Buying an apartment does not end with agreeing on the price or choosing the right location. Rather, its most important stage begins when reviewing the contract that specifies the unit's specifications, financial obligations, delivery date, guarantees, and the rights of each party in case of breach of the agreement. Details that may seem minor before signing can later turn into costly disputes, especially if the buyer relies on verbal promises or information contained in the advertisement without ensuring that it is included in the contractual documents.
The review process becomes even more crucial when purchasing an off-plan residential unit, as the transaction is linked to project permits, construction phases, payment schedules, and delivery dates, all in accordance with regulations governing off-plan sales. For completed apartments, verification of ownership documents, unit condition, transferability of ownership, and any obligations related to the building and common areas is essential.
The following are 10 items that the buyer should review before signing the contract or transferring any funds, referring to the official regulations and bylaws according to the nature of the transaction.
1. The apartment's specifications and size... Do they match the agreed-upon unit?
According to the executive regulations of the system for selling and leasing off-plan real estate projects , the contract review begins by ensuring that the unit contained therein is the same as that chosen by the buyer, by matching the apartment number, floor, building, area, plan, and the accessories included in the sale, such as the parking space or storage, if they are part of the agreement. It is not enough to rely on the marketing area or the description contained in the advertisement, but rather the unit data should be verified in the approved documents, and how to deal with any difference between the agreed area and the final area.
For off-plan units, this review is particularly important, as the executive regulations governing the sale and lease of off-plan real estate projects address contractual data related to the unit and its specifications, as well as provisions governing any changes that may occur. Therefore, the buyer should ensure that the unit's description, layout, facilities, and amenities are documented in the contract or its addenda, and that any potential modifications comply with the relevant legal and contractual provisions.
2. The total price... does it include all financial obligations?
The contract should not be limited to stating the price of the apartment, but should clarify the value of the transaction, the payment dates, and any additional amounts that the two parties agreed to bear, specifying the party responsible for each amount. This includes verifying the status of parking spaces, storage, additional equipment, administrative fees or commissions if any, and costs associated with the procedures for completing the sale.
The importance of this clause lies in distinguishing between the advertised price and the actual cost of the purchase. The buyer may discover after the agreement that there are expenses that were not clear during marketing. Therefore, financial obligations should be specified and understood in the contractual documents, without assuming that all fees are uniform or that any amount requested by the seller or marketer is automatically payable. Rather, its legal or contractual basis should be verified.
3. Real estate transaction tax: Who is responsible for paying it?
The real estate transaction tax in Saudi Arabia is 51 TP3T of the taxable property value, with exceptions and special provisions governed by the Real Estate Transaction Tax Law and its implementing regulations. Before finalizing the transaction, the buyer should verify the applicable tax amount, the applicability of any government exemptions or subsidies, and how the financial obligations related to the property transfer will be settled.
According to the Zakat, Tax and Customs Authority, the real estate transaction is registered through the designated portal before the transfer or documentation of the contract, which allows determining the extent to which it is subject to tax and the amount due. The state also bears the tax on the first home for the citizen according to the established regulations, within the limits of a home value of one million riyals. Therefore, it is not correct to assume that this support applies to every buyer or every transaction without verifying the eligibility conditions.
It is preferable for the contract to clarify how the tax will be dealt with within the financial settlement between the two parties, taking into account the responsibilities specified by the system, instead of being satisfied with a general statement that may open the door to dispute when completing the transfer.
4. Payment schedule: When are payments due and what is the impact of delays?
The payment schedule is a crucial element of an apartment purchase contract, and the buyer must be aware of the amount of each payment, its due date, payment method, and the consequences of late payment. It is also essential to ensure that the total payments match the total value of the transaction and that the contract does not leave any substantial amounts or financial obligations outside the agreed-upon schedule.
In off-plan projects, the executive regulations governing the sale and lease of off-plan real estate projects regulate the provisions related to contracts and financial payments, including obligations related to buyer delays in payment, and the mechanism for handling funds according to the project's regulations and the escrow account. Therefore, the payment schedule should be reviewed in light of the contract and the regulations, and it should be confirmed whether the payment due dates are linked to specific dates or project implementation phases, as stipulated in the agreement and applicable regulations.
5. Delivery date... What is the procedure if the seller is late?
The contract must include a clear delivery date for the apartment, specifying the condition of the unit the seller is obligated to deliver, and outlining the agreed-upon procedures in case of delays or if the unit is not ready for occupancy. It is also important to review any extensions or circumstances under which the delivery date can be modified, rather than relying on vague phrases like "upon completion of the project" without a clear timeframe.
In off-plan sales, the executive regulations address the provisions relating to the project implementation period and delivery date, and the provisions related to delays regarding compensation, fair market rent, and contract termination, according to the applicable cases and controls. Therefore, the buyer should read these provisions along with the text of his contract, and ensure that the mechanism for dealing with delays is specified in accordance with the system.
When buying a ready-made apartment, the date of completion of the transfer of ownership and the date of actual delivery should be separated, and it should be ensured that the unit is free of any concerns that prevent its use, and that the obligations related to the handover of keys, facilities and related documents are clear.
6. Specifications and finishes... Are marketing promises binding?
Disputes may arise between buyer and seller when the unit received differs from the pictures or models shown during marketing. To reduce this possibility, the agreed technical specifications and finishes should be documented, including floors, doors, windows, sanitary fittings, air conditioning, connections, and any equipment or facilities included in the apartment's value.
General marketing phrases such as “luxury finish” or “high-quality materials” are not sufficient unless they are supported by clear specifications that can be verified upon receipt. If the finishing details are contained in a technical annex or separate schedule, it is best that the contract explicitly refers to them and that they be part of the documents agreed upon between the two parties.
In units under construction, the agreed specifications should be reviewed in light of the plans, the contract, and the regulations governing off-plan sales, with verification of the provisions governing modifications during implementation, because the reference in case of a dispute is what is proven by the documents and contractual obligations, and not just a verbal promise or an advertising image.
7. Guarantees... What defects are covered and who is responsible for repairing them?
The buyer should not be satisfied with a general statement that the apartment is "guaranteed," but should review the available guarantees, the elements they cover, their durations, their effective date, and the entity responsible for receiving claims and addressing defects. Important questions include whether the guarantees cover structural elements, insulation work, or mechanical and electrical equipment, and what procedures are required when a defect is discovered after delivery.
Warranty coverage varies depending on the nature of the item and the applicable regulatory and contractual requirements of the project. Therefore, it should not be assumed that all defects are covered by the same warranty period or that every defect that appears after acceptance automatically requires repair. It is best to obtain written warranty documents and keep receipts and correspondence that proves the date any defect was reported.
In off-plan projects, the documents and guarantees related to the project should also be reviewed in accordance with the requirements of the “Wafi” program and the relevant regulations, and their details should be verified from the official source before relying on them.
8. Ownership and division... Can the ownership of the apartment be transferred legally?
Before paying the final amount, the seller’s identity, capacity, and eligibility to dispose of the property must be verified, ownership documents and the unit’s status reviewed, and the possibility of completing the transfer of ownership according to the approved procedures must be confirmed. Any declared restrictions or rights that may affect the disposal or use of the property should also be inquired about, and ownership of the building as a whole should not be considered sufficient if the transaction relates to an independent apartment within it.
The system governing real estate unit ownership, subdivision, and management regulates the procedures for dividing a property into independent units, stipulating that each subdivided unit has a specific status and rights linked to its approved documentation. Therefore, it is essential to verify that the apartment is clearly designated as an independent unit according to the relevant legal procedures, and to review the documentation proving its status and the rights associated with the common areas.
As for off-plan sales, the project license, the developer’s qualifications, and the applicable contractual procedures must be verified, and the provisions for registering contracts and transactions in accordance with the relevant executive regulations must be reviewed. This step helps to reveal any discrepancy between what is offered for sale and the actual legal status of the unit.
9. Owners' Association fees... How much will building maintenance cost you annually?
The cost of owning an apartment does not stop at the purchase price, as the owner may bear periodic subscriptions and expenses for managing and maintaining common parts, such as elevators, entrances, corridors, parking, safety systems and common facilities. It is important to know the expected value of fees, how they are calculated, who is in charge of management, and whether there are outstanding amounts or existing financial obligations that should be reviewed before completing the transaction.
The system governing the ownership, division, and management of real estate units regulates the relationship between unit owners in shared properties. It also establishes the framework for forming owners' associations, managing shared property affairs, and financing management and maintenance activities. Under this system, owners are obligated to contribute to the costs of managing the shared property and maintaining its common areas, in accordance with the applicable regulations. Therefore, it is essential to review the maintenance budget and the bylaws of the owners' association, if any, and to understand the obligations associated with each unit before signing any agreement.
This item is of increasing importance in buildings that have multiple facilities or shared services, because operating fees may affect the actual annual cost of owning an apartment, even after the full price has been paid.
10. Cancellation and termination... When do you get your money back?
The contract must clarify the circumstances under which the transaction may be terminated or cancelled, the procedures required to address breach of obligations, and the financial implications of cancellation, including the fate of amounts paid, deadlines set for correcting the breach, and the dispute settlement mechanism, because failure to review these clauses may leave the buyer facing obligations or losses that he did not expect when paying the deposit or signing the contract.
It is incorrect to assume that the deposit is forfeited in all cases of cancellation, or that the full amount is automatically refunded if the deal falls through. This depends on the nature of the deposit, the terms of the agreement, the reason for termination, and the applicable regulations. Therefore, the cancellation clause should be read in conjunction with the rest of the contract, ensuring that the rights of both parties and the procedures to be followed in case of a dispute are clear. For off-plan sales projects, the executive regulations address provisions related to delivery delays, compensation, fair market rent, and contract termination, according to the stipulated rules and conditions. Consequently, the buyer must review these provisions alongside the specific terms of their project and not rely solely on general wording that fails to clarify the financial consequences of termination.
Read also:
Before paying the deposit: 5 steps to protect property buyers from fake advertisements
Will the property arrive as advertised? Amlak monitors the risk points from contract to handover.
Your guide to detecting risks: 8 signs to check the safety of shared accommodation
