Article 14 of the Saudi Off-Plan Real Estate Sales and Leasing Law
المادة 14 من نظام بيع وتأجير مشروعات عقارية على الخارطة
The article requires keeping 5% of the construction cost in the escrow account, or a bank guarantee of the same percentage, after the completion certificate; it is released only after a year or with latent-defects insurance.
Official text (Arabic)
This article has not been amended since the law was issued.
يجب على المحاسب القانوني الاحتفاظ بنسبة (5%) من القيمة الإجمالية لتكلفة الإنشاءات في حساب الضمان، أو أن يقدم المطور للمحاسب القانوني ضمانًا بنكيًّا بالنسبة نفسها، وذلك بعد حصول المطور على شهادة الإنجاز. ولا يصرف المبلغ المحتفظ به في حساب الضمان للمطور إلا بعد انقضاء مدة (سنة) من تاريخ انتهاء المشروع العقاري المرخص له. أو في حال تقديم وثيقة تأمين على العيوب الخفية للمباني والإنشاءات وذلك وفقًا لما تحدده اللائحة.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 14 explained in plain English
This article provides a guarantee after the project is completed, protecting buyers from defects that may appear after handover.
When does the rule begin? After the developer obtains the completion certificate.
What is required? One of two things:
- The certified accountant retains 5% of the total construction cost in the escrow account, or
- The developer provides the certified accountant with a bank guarantee of the same percentage.
When is the retained amount released to the developer? It is released only in one of two cases:
- After one year has passed from the date the licensed real estate project ended, or
- On providing a latent-defects insurance policy for the buildings and construction.
The article refers the details to what the Implementing Regulations specify.
Note that the percentage here is calculated from the construction cost, unlike Article 13, which concerns withdrawing the surplus over the cost of finishing the project while leaving 20% in the account until it is finished. The two articles together provide a gradual release of the account's funds: a margin during execution, then a retention after completion.
Anyone who discovers a latent defect in their unit after handover would do well to consult a lawyer who specializes in real estate cases to learn their rights.
Practical example
A development company in Abha obtained the completion certificate for a project whose construction cost reached SAR 20 million. The certified accountant retains SAR 1 million (5%) in the escrow account, or the company provides a bank guarantee for the same amount, and the retained amount is not released to the company until a year after the project ends or when a latent-defects insurance policy is provided.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 14 of the Saudi Off-Plan Real Estate Sales and Leasing Law
How much is retained from the construction cost after the project is completed?
5% of the total construction cost, retained in the escrow account by the certified accountant, or the developer provides a bank guarantee of the same percentage.
When is the retained amount released to the developer?
Only after one year from the date the licensed real estate project ended, or on providing a latent-defects insurance policy for the buildings and construction.
When does the 5% retention begin?
After the developer obtains the completion certificate.
More articles on Project Escrow Account
- Article 9
The article requires a separate escrow account in the name of each real estate project, activated only after the project is licensed and the property's title deed is annotated.
ينشأ حساب ضمان مستقل باسم كل مشروع عقاري، ولا يُفعَّل إلا بعد الحصول على الترخيص الخاص للمشروع العقاري والتأشير على صك تسجيل الملكية للعقار المراد تطويره.
- Article 10
The article dedicates the escrow account to spending on the licensed project only, bars attachment of its funds for the developer's creditors, and requires any project financing to be deposited in it.
1- يكون حساب الضمان مخصصًا لأغراض الصرف على المشروع العقاري المرخص له فقط، ولا يجوز الحجز على المبالغ المودعة فيه لمصلحة دائني المطور. 2- إذا حصل المطور أو مالك
- Article 11
The article requires a disbursement document signed by the developer, the consulting office and the certified accountant for spending from the escrow account, and allows emergency disbursement at the competent authority's request.
يكون الصرف من حساب الضمان بناءً على وثيقة صرف يوقعها المطور والمكتب الاستشاري والمحاسب القانوني، وفي الحالات الطارئة يجوز الصرف بطلب من الجهة المختصة، وفقًا لما
- Article 12
The article allows the developer to spend from the escrow account on administrative, marketing and other non-construction expenses up to 20% of the value of the real estate unit sold.
يجوز للمطور طلب الصرف من حساب الضمان للمصاريف الإدارية والتسويقية -والمصاريف الأخرى غير الإنشائية للمشروع العقاري المرخص له- بنسبة لا تتجاوز (20%) من قيمة الوحد
- Article 13
The article lets the developer, with the competent authority's approval, withdraw what exceeds the actual cost of finishing the project based on the contractor's and consulting office's report, with 20% left in the account.
يجوز للمطور -بعد موافقة الجهة المختصة- سحب ما يفيض عن التكلفة الفعلية الإجمالية لإنهاء المشروع العقاري وخدماته، بناءً على تقرير من المقاول والمكتب الاستشاري. عل
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.