Technical Guide For Processing Delayed and Troubled Real Estate Projects - Off-Plan Sale and Lease Projects -

In implementation of Article (Thirty-Six) of the Implementing Regulations of the Off-Plan Sale and Lease of Real Estate Projects Law, issued by the Real Estate General Authority (REGA) Board of Directors Resolution No. (Q/M/E/H/8/2024/T) dated 20/10/1445H. 

This guide has been prepared to detail the procedures for dealing with delayed or troubled off-plan sale and lease projects, and the mechanisms and methods for processing such projects, through implementing best practices to protect stakeholders in these projects and address the challenges facing off-plan real estate development projects.

1.1 Scope of Application
This guide is directed to Real Estate General Authority (REGA) personnel concerned with off-plan real estate projects, and to the private sector specialists in developing off-plan real estate projects. 

1.2  Application Exclusions
This guide specifically concerns only delayed and troubled real estate projects covered by the provisions of the Off-Plan Sale and Lease of Real Estate Projects Law. 

1.3  Definitions
1.3.1 REGA: Real Estate General Authority.
1.3.2 Committee: The committee responsible for supervising the processing of delayed and troubled real estate projects.
1.3.3 Project Parties: The real estate developer of the project, the engineering consulting office supervising the project, and the certified public accountant. 
1.3.4 Stakeholders: Purchasers, lessees, and financiers of off-plan developed real estate units. 
1.3.5 Cash Flows: Stakeholder deposits in the guarantee account according to completion percentages, amounts due from stakeholders that have not been deposited, and remaining amounts to complete the project.

2.1 Description of Delayed and Troubled Projects
2.1.1 Delayed Projects
A project is considered delayed if it is not implemented according to the time schedule and the Schedule Performance Index (SPI), or if the project is not completed within the specified completion period.

2.1.2 Troubled Projects
A project is considered troubled in the following cases:
2.1.2.1 If the project is not completed within the specified period, including the additional period granted to the developer. 
2.1.2.2 If implementation work stops for more than (one hundred and eighty) days, at any stage of the project phases.

2.2  Project Path Assessment:
Project performance is evaluated through project path monitoring procedures in effect at the competent department in REGA, including:
a. Periodic reports submitted by the developer. 
b. Periodic reports prepared by the consulting office. 
c. Field visits by the competent REGA representative.  
Project performance is measured according to the report, based on the time schedule and weight table approved by REGA. 
 

2.3.1  Degrees of Project Delays
The degree of delay in projects is determined based on Schedule Performance Index (SPI) data, according to the formula (Actual completion percentage "EV" / Planned completion percentage "PV" = "SPI"), and the degree is determined according to the following table: 

Delay Degree  Schedule Performance Index (SPI) Ratio    No.
Minor Delay    From (0.90) to (0.99)    1
Moderate Delay    From (0.80) to (0.89)    2
Severe Delay    Less than (0.79)    3

2.3.2  Types of Project Troubles
The type of project trouble is determined after studying reports submitted by project parties or reports recorded based on field visits by the REGA representative, as follows: 
2.3.2.1  Technical Trouble: If the project is not completed within the specified period, including additional periods granted to the developer due to technical, construction, or administrative reasons. 

2.3.2.2  Financial Trouble: If the project is not completed within the specified period, including additional periods granted to the developer due to insufficient cash flows, weak marketing, or lack of financing sources. 

The procedures contained for processing delays must be implemented during the specified period for project completion, or the additional period granted. If the delay is not processed during the specified completion period, or the additional period granted, the project shall be treated as a troubled project.                                                                               

3.1.1    Documents Required for Delay Processing:
3.1.1.1    Minor Delay:
a.    Written statement from the developer explaining delay reasons and project path correction management plan.
b.    Technical report from the consulting office supervising the project, including at minimum:
1-    Technical status assessment of the project according to project scopes, and statement of units sold in each project scope 
2-     Delay reasons 
3-     Statement of workforce numbers in the project 
4-     Proposed processing mechanisms 
c.    Report from the certified public accountant supervising the project, including at minimum:
1-    Statement of number of units sold 
2-     Cash flows in the project and future collection mechanisms 
3-     Financing sources 
4-     Proposed processing mechanism 
d.    Guarantee account statement from the bank for the entire project period 
e.    Report from the competent department in REGA on the number and type of complaints received, and the extent of developer's commitment to addressing them.

a.    Written statement from the developer explaining delay reasons and project path correction management plan
b.    Technical report from the consulting office supervising the project, including at minimum:
1-    Technical status assessment of the project according to project scopes and statement of units sold in each project scope
2-     Delay reasons 
3-    Statement of working hours and actual number of workers in the project, compared with planned values.
4-    Photographic report documenting the project status 
5-    Report on public utilities connection and activation status.
6-     Proposed processing mechanisms.
c.    Report from the certified public accountant supervising the project, including at minimum:  
1-    Statement of number of units sold 
2-     Cash flows in the project and future collection mechanisms 
3-     Financing sources 
4-     Proposed processing mechanism 
d.    Guarantee account statement from the bank for the entire project period 
e.    Report from the competent department in REGA on the number and type of complaints received, and the extent of developer's commitment to addressing them.

a.    Written statement from the developer explaining delay reasons and project path correction management plan.
b.    Technical report from the consulting office supervising the project, including at minimum:   
1-    Detailed report on the project's technical status according to project scopes and statement of units sold in each project scope 
2-    Statement of expected costs to complete the project, for each scope separately and the total expected cost to complete the project 
3-    Delay reasons 
4-     Statement of working hours and actual number of workers in the project, compared with planned values.
5-     Photographic report documenting the project status 
6-     Report on public utilities connection and activation status 
7-     Proposed processing mechanism
c.    Report from the certified public accountant supervising the project, including at minimum:
1-    Statement of number of units sold 
2-     Cash flows in the project and future collection mechanisms 
3-     Financing sources 
4-     Proposed processing mechanism 
d.    Guarantee account statement from the bank for the entire project period 
e.    Report from the competent department in REGA on the number and type of complaints received, and the extent of developer's commitment to addressing them.

a.    Written statement from the developer explaining trouble reasons and project path correction management plan.
b.    Technical report from the consulting office supervising the project, including at minimum: 
1-    Detailed report on the project's technical status according to project scopes and statement of units sold in each project scope 
2-    Statement of expected costs to complete the project, for each scope separately and the total expected cost to complete the project 
3-     Trouble reasons 
4-     Statement of working hours and actual number of workers in the project, compared with planned values.
5-     Photographic report documenting the project status 
6-     Report on public utilities connection and activation status 
7-    Proposed processing mechanism 
c.    Report from the certified public accountant supervising the project, including at minimum:  
1-    Statement of number of units sold 
2-     Cash flows in the project and future collection mechanisms 
3-     Financing sources 
4-     Proposed processing mechanism 
d.    Guarantee account statement from the bank for the entire project period 
e.    Report from the competent department in REGA on the number and type of complaints received, and the extent of developer's commitment to addressing them.

3.2.1    Delay Processing Methods
The competent department in REGA submits to the Committee the technical opinion and recommendation - accompanied by legal opinion - based on requirements mentioned in section (3.1.1) requesting the Committee's decision to approve implementing the following: 
3.2.1.1    Obligating the Developer to Implement One or More Delay Processing Methods, According to its Degree:
3.2.1.1.1     Minor Delay Case:
a.    Increasing the number of workers in the project
b.    Increasing the consulting office staff in the project
c.    Limiting construction works to sold units only  

3.2.1.1.2    Moderate Delay Case:
a.    Changing the project time schedule
b.    Modifying unit and project characteristics and specifications, without prejudicing stakeholders' rights
c.    Increasing the number of workers in the project
d.    Increasing the consulting office staff in the project
e.    Limiting construction works to sold units only
f.    Restricting sales license to sold units in the project only
g.    Restricting sales operations in project scopes in phases, according to developer's progress in actual completion percentages

3.2.1.1.3    Severe Delay Case:
a.    Changing the project time schedule
b.    Modifying unit and project characteristics and specifications, without prejudicing stakeholders' rights 
c.    Increasing the number of workers in the project
d.    Increasing the consulting office staff in the project
e.    Limiting construction works to sold units only  
f.    Restricting sales license to sold units in the project only
g.    Restricting sales operations in project scopes in phases, according to developer's progress in actual completion percentages
h.    Changing the consulting office in the project 
i.    Changing the contractor in the project 
j.    Modifying the license by dividing project units into more than one license  

3.2.1.2    Monthly Follow-up
The competent department monitors the project monthly through field visits and reviewing reports submitted by project parties. 

3.2.1.3    Periodic Updates
 The competent department prepares a technical report for the "Committee" monthly to measure the developer's compliance with adopted processing methods, including comparison of Schedule Performance Index (SPI). 

The competent department in REGA submits to the Committee the technical opinion and recommendation - accompanied by legal opinion - based on requirements mentioned in section (3.1.2), requesting the Committee's decision to approve implementing the following: 
3.2.2.1    In Case of Technical Trouble
3.2.2.1.1     Obligating the Developer to Implement One or More of the Following Processing Methods:
a.    Changing the project time schedule
b.    Modifying unit and project characteristics and specifications, without prejudicing stakeholders' rights. 
c.    Preparing an updated feasibility study for the project in its current state, including marketing plans and target segments. 
d.    Increasing the workforce in the project.  
e.    Increasing the consulting office staff in the project
f.    Limiting construction works to sold units only  
g.    Restricting sales license to sold units in the project only
h.    Restricting sales operations in project scopes in phases, according to developer's progress in actual completion percentages
i.    Changing the consulting office in the project 
j.    Changing the contractor in the project 
k.    Modifying the license by dividing project units into more than one license  

The competent department monitors the project monthly through field visits and reviewing reports submitted by project parties. 

The competent department prepares a technical report for the "Committee" monthly to measure the developer's compliance with adopted processing methods, including comparison of Schedule Performance Index (SPI). 

3.2.2.2.1    Implementing Procedures in Chapter (Four)
3.2.2.2.2    Monthly Follow-up
The competent department monitors the project monthly by reviewing reports submitted by project parties. 

The competent department prepares a technical report for the "Committee" monthly to measure the developer's compliance with adopted processing methods, including comparison of Schedule Performance Index (SPI). 

If implementing the processing methods mentioned in section (3.2) does not result in increased completion percentage in line with the time schedule and Schedule Performance Index (SPI), the competent department prepares a study with related departments regarding dealing with stakeholders and measuring the expected impact of implementing main intervention tools for project processing, and submits it to the Committee requesting approval to implement one or more - after consulting with the certified public accountant and consulting office - of the following tools: 

3.3.1.1    Appointing a qualified person to manage the relationship with the developer to process real estate project troubles through procedures outlined in Chapter (Six), upon occurrence of one of the following cases:  a.   Developer's non-responsiveness to implementing prescribed processing methods
b.    Existence of dispute between project parties, or between developer and landowner

a.    If there is conflict in data submitted by project parties 
b.    If the competent department detects conflict between submitted reports and completed works in the project, through field visit reports by the competent REGA representative  

a.  Refusal or delay of one of the project parties to disburse for the project's benefit 
b.  Disbursing project parties' dues upon maturity and developer's non-cooperation 
c.  Disbursing advance payments higher than actual completion percentage for construction works

a.    If it becomes evident that one of the project parties or their staff has direct involvement in delaying project works
b.    If it becomes evident that one of the project parties or their staff is not responsive to implementing prescribed processing methods

a.   If developer's inability to complete the project is proven 
b.   Developer's non-responsiveness to implementing prescribed processing methods
c.   In case of developer's bankruptcy 
d.   In case of developer's financial insolvency or lack of project financing sources  

If REGA deems project completion impossible and developer's inability to complete the project is proven, provided that amounts in the guarantee account are sufficient to cover purchasers' or lessees' deposits. 

a.  If REGA deems implementing available trouble processing methods unfeasible 
b.  If the project is affected by government decisions related to stoppages or change of project land use  

Financial restructuring is a process aimed at improving the project's financial status to ensure continuity of financial flows in the project, through implementing changes to improve the project's overall situation, after the competent department in REGA studies project data based on requirements mentioned in section (3.1.2). 

4.1.1    The competent department in REGA evaluates and studies the project's financial status and measures cash flows to determine the type of financial trouble in the project, upon occurrence of one of the following cases:  
a.    Weak project sales
b.    Mismatch between payments due in the project and actual completion stages 
c.    Non-implementation of financial solutions specified in the project feasibility study  

4.1.2    The competent department in REGA submits to the committee the technical opinion and recommendation - accompanied by legal opinion - based on evaluation results in section (4.1.1) requesting the Committee's decision to approve implementing the following:

4.1.2.1    Obligating the Developer to Implement One or More of the Following Solutions:
a.    Implementing financial solutions specified in the project feasibility study
b.    Providing an updated feasibility study with new project parameters, including solutions to address financial trouble in the project
c.    Self-financing the project or through financing agreements
d.    Providing a partnership plan with the public or private sector with a specific timeframe 
e.    Providing a plan in coordination with one of the real estate investment funds, with a specific timeframe 
f.    Changing payment schedule or relative weights schedule to match project completion stages  
g.    Restricting disbursement operations from the project guarantee account to construction operations only  

The Committee may, by its decision, grant the delayed project additional periods, after implementing one or more delay processing procedures outlined in section (3.2.1.1), provided there is improvement in the project performance factor, according to the following: 

5.1.1    Minor Delay
The project is granted additional periods - as needed - not exceeding in total (three months). 
5.1.2    Moderate Delay 
The project is granted additional periods - as needed - not exceeding in total (six months). 
5.1.3    Severe Delay
The project is granted additional periods - as needed - not exceeding in total (one year). 
In all cases, the additional periods granted to the project, across all degrees of delay, must not exceed (one year) from the date of expiry of the period specified for the project. 

6.1    Appointing Specialized Entities for Inspection
REGA may contract with a specialized inspection entity through tendering - according to applicable regulations - to select the specialized entity - after Committee approval - for the purpose of implementing necessary inspection works for the project, to enable the competent department to perform any of its tasks or competencies under the provisions of the Law and its Implementing Regulations, and the Technical Guide. 

Inspection generally aims to achieve special care for delayed and troubled projects, including but not limited to measuring the following:  
1.    Extent of developer's compliance with provisions of the Law and its Implementing Regulations and contracts concluded with stakeholders 
2.    Extent of developer's compliance with implementation works in the project and adherence to approved plans and scheduled time program for implementation 
3.    Extent of compliance and cooperation of the developer and project parties with tasks and works assigned to each party in achieving the project's interest  

The specialized inspection entity may review all contracts related to the project, as well as all reports and correspondence submitted to the competent department from the developer, consulting office, certified public accountant, or bank related to the project. 

Inspection shall be - according to the assignment decision - engineering, accounting, documentary, or comprehensive of all the above. Inspection forms include but are not limited to the following:  
6.1.3.1    Inspecting the project on the ground at any time, and verifying the status of works and completion percentages achieved in the project 
6.1.3.2    Verifying compliance of implementation works in the project on the ground with approved plans 
6.1.3.3    Reviewing completed quantities according to the approved inventory by the consulting office 
6.1.3.4    Reviewing reports and statements submitted by the developer, and periodic reports and statements issued by the consulting office, certified public accountant, and bank 
6.1.3.5    Financial review of payment certificates submitted by the developer to the consulting office, in addition to disbursement documents 
6.1.3.6    Comparing what has been actually implemented in the project with what was planned, based on the approved time schedule 
6.1.3.7    Implementing any inspection, examination, or auditing works required by REGA, and contracting with any third party for the purposes of implementing any of the above, such as engineering laboratories 
6.1.3.8    Inspecting development works related to the project after completion of construction or when delivery date arrives, to verify the condition of constructions and readiness for delivery according to plans and concluded contracts  

erforming its work within the limits of the assignment issued by REGA 
6.1.4.2    Not subcontracting to implement works assigned to it without Committee approval 
6.1.4.3    Submitting its reports to REGA, and REGA may provide any interested party with copies of inspection reports 
6.1.4.4    Bearing any transgression or negligence in its work, or in disclosing confidentiality of information accessed during implementation of its tasks 
6.1.4.5    Implementing any inspection works requested by the Committee  

REGA may contract with a qualified specialized entity for evaluating and correcting real estate project troubles through tendering - according to applicable regulations - to select the specialized entity - after Committee approval - for the purpose of evaluating and correcting the real estate project path. 

Developing plans to manage correction of troubled real estate development project paths, according to best practices in the field, in accordance with provisions of the Law and Regulations. 

The specialized entity for evaluating and correcting real estate project troubles may review all contracts, reports, and data related to the project, and may manage project parties to achieve correction of the troubled project path. 

6.2.3.1    Preparing management plans and correcting the troubled project path while considering stakeholders' rights, according to best practices in the field, including path correction management steps within a timeframe 
6.2.3.2    Managing project path correction with project parties, according to the plan approved by the Committee 
6.2.3.3    Submitting necessary reports that clarify the course of works and implementation in the troubled project to the competent department in REGA  

6.2.4.1    Performing its work within the limits of the assignment issued by REGA 
6.2.4.2    Not subcontracting to implement works assigned to it without Committee approval 
6.2.4.3    Submitting its reports to REGA, and REGA may provide any interested party with copies of inspection reports 
6.2.4.4    Bearing any transgression or negligence in its work, or in disclosing confidentiality of information accessed during implementation of its tasks 
6.2.4.5    Implementing any inspection works requested by the Committee