Dubai amends property law in response to defaults

Sunday, 19 April 2009 10:31 AM

The Dubai Land Department has drawn up new property laws to clarify how much money developers and investors are due when an investor defaults on their payments, it was reported on Sunday.

The revised law will see refunds for defaulting investors calibrated to the amount of building progress that has already been made on the project, according to information from lawyers briefed in the matter, reported in UAE daily The National.

Details of the amendment have come to light following comments in a previous article in UAE daily the Xpress by Emad Eldin Farouq, a senior legal counsel with the Dubai Land Department.

In the article he revealed the amendment to article 11 of the current Dubai Law 13 of 2008, had been drawn up and signed off.

The amendment would “maintain the confidence of investors and safeguard the real estate of Dubai”, Farouq said.

The move comes in the wake of a property slowdown in Dubai, brought on by the credit crunch, which has seen investors default on loans and construction grind to a halt in the past six months.

The amendment stipulates that investors who default will lose all their paid-in money if 80 percent of the project has been built - the developer can then auction off the property to compensate for the rest of the costs.

When 60 percent of a construction has been finished the developer can claim 40 percent of the purchase price, and when less than 60 percent has been completed the developer can only retain 25 percent of the purchase price.

Where the developer has failed to start construction through “no negligence or omission” on their part they may keep 30 per cent of the money paid by the buyer to that point.

All money due to the investor will have to be refunded by the developer within 60 days of the resale of the home, according to lawyers.

Under the current law buyers who default on payments to a developer are able to recover 70 percent of any money handed over to that point.

However, when the property bubble burst, Dubai’s Real Estate Regulatory Agency issued an emergency interpretation of the law to stop more defaulters that that said developers could retain 30 percent of the total price of the property – that in some cases meant all the money paid by an investor.

The new amendment called, Dubai Law No. 9 of 2009, “provides much anticipated clarification regarding the procedures required to be followed by developers in respect of defaulting purchasers, as well as the rights of developers to retain purchaser monies upon cancellation”, said a legal briefing from the law firm Clyde & Co.

The amendment will be retroactive for all property contracts signed in Dubai and any contract between a buyer and a developer that has a contrary clause will be rendered void, according to the Clyde & Co.

However, some investors said the amendment did not go far enough in protecting investors from developers who had delayed construction indefinitely.

“It is taking away our rights from the way the law was originally written,” said Nigel Knight, a homebuyer and member of the Dubai Property Investors Group who petitioned the Land Department last week to discuss the amendment.

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Posted by: Skyprops Wednesday, 7 April 2010 11:30 PM[UAE]

In 2008 we signed a deed of sale with Tameer(Elite Residence) and started paying per our payment schedule. After numerous request for a copy of the deed of sale, to date we have received nothing. We were also transfering the payments into the said escrow account only to discover they had subsequently changed banks and they failed to notify us. Only some of the payments are reflecting on the Ledger. We decided to stop paying as we had no legal document in our possession and waited for them to contact us with regards to late payments. The last payment we made was in Jan 2009. For the entire 2009 we received no correspondence and the scheduled completion date was supposed to be Jan 2010 has been moved to 2012 sometime. We were in Dubai on the 24th March 2010 for 4 days and the concrete structure (Elite Residence) only seems to be at about floor 40 of 91. Today, we received a Final Cure and Termination Notice. this document, does not state the amount we have paid, only the amount which is in default. They have not included a payments which have been made, as stated earlier some of the payments have gone AWOL and we know have to trace those funds to have them credited to the account. They have now included an additional amount of AED350 000 to be paid as a penalty. In our country if this was the situation and the developer was two years behind, the developer would be paying the penalty not the purchaser. Also Tameer should be in breach of contract as they have not provided the purchaser with the necessary infomation and documents (which was requested on several occassions) to remedy the situation timously. We think the Dubai Property Laws should be in question. It appears to be one-sided and this will definitely put off future investors. If anybody can share some advise, please do.

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Posted by: Thomson Sunday, 21 February 2010 6:13 PM[UAE] - UAE

Can someone advise please? we bought 2 apartments in a building that was due to be delivered June 2008 (altho no delivery date was stated on the contract with the developer) However, we took a mortgage with Amlak who were paying according to a schedule and the last payment was due (on completion)in June 2008. The building has been delayed by 2 years. We are requested to pay Dhs 150,000 (which we do not have)due to added interest by Amlak because of this delay. Amlak have said they think Mag the developer should pay, and Mag say it's Amlak's responsibility, but it looks like WE will ultimately have to pay, which makes us want to walk away from our investment and lose our 10% that we put in. SURELY we cannot be responsible for the developer's delay?

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Posted by: M. Mouse Wednesday, 13 May 2009 9:17 AM[UAE] - Cayman Islands

The whole property law in Dubai needs a major shake up. In light of the current situation and the ongoing horror stories who in their right mind is going to buy propery here!!

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Posted by: Pete Tuesday, 12 May 2009 7:11 PM[UAE]

Can anyone tell me, does scratching a hole in the ground at the waterfront constitute start of construction? If so RERA has just sealed the fate and the savings of hundreds of investors. How can one law be so one sided, what a joke, and this was meant to instill confidence in the market, hahahaha.

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Posted by: Tom Tuesday, 12 May 2009 2:26 PM[UAE] - Ireland

Me and my family have invested over �1,000,000 in Jumeriah waves business towers over 2 years ago and the development hasn't even started...can anyone help us or where do we turn to? This is a total disgrace and the developer has done a runner and cannot be tracked down...

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