Dubai Court: A Developer’s Mortgage Is Void Unless the Loan Went Into Escrow
Published October 2, 2026 · 4 min read · Sources: Khaleej Times, Dubai developer mortgages are void unless funds go into escrow, says court (2026); Dubai Law No. 8 of 2007 on escrow accounts for real estate development; Dubai Land Department.
What the court decided
Dubai’s Court of Cassation, the emirate’s highest court, has held that when a bank lends to a developer for a project and takes a mortgage over it, the mortgage is only valid if the loan money was paid into the project’s escrow account. Where it was not, the lawyers involved say, the mortgage is treated as if it never existed and the bank loses its priority claim over the project. “A mortgage agreement in such circumstances is deemed as if it never existed,” Ahmed Labib, senior associate at BSA Law, told Khaleej Times.
Dh246 million registered, Dh93 million enforceable
The case behind the ruling shows how it works in practice. The bank held a mortgage for Dh246 million. BSA’s lawyers showed that only Dh93 million of the loan had actually been deposited into the project’s escrow account, and the court reduced the mortgage to that figure. So the court did not throw the security out entirely: it kept it alive for the money it could trace through escrow and cancelled the rest.
The law it rests on
Dubai Law No. 8 of 2007 is the escrow law that every off-plan project in the emirate is sold under. It requires each project to have its own escrow account with an approved bank, requires buyers’ payments to go into it, and requires a bank financing the development to pay its loan into the same account. The point is that every dirham meant for the building can be traced to the building. The ruling treats that payment rule as a condition of the mortgage itself, not as paperwork a lender can skip.
Why it matters to off-plan buyers
A buyer’s risk on an off-plan purchase is that the money runs out before the building is finished. Escrow exists so the money paid in is spent on construction and nothing else. A lender that funds a project outside escrow and then claims first call on it competes with the buyers whose payments are in the account. The ruling puts lenders back inside the system: a bank that wants priority over a project has to fund it the same traceable way buyers do.
What to check before you pay
Pay only into the project’s escrow account, never to a developer’s general account or a sales agent, and check that the account number on your payment instruction matches the one on your sales agreement and the project’s registration with the Dubai Land Department. Make sure your purchase is registered on Oqood, the DLD’s off-plan register. Ask who is financing the construction: a project funded by a bank through escrow is a normal and healthy structure, and this ruling makes it a safer one.
Related questions
What did the Dubai court rule about developer mortgages and escrow?
Dubai’s Court of Cassation ruled that a bank’s mortgage over a development project is void to the extent the loan was not paid into the project’s escrow account, as Dubai Law No. 8 of 2007 requires. In the reported case a Dh246 million mortgage was reduced to the Dh93 million actually deposited.
Does the ruling affect off-plan buyers?
Indirectly, and in their favour. It stops a lender that funded a project outside escrow from claiming priority over it, which keeps the project’s money inside the account that also holds buyers’ payments.
What is Dubai Law No. 8 of 2007?
It is Dubai’s escrow law for real estate development. Every off-plan project needs its own escrow account with an approved bank, buyers’ payments go into that account, and a bank financing the development must pay its loan into the same account.
How do I check my off-plan payment goes into escrow?
Pay only to the escrow account named on your sales agreement, confirm it matches the project’s registration with the Dubai Land Department, and make sure your unit is registered on Oqood. Never pay a developer’s general account or an agent directly.
