Ownership & RightsProperty Sale
Synonyms: Real estate sale، Property disposal، Conveyance for value
Last updated: 2026-09-25
Short Definition
A property sale is a contract by which the seller transfers ownership of real estate to the buyer for a cash price, effective against third parties once conveyed at the Ministry of Justice or registered in the Real Estate Registry, and normally subject to the 5% Real Estate Transaction Tax.
Overview
A property sale is a contract by which the seller transfers ownership of real estate to the buyer for a cash price, effective against third parties once conveyed at the Ministry of Justice or registered in the Real Estate Registry, and normally subject to the 5% Real Estate Transaction Tax.
The Civil Transactions Law defines sale in Article 307, requires the property to be known to the buyer by inspection or by its distinguishing description (Art. 308), and makes the price payable immediately unless deferral or instalments are agreed (Art. 317). In a deferred-price sale the seller may stipulate that title remains with him until the full price is paid (Art. 320), and the seller must deliver the property free of any third-party right unknown to the buyer (Art. 321). If the area stated in the contract proves smaller or larger, a claim to rescind, reduce or complete the price is not heard after one year from delivery (Art. 323). A co-owner of an undivided property has a right of pre-emption (shuf'a) under Articles 658–672.
In practice the deal moves from checking the deed and encumbrances, to agreeing the price and payment method, to conveyance or registration. RETT is owed primarily by the seller (the transferor), while the buyer may be jointly liable in cases of evasion or concealment, and ZATCA may assess tax on fair market value where the declared price is lower. Where a licensed broker is involved, the Real Estate Brokerage Law sets the commission at 2.5% of the deal value unless otherwise agreed in writing, payable by the party that contracted the broker, and brokerage services carry 15% VAT. Off-plan sales are governed by separate regulations.
⚖️ Legal Basis
A property sale is governed by the Civil Transactions Law (Royal Decree M/191 dated 29/11/1444H), Articles 307–323, 655–657 and, on pre-emption, 658–672; by the Law of Real Estate Registration (Royal Decree M/91 dated 19/9/1443H) for properties in announced areas; and by the Notarization Law (Royal Decree M/164 dated 19/11/1441H) for conveyance before notaries. The 5% Real Estate Transaction Tax applies under the RETT Law (Royal Decree M/84 dated 19/3/1446H) and its Implementing Regulations effective 10 April 2025. Article 14 of the Real Estate Brokerage Law (Royal Decree M/130 dated 30/11/1443H) sets the broker's commission at 2.5% of the deal value unless otherwise agreed in writing.
💡 Practical Example
Hind sells a villa in Jeddah for SAR 2,000,000 through a licensed brokerage office she engaged under a written brokerage contract. The office's 2.5% commission is SAR 50,000 plus SAR 7,500 VAT, a total of SAR 57,500 paid by Hind as the party that contracted the broker. RETT at 5% (SAR 100,000) is paid before conveyance, which is then completed on the Real Estate Exchange after both parties approve via Nafath and the price is transferred. Four months later the buyer discovers the plot is 480 m² rather than the 500 m² stated in the contract; he may claim a price reduction provided he files within one year of delivery.
⚠️ Common Mistakes
- ✗Paying the full price in cash or by transfer outside the conveyance system before checking the deed for mortgages and restrictions.
- ✗Declaring a price below the real one to reduce tax; ZATCA may assess fair market value and the buyer may be held jointly liable.
- ✗Overlooking a co-owner's pre-emption right when selling an undivided share to an outsider, exposing the deal to a pre-emption claim.
- ✗Not stating expressly in the contract who bears RETT, the broker's commission and the VAT on it.
- ✗Delaying an area-shortfall claim; it is not heard after one year from delivery.
🌍 International Differences
The UAE has no transaction tax in the Saudi sense but charges registration fees through land departments such as Dubai's. In Egypt, the sale contract must be registered with the real-estate publicity office to transfer title. In Turkey a title-deed fee (tapu harcı) is paid on registration, customarily split between seller and buyer. Internationally, it is standard practice to allocate taxes and commissions expressly in the contract to avoid disputes.
FAQs
How much tax applies to a property sale in Saudi Arabia?▾
The Real Estate Transaction Tax is 5% of the disposition value regardless of the property's condition, whether the whole property, a separated part or an undivided share is sold. It must be paid before conveyance or registration.
Who pays the Real Estate Transaction Tax, the seller or the buyer?▾
The tax is owed primarily by the transferor, i.e. the seller, although the parties may agree that the buyer bears it. The buyer becomes jointly liable if he causes non-payment, for example through evasion or concealing the value.
Does a citizen pay RETT when buying a first home?▾
The state bears the RETT on an eligible citizen's first home up to SAR 1,000,000 of its value through a certificate issued by the Sakani programme; the citizen pays the tax on any amount above that.
What is the broker's commission on a property sale?▾
Article 14 of the Real Estate Brokerage Law sets the commission at 2.5% of the deal value unless the parties to the brokerage contract agree otherwise in writing, and it is paid by the party that contracted the broker. VAT at 15% is added to it.
Can a seller retain title until instalments are paid?▾
Yes. Article 320 of the Civil Transactions Law allows a seller in a deferred or instalment sale to stipulate that title passes only when the full price is paid, even if the property has been delivered. Once paid, the buyer's ownership is deemed to date from the conclusion of the sale.
