Off-Plan and Secondary Market Contracts in Times of Geopolitical Disruption
Periods of regional instability in early 2026 — including airspace restrictions, disruption to commercial shipping routes through the Strait of Hormuz, and broader geopolitical uncertainty — have introduced volatility into Dubai’s real estate market. Market participants have reported delays in site visits, transaction timelines, and investment decision-making. For buyers, developers, and investors holding positions in both off-plan and completed property contracts,
the immediate legal question is whether such events trigger force majeure or hardship protections — and what that means for contractual obligations.
The Legal Framework: Two Distinct Doctrines
Dubai real estate contracts operate within a layered legal architecture comprising the UAE Civil Code, Dubai-specific legislation administered by the Dubai Land Department (“DLD”) and the Real Estate Regulatory Agency (“RERA”), and the contractual terms of individual Sale and Purchase Agreements (“SPAs”).
Force majeure is governed by Article 273 of the current UAE Civil Code (corresponding to Article 236 of the new Civil Transactions Law, Federal Decree-Law No. 25 of 2025, effective 1 June 2026). It applies where an external event renders contractual performance objectively impossible — not merely more expensive or commercially unattractive. When force majeure is established, the obligation may be extinguished by operation of law and the contract may be subject to rescission, depending on the circumstances and judicial determination where disputed. The new law addresses different forms of impossibility, including total, partial, and temporary impossibility, and provides corresponding remedies depending on the nature and extent of the disruption.
On the other hand, the concept of Unforeseen Circumstances (or Hardship) is governed by Article 249 of the current Civil Code (corresponding to Article 224 of the new law). This applies where exceptional, general circumstances arise after the conclusion of the contract, making performance excessively onerous and threatening the debtor with serious loss — although performance remains technically possible. Under the new law, the court may reduce the onerous obligation to a reasonable limit or rule for rescission of the contract, and any agreement to the contrary is void.
The distinction matters enormously. Rising construction costs, repriced war-risk insurance, and rerouted supply chains make performance more expensive — in other words, hardship. A government order physically closing construction sites or legally preventing performance — that may amount to force majeure. UAE courts have consistently drawn this line with care.
Off-Plan Contracts: Where the Pressure Is Greatest
Off-plan property in Dubai represents a substantial proportion of transactions and is the segment most directly exposed to geopolitical disruption. These contracts depend on sustained construction progress, continued supply chain access, and staged buyer payments linked to verified milestones.
Dubai’s off-plan regulatory framework, principally Law No. 13 of 2008 (as amended by Law No. 19 of 2017 and Law No. 19 of 2020) and Law No. 8 of 2007 concerning escrow accounts, provides structural protections. All buyer payments must be deposited into RERA-approved escrow accounts, and developers may only withdraw funds upon verified construction milestones audited through the applicable regulatory framework. Under the escrow regime, investor funds remain protected within project escrow accounts subject to regulatory supervision, even where projects face delay.
Disruption to global shipping, logistics, labour availability, or supply chains may be considered within force majeure provisions where contractual and legal requirements are satisfied. However, the DLD and courts assess each case individually, scrutinising whether the delay genuinely stems from an uncontrollable external event or from developer negligence, poor planning, or pre-existing delay.
For buyers holding off-plan contracts, the critical question is whether a developer’s delay in handover — caused by material shortages, labour disruption, or logistics constraints arising from regional instability — entitles the developer to an extension of time or excuses the developer from liability. The answer depends on the SPA’s force majeure clause, the specific causal link between the external event and the delay, and whether the developer has complied with notice and mitigation obligations.
For developers, the statutory framework is demanding. Force majeure is a defence to late delivery, but it requires strict proof that the event was unforeseeable, unavoidable, and rendered performance genuinely impossible or legally prevented. A developer who was already behind schedule before the external event arose — as recognised in UAE Court of Cassation jurisprudence, including Judgment No. 479 of 2021 — may face difficulty attributing the delay to force majeure where the delay pre-dated the disruptive event.
Secondary Market and Completed Property Contracts
For completed property transactions — sales between private parties, lease agreements, and property management arrangements — the force majeure analysis is different. The sale of a completed unit does not depend on construction progress, and the payment of purchase consideration is typically a straightforward financial obligation.
UAE courts have generally held that financial obligations are rarely excusable on force majeure grounds. An inability to pay due to economic difficulty, market downturn, or reduced rental income does not usually constitute impossibility of performance. In such cases, the hardship doctrine under Article 249 is more likely to be relevant, although its threshold remains high.
Lease contracts in Dubai, governed by Law No. 26 of 2007 and Law No. 33 of 2008, are similarly difficult to excuse on force majeure grounds. Rent generally remains payable unless a government order or comparable legal restriction physically prevents use of the premises. Reduced footfall, lower tourism numbers, or a general economic slowdown do not make rent payment impossible — they make it harder. Hardship arguments may support renegotiation or judicial rebalancing in appropriate circumstances, but they do not guarantee relief.
Practical Implications for Market Participants
In light of the current situation, parties to Dubai real estate contracts may wish to consider the following actions:
Review your SPA or lease agreement now. Identify the force majeure clause, its qualifying events, notice periods, and whether payment obligations are excluded from relief. Many SPAs define force majeure narrowly; others include broader language covering war, armed conflict, government restrictions, supply disruption, and related events. The availability of relief depends primarily on the contractual wording.
Issue notices promptly. Contractual notice deadlines — often 14 to 28 days — are typically strictly enforced. Missing a notice deadline can be fatal to a claim, regardless of its substantive merit. Under Article 221 of the new law (Article 246 of the current Civil Code), contracts must be performed in good faith, and timely communication with counterparties is part of prudent legal and commercial conduct.
Document the causal link. UAE courts require specific, direct evidence linking the external event to the contractual obligation that cannot be performed. Government circulars, supplier correspondence confirming disruption, freight quotations demonstrating cost increases, and insurance correspondence may all be relevant. General references to regional instability will not suffice.
Classify the problem correctly. Ask whether performance is impossible or merely more expensive. If construction materials cannot physically enter the country or legal restrictions prevent performance, that may support a force majeure argument. If materials remain available but at significantly higher prices, that is more likely hardship territory — and the remedy is judicial rebalancing rather than automatic termination.
Verify escrow compliance. For off-plan holdings, the RERA Oqood system allows verification of construction progress and escrow account status. Any concern regarding escrow withdrawals or project progress should be reviewed promptly against the applicable regulatory requirements.
Conclusion
Dubai’s real estate market has demonstrated resilience through previous periods of financial stress, regional instability, and global disruption. The structural safeguards present today — including regulatory oversight, mandatory escrow frameworks, relatively high levels of equity-funded transactions, and more disciplined project financing structures — provide additional stability compared to earlier market cycles.
However, the legal framework is unforgiving for those who fail to act. Force majeure under UAE law requires genuine impossibility or legal prevention of performance, not mere commercial difficulty. The hardship doctrine offers a safety net but demands a high evidentiary threshold. The new Civil Transactions Law — with its treatment of different forms of impossibility, its mandatory hardship protection that cannot be contracted away, and its clearer articulation of good faith and judicial rebalancing — will shape the legal landscape from 1 June 2026 onward.
For buyers, developers, landlords, and investors alike, the message from both legislation and caselaw is the same: review your contracts, document the impact, act on notice obligations, and classify the situation with precision. The difference between a successful claim and a failed one often lies not in the severity of the disruption, but in the quality of the evidence and the accuracy of the legal analysis.
Authors: Dean Jaloudi, Partner and Khaled Abu Orabi, Senior Associate.