Thinking of purchasing a piece of land in Bahrain and start developing your mega project, then you ought to be aware of the regulations applied by the country on your upcoming project.
Whether your project is residential or commercial, developing a project in Bahrain and according to the Law No. 28 of 2014 – governing real estate developments in Bahrain – will make you a ‘Developer”, hence, rules will be applied on your project.
As per the law, rules will be applicable on any developer taking the action of development activities and selling properties and receiving payments from the selling process.
We have rounded up the main provisions mentioned by the real estate development law and which all developers in Bahrain will be required to follow.
1. Developers License
All developers will be required to obtain a developers license from the related authority with respect on the nature of the development itself
The licensee validity will not exceed more than 3 years.
To obtain the license, developed are obliged to submit a master plan of their project alongside the following:-
– Title deed
– Execution permit and building permit.
– An undertaking to commence work from both the developer and sub-developer.
– A confirmation form Committee of Professional Engineering Practice with an estimate value of the development.
– An approval on all engineering, architectural and construction plans
– A sample from the sale contract.
– A statement from the developer’s escrow bank that ensures a 20% deposit of the total estimated value has been paid.
– All documents required by the authority that verify the developer and sub-developer experience.
2. Off-plan sale
In an attempt to protect purchasers, the new law has came to force developers to obtain developers license and register any details related to units to The Survey and Land Registration Bureau in Bahrain (SLRB) registration account.
Any details regarding the off-plan registration or a sale agreement that are not going to be submitted to The Survey and Land Registration Bureau in Bahrain, will be considered null and will get void.
3. Template of sales agreement
According to a Ministerial Order, buyers will receive a template of the off-plan sales agreement that indicated the following:
– Units specifications and size.
– Units plans
– A payment schedule that is linked to the construction phases.
– Other requirements the authority deems necessary.
4. Escrow account
Developers will be obliged to open an escrow account in any financial institution for each project.
This escrow account will be used to regulate any proceeds from buyers or finance given to the project.
Developers are allowed to retain only 5% of the total projects value for a period of one year from the date units are handed over.
The financial institution by which an escrow account will be opened is required to be licensed by the Central Bank of Bahrain.
A copy of the escrow agreement will be submitted to the authority where the escrow bank will be obliged to provide the authority with any financial statements it requests.
5. Developers restrictions
Developers should start commencing the development within 6 months from receiving the development license.
In case of changing legal status of the developer, the authority will not allow it unless it is in the best interest of the development and doesn’t jeopardize the rights of stakeholders.
With regards to implementing the project, the developer must go in accordance with the documents submitted to obtain the license and any deviation from the agreed plans must approved by the authority first.
A dispute committee will be established by the ministry to resolve any disputes regarding the real estate development.
The committee members will be reviewed 3 years and all disputes will be managed urgently and judgments will enforceable immediately.
Appeals to the High Court will be allowed.
If the works on the development for any reason stopped, the committee will then refer to the escrow bank and take all the actions needed to ensure the development works proceed or return the funds to investors.
According to the law’s provisions, if the handover of the units is delayed without any reasonable justification then the purchaser will be allowed to request the committee to terminate the selling agreement after 90 days from serving notice the developer and escrow bank.
Also, if a purchaser violates contractual obligations without any reasonable justification, then the developer will can request the authority to terminate the selling agreement after 90 days from serving notice the buyer.