Buying a residential unit off-plan in investment complexes

The office of lawyer Ali Barakat in Baghdad sets out the purchase of a residential unit before its construction is completed, in complexes marketed off-plan. The framework combines the conclusion of a sale of immovable property under the Civil Code and the Real Estate Registration Law, the rules on a promise to conclude a contract, and what Investment Law No. 13 of 2006, as amended, published in the Iraqi Official Gazette, issue 4031, of 17/1/2007, requires of an investor in residential projects.

Conclusion of the sale of the unit, and a promise before registration

A sale of immovable property does not conclude unless it is registered and the form required by law is fulfilled, under article 508 of Civil Code No. 40 of 1951. An immovable disposition does not conclude except by registration at the Real Estate Registration Department, under article 3 of Real Estate Registration Law No. 43 of 1971. What is written between the buyer and the investor or developer, before the unit is registered in the buyer's name in the real estate register, does not of itself transfer ownership, even if it is called a sale, a reservation contract or an allocation contract.

A preliminary agreement by which both parties, or one of them, undertake to conclude a particular contract in the future is not valid unless the essential terms of the intended contract, and the period within which it must be concluded, are fixed. If the law requires a particular form for the contract, that form must also be observed in the preliminary agreement, under article 91 of the Civil Code. Because the sale of the unit concludes only by registration, what is made before that entry is closer to a promise, or to an obligation to conclude the sale when the conditions are met, than to a completed sale. The difference between a promise and a completed sale is the subject of the page A promise to sell and how it differs from a completed sale.

The agreement is reviewed for a description of the unit and its place in the complex, the price and the payment timetable, the time for completion and handover, what establishes the seller's title to the land or the right to dispose of it, and whether the unit will be partitioned and registered at the Real Estate Registration Department in whose area of work the property lies. A copy of the register or the title deed shows the owner and any mortgage or restriction on disposition affecting the property, under articles 10 and 83 of the Real Estate Registration Law.

The investment licence and the duty to build and sell the units

If the complex is an investment project, the investment licence issued by the National Investment Commission, or by the Baghdad Investment Commission if the project is in that governorate and falls within its competence, or by the investment commission of a governorate not organised in a region, is reviewed, under the definitions in article 1 of the Investment Law. Which commission is to be approached is set out on a separate investment-licence page.

An Iraqi or foreign investor may be granted ownership of land allocated for residential projects and belonging to the State or the public sector, and may buy land belonging to the private or mixed sector for housing projects only, provided this does not conflict with the uses in the master plan, under article 10, second, of the Investment Law as amended. The project contract is concluded with the sectoral body that regulates the activity or with the commission that granted the licence, while the contract relating to the property is concluded with the owning body. A restriction on disposition is placed on the title deed until the investor has performed the obligations, as confirmed by the investment commission that granted the licence.

The investor or developer must construct the residential units within the period fixed in the agreement, and sell or let them to citizens in accordance with instructions issued for that purpose, under article 10, second, (waw). If an investor who acquired property under this law fails to perform the obligations within the period fixed in the agreement, the Real Estate Registration Department, on an application by the commission, cancels the registration and returns the property to its previous owner against repayment of the sale price, after equivalent rent for that period has been collected, under paragraph (ha). That is a rule between the commission, the investor and the previous owner of the land. It shows the importance of the restriction and of the time obligation. It does not take the place, for the buyer, of registration of the unit in the buyer's name.

The developer may transfer ownership of part of the investment project, after completion of the proportion fixed by article 10, to a secondary developer, with the consent of the commission that granted the licence. The secondary developer enjoys the advantages of the law and is subject to its obligations from the date of obtaining an investment licence for the part transferred. Delay by a contractor in completing the work is read on the page Contractor delay, defects and the decennial warranty. A change in the kind of the land, if the site of the complex is land whose use is to be converted, is read on the page Changing the land category from agricultural to residential or commercial.

What does not take the place of registration in the buyer's name

Payment of instalments of the price, handing over keys by way of permission to occupy, advertising the complex, or the existence of an investment licence for the project, none of these transfers ownership of the unit to the buyer unless it is registered in the buyer's name at the Real Estate Registration Department. The licence establishes that the project falls under the Investment Law and that the investor has obligations towards the commission that granted it. It is not a title deed to a unit sold off-plan.

If the buyer disputes the obligation to complete, the repayment of what was paid, or the conclusion of the final sale when the conditions of the promise are met, the dispute is heard by the Court of First Instance on the basis of the contract and of articles 91 and 508 of the Civil Code, together with whatever appears from the investment licence and from any restriction on disposition in the register.

Legal basis and sources

1. Civil Code No. 40 of 1951 (Iraqi Official Gazette, issue 3015 of 8/9/1951) — Articles 91 and 508
2. Real Estate Registration Law No. 43 of 1971 (Iraqi Official Gazette, issue 1995 of 10/5/1971)
3. Investment Law No. 13 of 2006, as amended (Iraqi Official Gazette, issue 4031 of 17/1/2007) — Article 10

Frequently asked questions

Related topics and articles

• 01A promise to sell and how it differs from a completed saleA preliminary agreement under Civil Code article 91, and a completed sale of land that concludes only by registration under articles 90 and 508.
• 02Contractor delay, defects and the decennial warrantyContractor delay, and the ten-year warranty against structural collapse, under Civil Code articles 868 and 870 to 874.
• 03Changing the land category from agricultural to residential or commercialChanging a property's kind or class in the register from agricultural to residential or commercial, under Land Registration Law 43/1971.
• 04What a landlord reviews before and after a lease in BaghdadWhat a Baghdad landlord reviews before and after a lease under Rent Law 87/1979 and the Civil Code.
• 05Sale or mortgage and the real-estate tax step in governorates not organised in a regionSale or mortgage and the real-estate tax step in governorates not organised in a region, under Law 162/1959 and Land Registration Law 43/1971.

Always check the text in force and its amendments in the official source.

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