Amlak Finance, the Islamic mortgage company part-owned by Emaar Properties, is threatening tenants living in properties it has repossessed to repay their rent or face eviction, home owners have claimed.
Tenants said they had been contacted by Amlak, one of the biggest mortgage providers in Dubai, following foreclosure proceedings, notifying them that it will not honour existing tenancy contracts.
One tenant, who wished to remain unnamed, paid a year’s rent in October for her Dubai Marina property after requesting a copy of the landlord’s title deed. She was contacted by Amlak in January and told to repay the rent stated in her previous contact or move out.
A representative from the company said she would have to follow up previous payments with her former landlord.
“Amlak invited me into the office and said you have to tell us what you are going to do; whether you are going to pay us with one cheque… or tell us how many days you need to vacate the property,” she said.
“For me, it’s absolutely wrong; if someone’s apartment is taken over by a new owner then they have to follow the tenancy contract that was signed by the previous owner. [When I signed in] October they (Amlak) didn’t have the title deed in their name, they were not the owners,” she added.
The number of owners defaulting on mortgage repayments soared in the wake of the economic downturn, which saw Dubai property prices decline by over 60 percent. The emirate introduced a repossession law in 2008 setting out rules for default, foreclosure and repossession.
UK-based Barclays won Dubai’s first foreclosure case in court in 2010, clearing the way for other lenders to take action when borrowers default. Islamic lender Tamweel estimated in 2010 that 3 percent of its mortgages were in default.
Shares of Amlak and Tamweel were suspended in November 2008 following on onset of the global downturn. Amlak posted a third quarter loss of AED40m (US$11m) in 2011, the last time it disclosed financial results.
Creditors of Amlak are considering a restructuring proposal from the mortgage company in a bid to revive its business, sources told Reuters earlier in the month.
Mortgage companies that repossess properties should honour existing tenancy contracts, said Elizabeth Riesenburg, who specialises in real estate arbitration at Dubai law firm Habib Al Mulla & Company.
“Law no.26 of 2007, article 7 clearly states that where a tenancy contract is due invalided it cannot be unilaterally terminated by the landlord or tenants unless both parties agree on such termination,” she said.
“The tenant still has a valid tenancy contract, even though it was entered with the previous landlord,” she added.
Amlak Finance did not respond to email requests or phone calls from Arabian Business.
Arabian Business understands that Amlak has since requested the tenant sign a new tenancy agreement with another real estate broker and is now only requesting she repay her security deposit.