Issue No. 3211 - Thursday, May 28, 2015

Central Bank of Bahrain

Resolution No. (28) of 2015 regarding the regulation of the activity of the Project Accountant for Real Estate Development Projects

Governor of the Central Bank of Bahrain:
Having reviewed the Central Bank of Bahrain and Financial Institutions Law issued by Law No. (64) of 2006, and Law No. (28) of 2014 regarding Real Estate Development, and Royal Decree No. (6) of 2015 designating the relevant Minister, Ministry, and Authority responsible for implementing Law No. (28) of 2014 regarding Real Estate Development, and the Executive Regulations of Law No. (28) of 2014 regarding Real Estate Development issued by Resolution No. (25) of 2015, has decided the following:

Article (1)
For the purpose of applying the provisions of this Resolution, the following words and expressions shall have the meanings set forth next to each of them, unless otherwise intended by the context:

1. Real Estate Development Project: Works or projects for the development of real estate authorized in accordance with the provisions of this Law, regardless of their nature (infrastructure or building construction), purposes (commercial, industrial, private residential, or public), financing methods (such as off-plan sales, lease-to-own, land contribution, build-operate-transfer and reversion, or others), or the entity undertaking them (natural or legal person).
2. Principal Developer: A natural or legal person authorized to conduct various real estate development activities, such as construction and off-plan sales.
3. Sub-Developer: A natural or legal person authorized to conduct real estate development activities, who is entrusted by the Principal Developer pursuant to an agreement between them with the development of all or part of the property under its development.
4. Project Account: A bank account in the name of the Real Estate Development Project for depositing amounts from the Developer and Depositors, dedicated to the construction and implementation of the Development Project.
5. Project Accountant: A bank authorized by the Central Bank of Bahrain that manages the Project Account.
6. Depositors: Holders of monetary shares, such as the Developer, Financier, Purchaser, and the Bank or financial institution lending to the Project.

Article (2)
The Project Accountant shall manage the Real Estate Development Project Account in accordance with the controls stipulated in the Real Estate Development Law and this Resolution, and the Central Bank of Bahrain may establish additional controls if necessary.

Article (3)
The Project Accountant must meet the following conditions:

1. Be one of the retail banks authorized by the Central Bank of Bahrain.
2. The Project Account shall be managed by the Bank's offices within the Kingdom and by employees with at least three years of experience in managing various types of bank accounts.

Article (4)
The Project Accountant for the Real Estate Development Project shall be appointed pursuant to a written agreement between the Developer and the Project Accountant to establish an account for the Project, into which all amounts provided by the Developer and Depositors shall be deposited. The Project Accountant shall notify the Central Bank of Bahrain with a copy of the aforementioned written agreement.

Article (5)
The Project Accountant shall be committed to the following:

1. Not providing other financial services to the Real Estate Development Project.
2. Not mortgaging the Real Estate Development Project Account for any reason.
3. Not delegating or transferring its duties as Project Accountant stipulated in the agreement with the Developer to a third party during the project implementation period for any reason.
4. Not permitting inspection of the data and information recorded in the records held by the Project Accountant or Project Management, except to Depositors within the limits of data and information specific to each Depositor only, or in execution of a court order or upon request by the Public Prosecution.
5. Providing the relevant Authority for issuing licenses at the Comprehensive Municipal Center with periodic statements of revenues and payments of the Project Account, and any information or data requested for necessary inspection, subject to the provision of paragraph (b) of Article (6) of Law No. (28) of 2014 regarding Real Estate Development.
6. Providing a statement of account to the Developer in case of terminating the agreement or closing the Project Account for any reason before completing the project implementation.

Article (6)
The Project Accountant shall adopt in the deposit and withdrawal procedures of the Project Account the same procedures applied to deposits and withdrawals from a current account. An amount of 20% of the estimated value of the Project shall be deposited in the Project Account, with the land value included in this percentage. When calculating the 20% ratio, each stage of project implementation shall be considered independently, taking into account the provisions of the Executive Regulations of Law No. (28) of 2014 regarding Real Estate Development. The Developer shall deposit the aforementioned 20% ratio, and the loan amount in case it mortgages the Real Estate Development Project to obtain a loan from banks, institutions, or financing companies, along with all amounts provided by the Developer and Depositors. Withdrawals from the Project Account shall not be made except after approval by the Project's Consulting Engineer.

Article (7)
Without prejudice to the provision of Article (4) of this Resolution, in case the Developer and Project Accountant agree to change the Accountant, the Project Accountant shall notify the Central Bank of Bahrain thereof.

Article (8)
In case the Developer and Project Accountant agree on the project account management fee ratio and payment mechanism, the Account shall notify the Depositors thereof.

Article (9)
A database shall be established at the Central Bank of Bahrain containing the names of Accountants and Real Estate Development Projects they manage, in coordination with the Authority responsible for issuing licenses at the Comprehensive Municipal Center.

Article (10)
The relevant departments at the Central Bank of Bahrain, each within its respective scope, shall implement this Resolution, which shall take effect from the day following its publication in the Official Gazette.

Governor of the Central Bank of Bahrain
Rashid Mohammed Al Maraj
Issued on: 8 Sha'ban 1436 AH (Corresponding to: May 26, 2015 AD)