Escrow Account in Dubai: When Businesses Need One and How It Works

An escrow account can solve a simple problem in a high-value transaction: neither side wants to release money before the other side meets its obligations.

Instead of paying the seller, developer or counterparty directly, the money goes to an independent account. It stays there until agreed conditions are met. Once those conditions are satisfied, the escrow agent releases the funds.

In Dubai, escrow accounts are particularly important in off-plan real estate development. Developers selling units before construction is complete are subject to specific Dubai Land Department rules. Escrow can also be used voluntarily in mergers and acquisitions, financing arrangements, large commercial deals and transactions where payment depends on certain milestones.

However, opening a normal company in Dubai does not automatically mean you need an escrow account.

This guide explains when an escrow account Dubai businesses use becomes necessary, how the system works and what you should check before setting one up.

What Is an Escrow Account?

An escrow account is an account where money is temporarily held by an independent third party until specified contractual conditions have been fulfilled.

Imagine a company buying another business for AED 8 million. The buyer may be ready to pay, but only after certain licences are transferred and closing documents are signed. The seller may not want to transfer ownership until it knows the money is available.

The parties can place the money in escrow. The escrow agreement then states exactly when the bank or escrow agent can release it. The arrangement gives both sides more control over transaction risk.

When Is an Escrow Account Mandatory in Dubai?

The most clearly regulated mandatory use of escrow in Dubai is off-plan real estate development.

Dubai's Law No. 8 of 2007 Concerning Escrow Accounts for Real Estate Development applies to developers selling units off-plan and receiving money from purchasers or project financiers. The law defines the escrow account as the bank account into which those purchaser or financing payments are deposited.

A developer that wants to sell units off-plan must therefore arrange the project's escrow structure rather than simply collecting buyer payments into its normal business account.

Dubai Land Department also states that the escrow requirement applies to Dubai real estate developers selling off-plan units and receiving payments from purchasers, investors or financiers.

If you are entering the property sector, it helps to first understand the wider licensing requirements in Nexture's guide to setting up a real estate company in Dubai.

Do All Dubai Businesses Need an Escrow Account?

No. A restaurant, consulting company, software business, trading company or marketing agency does not normally need to open an escrow account simply because it operates in Dubai.

For most businesses, escrow is transaction-specific. You may decide to use one when the amount involved is substantial or payment depends on conditions that cannot happen simultaneously.

Common examples include:

• Acquisition of a company or business assets

• Share purchase transactions

• Large deposits before completion of a transaction

• Purchase-price adjustments

• Warranty or indemnity holdbacks

• Project and infrastructure financing

• Cash collateral arrangements

• Transactions requiring regulatory approval

• Commercial deals with milestone-based payments

For example, ADCB's commercial escrow service specifically refers to M&A transactions involving holdbacks for representations and warranties, purchase-price adjustments, regulatory approvals and good-faith deposits.

How Does an Escrow Account Work in Dubai?

The exact process depends on whether the account is a regulated real estate development escrow account or a private commercial arrangement. The basic structure is similar.

1. The Parties Agree on the Conditions

   The buyer, seller, developer, investor or other parties decide when money should be released. Those conditions must be written clearly.

   For example, an acquisition escrow agreement might say: AED 5 million is deposited at signing. The escrow agent releases AED 4.5 million once the share transfer is completed. The remaining AED 500,000 stays in escrow for six months to cover specified warranty claims.

   The escrow agent does not decide whether the commercial deal was good or bad. It follows the release mechanism written into the agreement.

2. An Escrow Agent or Trustee Is Appointed

   An independent financial institution normally holds the funds. For Dubai real estate project escrow accounts, the institution must meet the regulatory requirements for an approved account trustee.

   Dubai Land Department maintains an official list of approved escrow account trustees. The current list includes numerous UAE banks and financial institutions.

   Choosing a random bank account held by the developer does not satisfy the regulated project escrow requirement.

3. Money Is Deposited

   Once the account is active, the relevant money is transferred into escrow.

   For an off-plan real estate project, DLD explains that amounts received from buyers and project financing are deposited into the project's escrow account. The money is therefore separated from the developer's normal operating funds. 

   Under Law No. 8 of 2007, each development project must have a separate escrow account. Funds in that project account are dedicated to that real estate project.

4. The Required Milestone Is Verified

   Money is not necessarily available to the developer simply because a buyer has paid it.

   For real estate projects, releases are linked to the project's approved process, financial position and construction progress.

   DLD's current escrow activation service requires a payment plan and, depending on the basis for activation, may consider construction progress, developer contributions, financing or a bank guarantee.

   The aim is to keep project money linked to actual development requirements rather than treating buyer collections as unrestricted company cash.

5. Funds Are Released

   Once the required conditions have been confirmed, the trustee releases the relevant amount. In a private business transaction, the release conditions come mainly from the escrow agreement. In a regulated real estate project, withdrawals are governed by the DLD framework and project requirements.

How Does a Dubai Real Estate Escrow Account Work?

Real estate escrow has a more detailed regulatory structure because buyers often pay substantial sums before receiving a completed property.

The project must first be registered. DLD's current Register Project service combines real estate project registration with opening an escrow account for off-plan sales. The application goes through the Oqood system; project and technical documentation is submitted and the developer coordinates with the account custodian.

The current published project registration fee is:

AED 150,000 + AED 10 Knowledge Fee + AED 10 Innovation Fee.

These are project registration charges rather than a universal price for every type of commercial escrow account.

DLD also currently requires a 30% guarantee as part of the project registration conditions. This may be demonstrated through:

• 30% construction completion

• A bank guarantee covering 30% of construction

• An equivalent 30% cash deposit

Before relying on these figures for a specific development, check the latest DLD project registration requirements because service requirements can be updated.

Can a Developer Use Escrow Money for Anything?

No. Law No. 8 establishes the principle that the account is opened in the project's name and is dedicated to that development. If a developer operates several developments, separate escrow accounts are required for separate projects.

DLD's published guidance also explains that project escrow payments are generally connected to eligible project costs such as contractors, consultants and permitted marketing expenditure rather than every general expense of the development company.

This means a developer should not treat the project escrow balance as an ordinary operating balance.

A business planning property development also needs the correct corporate structure, licences and approvals. 

What Happens When the Property Project Is Completed?

Completion does not automatically mean every remaining dirham becomes immediately available to the developer. Law No. 8 provides for a 5% retention after completion, with the legislation setting conditions around its eventual release.

DLD's current project profit withdrawal service also requires an amount equivalent to 5% of net collections to remain in the project completion escrow account until the relevant NOC requirements are met. The department separately checks matters such as project completion, available construction funding and technical reports when applicable.

Because current administrative requirements can develop over time, developers should follow the latest DLD service conditions rather than relying only on an old checklist.

How Can Buyers Check a Dubai Project's Escrow Details?

A buyer should verify a project before transferring a large off-plan payment.

Dubai Land Department provides its Project Status Enquiry, also available through the Dubai REST application. Project records can include developer information, project status and escrow bank details.

As a practical rule, do not rely only on bank details sent over WhatsApp or included in an unofficial payment instruction.

Confirm that:

• The project is registered

• The developer details match

• The escrow account belongs to the correct project

• The receiving institution is an approved trustee

• The payment instructions match official project information

This is particularly important when the payment involves hundreds of thousands or millions of dirhams.

Escrow Account vs Corporate Bank Account

The two accounts serve very different purposes.

Documents You May Need for an Escrow Account

There is no single universal document list for every escrow arrangement. For commercial escrow, a bank may request documents such as:

• Trade licence

• Certificate of incorporation

• Memorandum and Articles of Association

• Shareholder and authorised signatory documents

• Emirates ID or passports

• Ownership structure

• Source-of-funds information

• Transaction agreements

• Escrow agreement

• Purchase or sale agreement

• Board resolution

• Transaction value and payment schedule

Real estate development escrow has additional project-level documentation and DLD requirements.

For project registration, DLD currently lists documents such as project details from the consultant, final building permits, relevant NOCs, development agreements where applicable and a bank guarantee where required.

How Much Does an Escrow Account Cost in Dubai?

There is no single standard escrow account fee covering every business transaction.

Commercial escrow charges depend on factors such as:

• Transaction value

• Bank or escrow agent

• Duration of the arrangement

• Currency

• Number of payment releases

• Complexity of release conditions

• Reporting requirements

• Legal documentation

• Due diligence and compliance requirements

A simple commercial arrangement and a large M&A escrow will not necessarily cost the same. Real estate developers should also distinguish the bank or trustee's charges from DLD's regulatory and project registration fees.

Common Mistakes Businesses Should Avoid

One common mistake is assuming escrow is legally required for every large transaction. It is not. Outside specific regulated activities, whether you use escrow often depends on the deal and its risks.

Another mistake is focusing only on the bank. The escrow agreement matters just as much. Vague release conditions can cause delays or disputes even when the money itself is safely held.

You should clearly define:

• Who deposits the funds

• Exact amount and currency

• Release conditions

• Evidence required before release

• Who can issue instructions

• How disputes are handled

• What happens if the transaction fails

• Refund conditions

• Bank and professional fees

• Expiry date of the escrow arrangement

For an AED 10 million transaction, wording such as "release when the transaction is completed" is unnecessarily vague.

State what completion means and which documents prove it.

Conclusion

An escrow account in Dubai is mainly a risk-control mechanism rather than an account every company is required to maintain.

For real estate developers selling units off-plan, escrow forms part of Dubai's regulated development framework. Buyer payments and relevant project financing go into a project-specific account managed through an approved trustee, with withdrawals connected to the project's approved requirements.

For other businesses, escrow is usually voluntary and transaction-based. It can be useful for acquisitions, financing, deposits, purchase-price adjustments and any large transaction where neither side should receive unrestricted control over the funds until specific conditions are satisfied.

Before opening an account, first identify which type of escrow arrangement you actually need. Then check the regulatory requirements, select an appropriate bank or trustee and make the release conditions precise.

Frequently Asked Questions