Update of Rule No. (300-1-3-6) of the Account Opening Rules

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Saudi Central Bank

Ref. No.: 46028059
Date: 1446/05/08
Attachments: 2 pages

Circular

Dear Sir/Madam,

Peace be upon you,

Subject: Update of Rule No. (300-1-3-6) of the Account Opening Rules.

I refer to Rule No. (300-1-3-6) concerning the real estate development guarantee account - off-plan property sales projects, included within the Account Opening Rules, notified via SAMA Circular No. (65681/67) dated 1440/11/01 AH. I also refer to the Off-Plan Property Sales and Leasing System issued via Royal Decree No. (M/44) dated 1445/03/10 AH and its Executive Regulations, as well as the Real Estate Joint Ventures System issued via Royal Decree No. (M/20) dated 1444/12/28 AH and its Executive Regulations, along with related issued instructions, in alignment with regulatory harmonization.

We inform you that the following has been decided:
First, amend the aforementioned rule to align with the attached format, as follows:

• Amend the requirements for opening and managing guarantee accounts for off-plan property sales or leasing projects.
• Introduce a new paragraph regulating the opening and management of bank accounts for real estate joint venture guarantee accounts.

Second, amend the term and definition of "Real Estate Development Guarantee Account - Off-Plan Property Sales Project" and add the definition for the Real Estate Joint Venture Guarantee Account within Chapter (One) regarding Definitions, as follows:

• "Off-Plan Property Sales or Leasing Project Guarantee Accounts:" A bank account for depositing amounts paid by project funders, buyers, or lessees.
• "Real Estate Joint Venture Project Guarantee Accounts:" A bank account for depositing real estate joint venture funds.

For your information and implementation effective from its date.
Yours sincerely,

Yazeed bin Ahmed Al Sheikh
Deputy Governor for Supervision

Distribution Scope:

• Banks and financial institutions operating in the Kingdom

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Saudi Central Bank

The Newly Established Rule within Rule No. (300-1-3-6) regarding the requirements for opening and managing bank accounts for real estate development guarantee projects.

• 300-1-3-6 Rules for Opening Real Estate Development Guarantee Accounts:
  Guarantee accounts for projects (off-plan property sales or leasing, or real estate joint ventures) shall be opened after fulfilling the following documents and procedures:

1. Identification and verification of the real estate developer, consulting office/ engineering consultant, and certified public accountant according to their official formats.
2. A written undertaking from the real estate developer not to disburse funds from the account except for project-related purposes, as well as depositing project financing amounts or proceeds into the guarantee account.
3. A written undertaking from the real estate developer to agree to amendments of the guarantee account agreement to align with any related systems, regulations, or instructions.

• Regulations for Opening and Managing Guarantee Accounts for Off-Plan Property Sales or Leasing Projects:

1. Only one account shall be opened per project under its name, with the account name being (Project "Project Name" - Guarantee Account for "Real Estate Developer Name"), and subsidiary accounts linked to the main project account are permitted, as follows: administrative and marketing expenses account, custody account, construction costs account, incentives account, financing deposit account.
2. Disbursement from the project guarantee account shall be made based on a disbursement document submitted by the real estate developer to the bank, countersigned by the consulting office and certified public accountant, specifying the required amounts and their justifications, and disbursement documents may be submitted via secure technological means.
3. As an exception to the provision of paragraph (2) above, disbursement from the guarantee account may be made upon request by the Real Estate General Authority, notified to the bank via SAMA.
4. Disbursement from the account is restricted to checks or transfers only, and shall be within the limits specified in paragraphs (2) and (3) above.
5. Deposits into the account shall be made by buyers, lessees, or funders through any payment method accepted by the bank without cash being required.

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Saudi Central Bank

• Regulations for Opening and Managing Guarantee Accounts for Real Estate Joint Ventures:

1. Only one account shall be opened per joint venture project under its name, with the account name being (Project "Project Name" - Guarantee Account for "Real Estate Joint Venture"), and subsidiary accounts linked to the main joint venture account are permitted, as follows: reserve account, revenue account, any other subsidiary accounts for the joint venture project such as financing account.
2. Disbursement from the account shall be made based on a payment document submitted by the real estate developer to the bank, countersigned by the engineering consultant and certified public accountant, specifying the required amounts and their justifications, and disbursement documents may be submitted via secure technological means.
3. Disbursement from the account is restricted to checks or transfers only, and shall be within the limits specified in paragraph (2) above.
4. Disbursement from the reserve account shall be made based on a payment document submitted by the real estate developer, countersigned by the engineering consultant and certified public accountant, specifying amounts and disbursement justifications; accompanied by shareholders' meeting approval.
5. Disbursement from the revenue account shall be made based on a payment document submitted by the real estate developer, with the document based on the shareholders' register and countersigned by the certified public accountant, specifying required amounts, accompanied by a completion certificate from the consultant or evidence of real estate joint venture liquidation.
6. Deposits into the main and subsidiary accounts shall be made by the relevant capital market institution for offering joint venture certificates, or by funders, buyers, or resulting from real estate joint venture liquidation operations through any means without cash being required.

• General Provisions:

1. The bank shall not activate the project guarantee account until the license issued by the "Authority" for operating an off-plan property sales or leasing project or offering a real estate joint venture is submitted.
2. The use of subsidiary project accounts is restricted to receiving deposits and transfers from the main guarantee account and to it.
3. Transferring any financial amounts from the guarantee account to other accounts is not permitted, except for subsidiary accounts of the guarantee account designated for specific purposes.
4. Checkbooks for this account shall be issued upon the real estate developer's request, and issuing ATM cards or credit cards on the account is not permitted.
5. The bank is not permitted to place a lien on the account for its own benefit or for the benefit of the real estate developer's creditors.
6. The bank shall not close the project guarantee account until obtaining the Authority's approval, without prejudice to what is stipulated in SAMA instructions and concluded agreements.

End.