularly in Dubai, the acquisition of off-plan real estate typically begins not with a Sale and Purchase Agreement but with the execution by the purchaser of one or two preliminary documents. These documents go by various names — Reservation Agreement, Booking Form, Expression of Interest, Letter of Intent (generically referred to herein as a “Reservation Agreement”) — but their essential function is the same. They seek to bind the purchaser to buying a specific unit, pay a substantial non-refundable deposit, and agree to execute the developer’s standard form Sale and Purchase Agreement (“SPA”) upon the developer’s demand.
Tens of thousands of such documents are signed every year. Yet the question of whether they are truly binding contracts, capable of being enforced against a purchaser who declines to proceed, remains far from settled. In fact, that question has become even more open to challenge following recent legislative changes across the entire UAE.
How are Reservation Agreements typically structured?
The typical Reservation Agreement is often carefully drafted by the developer, to favour the developer and give them maximum flexibility during a busy sale campaign.
Typically, a Reservation Agreement will follow the following structure:
- It will be framed as the “Purchaser’s Offer” to buy the property, which the developer may accept or reject at its absolute discretion.
- It will not impose any obligation on the developer. No obligation to sell, no obligation to accept the offer, and no obligation to proceed on any particular timeline. The purchaser, by contrast, is supposedly locked in. It will usually provide that once the form is signed, the purchaser may not withdraw without the developer’s consent.
- If the developer accepts the offer, the purchaser is required to collect and execute the SPA almost immediately upon notification — typically being required to submit the signed SPA to the Developer within five business days and comply with all payment obligations due under the SPA (usually a further 10% and/or the anticipated DLD fees).
Critically, however, at the time the Reservation Agreement is signed, the purchaser will often not have been given a copy of the SPA, often proceeding on the assurance that it is a standard form. The SPA is not usually annexed to the Reservation Agreement. Unless the purchaser is a repeat customer, the contents of the SPA are on most occasions entirely unknown to the purchaser.
If the purchaser then fails (or refuses) to sign the SPA within the stipulated period, the Reservation Agreement will usually provide that the developer may cancel the Reservation Agreement and retain the full deposit as a “pre-agreed estimate of its damages”. In many cases, the sums at stake are significant — deposits of 10% to 20% of the purchase price are commonplace.
Is a Reservation Agreement a binding contract under UAE law?
The enforceability of a Reservation Agreement as a binding contract under UAE law faces several challenges.
For a contract to be valid, Federal Decree-Law No. (25) of 2025 on Civil Transactions (“UAE Civil Code”) requires mutual consent of the parties, a lawful cause, and certainty of subject matter.
The consent requirement is particularly problematic. The UAE Civil Code requires genuine, informed consent, free from vitiating factors such as duress, fraud, or mistake.[1] It is difficult to argue that a purchaser has genuinely consented to the terms of an SPA that has never been disclosed.
The developer’s standard form SPA is not a document produced by any regulatory authority. It is drafted by or on behalf of the developer, is typically weighted heavily in the developer’s favour, and may be amended by the developer at any time prior to it being submitted to the purchaser for signing.
Similarly, the UAE Civil Code requires the subject matter of a contract to be defined or at least determinable.[2] If the essential terms of the SPA — including the developer’s rights regarding delivery dates, design amendments, and termination — are unknown to the purchaser, the certainty requirement is arguably unsatisfied.
If the Reservation Agreement does not itself transfer any right in the property, then its true character may be no more than an agreement to enter into a future agreement. Such arrangements face well-established enforceability challenges under UAE law, particularly where the terms of the future agreement are not sufficiently defined.
What are the regulatory requirements for off-plan property sales in Dubai?
Dubai imposes additional requirements on off-plan property transactions that compound the enforceability difficulties facing Reservation Agreements.
Article 3 of Law No. (13) of 2008 Regulating the Interim Property Register in the Emirate of Dubai (“Interim Register Law”) provides that any sale or other legal disposition that transfers or restricts ownership of an off-plan property unit is void unless entered in the Interim Property Register.[3]
Developers are aware of this requirement. Reservation Agreements are typically drafted to avoid characterisation as a sale contract or SPA, precisely to sidestep the registration requirement. However, this careful avoidance creates a paradox: if the Reservation Agreement is not a disposition that transfers any property right, what binding legal effect does it have?
The position is further reinforced by the Direction for General Regulation Concerning Jointly Owned Properties issued by the Dubai Land Department (“DLD Direction”). Article 4 of the DLD Direction requires a developer to provide a comprehensive written disclosure statement to the purchaser before any contract is signed.[4] This statement must include a description of the development, a copy of the proposed jointly owned property declarations, a draft land plan, a schedule of materials and finishes, estimated service charges, proposed utility arrangements, and the estimated handover date, among other matters. Article 5 is unequivocal: if the developer fails to provide this disclosure statement, the contract is “void and of no effect”.[5]
In practice, Reservation Agreements are routinely issued without any such disclosure. The developer’s approach — drafting the Reservation Agreement so that it does not constitute a “contract to buy” — may avoid the literal application of these provisions, but it simultaneously undermines the argument that the Reservation Agreement creates a binding obligation enforceable against the purchaser. This is primarily due to the fact that the Reservation Agreement ultimately aims to effect the sale of real estate to the purchaser.
How do Articles 121 to 123 of the UAE Civil Code affect the position?
As of 1 June 2026, the UAE Civil Code includes a statutory framework governing pre-contractual conduct.[6] Under the prior law, good faith obligations were principally directed at the performance of existing contracts.
Article 121 provides that the proposal, conduct, and termination of pre-contractual negotiations must also be carried out in good faith.[7] Whilst negotiations do not of themselves oblige the parties to conclude a contract, a party who negotiates or terminates negotiations in bad faith may be liable for the actual damage caused. Article 121 also provides that it is an act of bad faith to wilfully omit material information affecting the validity of the contract.[8]
Article 122 goes further. It requires a party who is aware of information of “decisive importance” to the other party’s consent to disclose that information.[9] Any clause seeking to limit, waive, or exclude this disclosure obligation is null and void. The aggrieved party may seek annulment of the contract.
These provisions are directly relevant to the Reservation Agreement model. A developer that seeks to bind a purchaser to executing an undisclosed SPA — the terms of which are of obvious decisive importance to the purchaser’s consent — without providing any pre-contractual disclosure may now face scrutiny under Articles 121 and 122. The developer’s failure to disclose the SPA terms, the development’s disclosure statement, and the identity of the actual landowner or development entity could each constitute a breach of the statutory good faith and disclosure obligations.
Can the developer retain the deposit as damages?
Even if a Reservation Agreement were found to be enforceable, the developer’s entitlement to retain the full deposit as pre-agreed damages is far from assured.
Article 340 of the UAE Civil Code provides that the court may reduce agreed compensation to equal the actual prejudice suffered.[10] The court may also reduce compensation where the creditor contributed to or increased the damage through their own fault, or may decline to award compensation entirely if the creditor’s fault outweighs the debtor’s.[11]
This is significant. If a developer can readily resell the unit — potentially at a higher price — its actual loss may be nil. In such circumstances, the court has the power to reduce the agreed damages to zero. Moreover, a developer that bound the purchaser to unknown terms without disclosure may itself be regarded as having contributed to the default.
The prohibition on abuse of rights under Article 104 of the UAE Civil Code provides a further basis for challenge.[12] A party may not exercise a contractual right where the primary intention is to cause harm, where the benefit to the party is disproportionate to the harm caused, or where the exercise exceeds what is customarily accepted.
Conclusion
Reservation Agreements occupy a legally uncertain space. They are ubiquitous in UAE real estate practice, and in the vast majority of cases purchasers proceed to execute the SPA without incident.
When a purchaser seeks to withdraw, the developer’s ability to enforce the Reservation Agreement and retain the deposit is open to serious challenge — on grounds of consent, certainty, regulatory non-compliance, and good faith.
The UAE Civil Code’s pre-contractual disclosure and good faith obligations add a further dimension. Developers, purchasers, and their advisers would be well served to consider carefully whether current market practice is sustainable in light of the evolving legal framework.
Endnotes
[1] UAE Civil Code. The consent requirements are consistent with the general principles governing contract formation under UAE law.
[2] UAE Civil Code. The requirement that the subject matter be defined or determinable is a longstanding principle of UAE contract law.
[3] Law No. (13) of 2008 Regulating the Interim Property Register in the Emirate of Dubai, Article 3(1).
[4] Direction for General Regulation Concerning Jointly Owned Properties (Dubai Land Department), Article 4(1). The Direction derives its authority from express legislation — principally Law No. (27) of 2007 Concerning Ownership of Jointly Owned Real Property (now superseded by Law No. (6) of 2019). It is noted that Article 51 of Law No. (6) of 2019 provides that "the bylaws, regulations, and resolutions issued in implementation of the above-mentioned Law No. (27) of 2007 will continue in force, to the extent that they do not contradict this Law, until new superseding bylaws, regulations, and resolutions are issued".
[6] UAE Civil Code, Articles 121–123. These provisions are entirely new and have no equivalent in the 1985 UAE civil code.
[7] UAE Civil Code, Article 221.
[8] UAE Civil Code, Article 121(1).
[9] UAE Civil Code, Article 122(1) - (4).
[10] UAE Civil Code, Article 340(1) & (2).
[11] UAE Civil Code, Article 340(3).
[12] UAE Civil Code, Article 104.
This article is for general information only and does not constitute legal advice. Independent legal advice should be sought in relation to any specific matter.
