Real Estate Purchases and Buyers’ Rights in Egypt

Real estate purchases in Egypt are subject to regulations governing project licensing, approvals, advertising, and purchaser funds.

The legal status of a real estate project is therefore a critical consideration for purchasers, particularly where units are marketed or sold before the developer has obtained the required licences and approvals. Egyptian law imposes specific requirements regarding the information provided to consumers and restricts the advertising, contracting and collection of funds in connection with projects that have not satisfied the applicable legal requirements.

Non-compliance with these requirements may give rise to consequences extending beyond regulatory violations. Depending on the circumstances, the purchaser may challenge the validity or enforceability of the transaction, particularly where material information concerning the project’s legal status was concealed or misrepresented. The Egyptian Civil Code may, in such circumstances, provide grounds for annulment based on fraudulent inducement or for challenging obligations founded on an absent or unlawful cause.

The interaction between the Consumer Protection Law No. 181 of 2018, Building Law No. 119 of 2008, Ministerial Decision No. 2184 of 2022 and the Egyptian Civil Code is therefore particularly relevant when assessing the legal consequences of selling units in a project before the required licensing and approvals have been obtained.

Right to Information

Article 4 of the Consumer Protection Law requires suppliers to provide consumers with all material information relating to the products offered, including their source, price, qualities and essential characteristics, as well as any other information prescribed by the Executive Regulations according to the nature of the product.

In the context of real estate transactions, this obligation is particularly relevant to information concerning the legal and factual status of a project. A purchaser should be able to assess, before entering into a transaction, whether the project has obtained the required licences and approvals and whether the developer is legally entitled to market and sell the units.

Accordingly, where material information concerning the project’s licences, approvals or legal status is withheld or inaccurately presented, this may constitute a failure to comply with the supplier’s statutory obligation to provide the consumer with the information necessary to make an informed decision.

Restrictions on Marketing and Contracting

Article 15 of the Consumer Protection Law prohibits the advertisement of the sale of real estate units, contracting for their sale, or the sale or subdivision of land intended for construction unless a building permit has first been obtained in accordance with the Building Law.

This requirement is particularly significant in the context of off-plan real estate transactions, where developers may seek to market and contract for units before construction has commenced. The provision establishes that obtaining the required building permit is a prerequisite to advertising or contracting for the sale of the relevant units, rather than a requirement that may be satisfied at a later stage.

Accordingly, where a developer advertises or enters into sale contracts for units before obtaining the required building permit, the transaction may be challenged on the basis that it was concluded in violation of a mandatory legal requirement. This is distinct from a subsequent failure to perform contractual obligations, as the legality of the transaction itself may be called into question from the outset.

Article 15 also renders null and void any contractual provision under which the seller or its successor is entitled to receive a percentage, fee or commission from the purchaser’s subsequent disposal of the real estate unit, further reinforcing the mandatory nature of the protections established by the provision.

Project Approvals and Building Licensing

The Building Law establishes a regulatory framework governing both the approval of land subdivision projects and the licensing of building works. These requirements are relevant when assessing whether a real estate project has the necessary legal basis for being marketed and developed.

Article 18 prohibits the advertisement of a land subdivision project or dealing in any plot forming part of the project unless the competent authorities have been provided with a certified copy of the decree approving the project and its attachments. The provision therefore links the ability to advertise or deal in plots forming part of a subdivision project to the prior approval of the project by the competent planning and regulatory authority.

The provision further requires the relevant party to provide evidence of the required deposit before an advertisement may be made. This ensures that the approval of the subdivision project is not merely an internal administrative matter, but a prerequisite to its lawful marketing and dealing.

In parallel, Article 39 prohibits the construction of buildings or structures, as well as specified building works, without obtaining a licence from the competent administrative authority. The licence is issued only where the proposed works comply with the applicable planning and building requirements, approved designs, technical standards and other prescribed safety and regulatory requirements.

Articles 40 and 41 set out the licensing process. Article 40 addresses the statement of site validity, the documents required for the licence application and the responsibilities of the relevant engineer or engineering office. Article 41 provides for the submission and approval of the drawings and supporting documents and the issuance of the building licence following verification that the required documents have been completed.

Taken together, these provisions demonstrate that the development and marketing of real estate projects are subject to prior regulatory approvals and licensing requirements. Consequently, where a developer proceeds to market or deal in a project without obtaining the approvals or licences required by law, the absence of such approvals may have implications not only for the developer’s regulatory compliance, but also for the legal validity and enforceability of transactions concluded with purchasers.

Advertising and Collection of Purchaser Funds

Article 3 of the Ministerial Decision establishes additional conditions governing the advertising and sale of units in real estate projects. In particular, a developer may not advertise units in a project before obtaining the required ministerial decisions approving both the project’s master plan and the detailed plan for the phase intended to be marketed.

The provision also links the launch of a new phase to compliance with the approved timetable for any previously advertised phase. This requirement is intended to ensure that developers do not proceed with marketing successive phases without demonstrating compliance with the development programme applicable to earlier phases.

Importantly, Article 3 imposes financial requirements before a developer may offer a phase or part thereof for sale. The developer must provide evidence that the required financial coverage for the relevant phase is available in the project’s designated bank account and must deposit the amounts required under the applicable financial framework. Only after satisfying these requirements may the developer be authorised to offer the relevant phase for sale.

The provision further requires developers to submit semi-annual financial reports concerning amounts collected from purchasers and expenditure on the relevant phase. Developers must also maintain a 5% reserve, or an equivalent bank guarantee, from the total collections in the account of each phase to meet potential refunds, with the reserve being released progressively in accordance with the delivery of the relevant units.

Accordingly, the regulatory framework does not merely require a developer to obtain the necessary planning and approval decisions before advertising units. It also imposes financial safeguards intended to ensure that the developer has sufficient financial coverage for the phase being offered and that amounts collected from purchasers are subject to ongoing financial oversight.

Where units are advertised or offered for sale before these requirements have been satisfied, the developer may therefore be acting contrary to the conditions governing the lawful marketing of the project. This may become particularly significant where purchasers have paid amounts before the developer was legally authorised to offer the relevant units for sale.

Fraudulent Inducement and Illegality of the Contractual Obligation

Article 125 of the Egyptian Civil Code provides that a contract may be annulled for fraud where the fraudulent acts committed by one of the contracting parties, or its representative, are sufficiently serious that the other party would not have entered into the contract had it not been for such acts. The provision also expressly recognises intentional silence concerning a fact or circumstance as fraud where it is established that the deceived party would not have entered into the contract had they known of that fact or circumstance.

This provision may be particularly relevant where a developer fails to disclose material information concerning the licensing or legal status of a real estate project. If the developer deliberately conceals the absence of required approvals or licences, and the purchaser would not have entered into the transaction had the true position been disclosed, the circumstances may support an argument for annulment on the basis of fraud.

The application of Article 125, however, depends on the facts of each case. The mere existence of a regulatory violation would not, by itself, necessarily establish fraud. It would be necessary to demonstrate the relevant concealment or fraudulent conduct and its material effect on the purchaser’s decision to contract.

Article 135 of the Egyptian Civil Code provides that where the subject matter of an obligation is contrary to public order or morals, the contract is void. In the context of real estate transactions, this provision may become relevant where the contractual obligation is connected to a transaction that contravenes mandatory legal requirements established to regulate the development and sale of real estate projects.

Accordingly, where a developer enters into a transaction in circumstances that violate mandatory regulatory requirements, the question may arise whether the violation affects the validity of the contract itself, rather than merely constituting a breach of an administrative obligation. The answer will depend on the nature and purpose of the relevant legal requirement and the circumstances of the transaction.

Practical Considerations for Purchasers

Before entering into a real estate transaction, purchasers should verify the legal status of the project and the developer’s authority to market and sell the relevant units. In particular, purchasers should consider:

Project approvals and licences: Confirm that the project has obtained the required approvals, including the relevant master plan and detailed phase approvals, as well as the applicable building permits.

Authority to market and sell: Verify that the relevant phase or units have been legally authorised for advertising and sale.

Financial compliance: Where applicable, confirm that the developer has satisfied the financial requirements applicable to the relevant phase before collecting purchasers’ funds.

Contractual documentation: Review the sale contract carefully and ensure that the project, unit and applicable approvals are accurately identified.

Representations and disclosures: Retain advertisements, brochures, correspondence and other materials provided by the developer, particularly where they contain representations concerning the project’s licences, approvals or completion status.

Payment records: Maintain records of all payments made to the developer and the circumstances in which such payments were requested and received.

These steps can assist purchasers in identifying potential legal issues before committing substantial funds and may also preserve important evidence should a dispute subsequently arise.

Conclusion

Egyptian law establishes a regulatory framework governing the approval, licensing, advertising and sale of real estate projects. The Consumer Protection Law, Building Law and Ministerial Decision impose requirements intended to ensure that projects are appropriately approved and licensed before being marketed and that purchasers’ funds are subject to applicable safeguards.

Where these requirements are not satisfied, the consequences may extend beyond regulatory non-compliance. Depending on the circumstances, the failure to disclose material information or the deliberate concealment of the project’s legal status may support a claim for annulment on the basis of fraud under Article 125 of the Civil Code. In other circumstances, where the transaction or obligation is contrary to mandatory rules of public order, Article 135 may become relevant to the validity of the contract.

For purchasers, verifying the legal status of a project before contracting is therefore an essential part of assessing the risks associated with a real estate investment.

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