Is it permissible to recover the deposit in the UAE?

Can a deposit be refunded in the UAE? The short answer is yes in some cases and no in others, and the line between them is a single sentence in the contract or the receipt. Under the Civil Transactions Law, paying a deposit (arboon) at the time of contracting signifies that the contract has become final and cannot be withdrawn from, unless the agreement or custom provides otherwise. If, however, the parties agreed that the deposit is the price of withdrawal, the party who paid it and withdraws forfeits it, and the party who received it and withdraws must return it together with an equal amount.

That is why so many people who claim their deposit back discover, too late, that the issue is bigger than the deposit itself: they may be entitled to recover it in full, they may lose it, or the other party may demand performance of the contract or compensation exceeding it.

In this article, AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS explains when a deposit is refunded and when it is lost, where contracting parties go wrong, and what a lawyer does in the claim.

What is a deposit (arboon) under the UAE Civil Transactions Law?

A deposit is a sum paid by one contracting party to the other at the time of contracting. It is common in the sale of real estate and vehicles, in commercial deals and in reserving units. It is governed by the Civil Transactions Law issued by Federal Decree-Law No. (25) of 2025, in force since 1 June 2026 after the repeal of the previous law. The rule on deposits has two limbs: a default rule that makes the contract final, and an exception that turns the deposit into the price of a right of withdrawal whenever the parties so agree.

One important caution: most of what you will find online about deposits cites Article 148 of the old Civil Transactions Law of 1985, which has been repealed. The substance has moved into the new law under a different article number, but relying on a repealed text in a legal notice or a court memorandum weakens your position before the other party and before the court.

Is the buyer entitled to recover the deposit? The question that decides the answer

Before asking about a refund, one thing has to be settled: did the parties agree that the deposit is the price of withdrawal? The outcome differs completely between the two cases.

The common mistake is for the payer to assume that the word deposit on the receipt gives him the right to walk away at the cost of the amount alone. That is not so unless the agreement or custom says so, and what counts is the intention of the parties, not the word written on the receipt.

When can a deposit be recovered?

• Termination by mutual consent: if the parties agree to rescind, the payer recovers the deposit on the terms they agree in settling accounts.

• Breach by the other party: if the seller fails to perform, for example by not delivering on time or not to the agreed specifications, termination may be sought and the amount paid recovered with compensation.

• A defect in the subject matter: if the item sold turns out to have a defect the seller did not disclose, or does not match what was agreed. In purchases from traders, the consumer's rights of replacement and refund under the Consumer Protection Law apply in addition.

• A void contract: if the contract is void, the parties are restored to the position they were in before contracting.

• Withdrawal by the party who received the deposit: if the deposit was agreed to be the price of withdrawal and the recipient withdraws, he returns it together with an equal amount.

Each of these cases requires proof: the seller's breach is proved by the contract and the correspondence, a defect by inspection or expert evidence, and mutual consent in writing. Whoever claims without proof risks turning from claimant into defendant.

When do you lose the deposit, and when do you lose more than it?

If the deposit was the price of withdrawal and the payer backs out, he forfeits it and owes nothing more. If there was no agreement on a right of withdrawal, backing out is a breach of a final contract, and the matter does not stop at the deposit: the other party may insist on performance or claim compensation for actual loss. This is where many people end up in court, because they acted on the assumption that the most they could lose was the deposit.

Can the seller withdraw from the sale after taking the deposit?

If the deposit was agreed to be the price of withdrawal and the recipient withdraws, he must return it together with an equal amount, that is, the sum he received plus a sum equal to it. If there was no agreement on a right of withdrawal, the seller's refusal to complete the sale is a breach of contract, and the buyer may demand performance or termination with recovery of what he paid and compensation. In both cases the buyer must prove the withdrawal itself, which sellers usually deny through delay rather than express refusal.

Deposit, advance payment and reservation fee

Not every payment made before a contract is a deposit. An advance payment is part of the price, paid in performance of a binding contract, and gives no right of withdrawal, while a reservation fee may be either, depending on what was written when it was paid. The name given to the amount on the receipt does not settle its nature; what the parties agreed does.

Deposits in property sales

In real estate the rule depends on the type of sale and its stage. A buyer who paid a developer without signing a contract is in the situation we covered in Refund from the Real Estate Developer: I Paid but Didn't Sign the Contract, and a buyer who backed out of a purchase after paying a deposit will find the detail in Refunding the Deposit After Withdrawing from Purchase in the UAE.

Rental deposits: you paid to reserve an apartment or villa and then changed your mind

The same rule applies to leases. In a case reported in the local press, the Dubai courts dismissed the claim of a person who paid a deposit to rent a villa, then withdrew from the contract and demanded it back, and ordered him to pay the fees and costs, because he was the one who withdrew although the landlord was ready to complete the contract. A person who reserves a property with a deposit and then finds a better offer should weigh the cost before backing out. Many people also confuse the deposit with the security deposit, which is a guarantee returned at the end of the lease after deducting what is due, and which we covered in Refund of Rental Security Deposit in Dubai.

Claiming a deposit back: what does the lawyer do?

The claim starts with classifying the amount and identifying the correct relief: recovery of the deposit, its return together with an equal amount, or termination of the contract with compensation. A mistake in the relief sought loses the case even where the right is established. Then comes the choice of route: a legal notice and settlement, or a claim before the competent court according to the value and nature of the dispute. Where these claims sit among other civil cases is explained in Civil Cases in the UAE.

A time limit that is no reason to delay

What to prepare before contacting the lawyer

Legal references

• Federal Decree-Law No. (25) of 2025 Issuing the Civil Transactions Law.

Frequently asked questions about recovering a deposit in the UAE