‘How my Dubai mortgage landed me in a police cell’

An ongoing dispute between a developer and a bank and breakdown in communication ended in handcuffs for one buyer
‘How my Dubai mortgage landed me in a police cell’
By Staff writer
Thu 30 Oct 2014 12:42 PM

When 33-year-old Indian resident Allan Paris decided to take a leap of faith and step onto the Dubai property ladder in 2008, few could have foreseen the property crash that was coming over the horizon. What is a little harder to understand is how the mortgage he took out with a large local bank would this year land him in handcuffs in a Dubai Police jail cell.

During the heady days of Dubai’s property boom in 2008, Allan decided to buy a AED1.3 million off-plan apartment in the Remraam development from Mizin, a subsidiary of Dubai Properties (DP).

Like many buyers, he decided to finance the purchase with a loan and opted for a Shariah-compliant mortgage with Emirates Islamic Bank (EIB).

When the property bubble burst in Dubai, prices slumped by up to 60 percent and nearly half of all projects were put on hold, including the Remraam project.

Luckily for Allan, he had an Islamic mortgage which meant that, unlike conventional mortgages, repayments only become due when the property had been completed and handed over to the owner.

To this day, Allan has still not got the keys to his apartment and the formal process has only just begun this week with the developer, with DP originally claiming that it was awaiting the final payment of funds from the bank.

Despite this, the bank claims that on January, 5, 2014 a handover notification was sent to Allan via SMS, following which it says its handover team tried to reach him on his mobile. However, between 2008 and 2014 Allan changed his mobile number and the bank claims its legal department issued a notice by letter to the PO Box number it had on file for him.

In February, the bank claimed the monthly mortgage repayments were due to start on the mortgage. Correspondence between the developer and Allan clearly shows the unit had not been handed over, but the alleged failure of the bank to adequately communicate with Allan soon turned the issue from a full-blown criminal case.

On 18 May, 2014, the bank, claiming it could still not get in contact with Allan, forwarded his case to its collection department. The following month, the collection department attempted to cash Allan’s AED1 million security cheque he had signed and issued as part of the mortgage. When this obviously bounced, the bank then filed a criminal case against Allan.

“I visited the police station in Qusais (close to home) to report a damage I found on my car while it was parked at the office. I felt there was a misunderstanding when the police officer informed me that I had a bounced cheque case registered against me by Emirates Islamic Bank. I tried to reason with them that the only relationship I have with that bank is for a mortgage on a property that is not yet handed over. All efforts were futile. I felt cheated, disappointed and shocked,” Allan says.

The main crux of the matter seems to be the bank’s claim that the handover of the property had occurred and that it could not make contact with Allan and was forced to push ahead with filing a criminal case, something he says he finds difficult to understand.

“When I signed up for the mortgage, the bank collected information from me pertaining to my physical address in the UAE as well as some references in the UAE. I have lived in the same building (residential address) since my birth in 1981. The bank’s claims are unacceptable.

“My primary contact number isn’t the same as the one in 2008; however, my UAE residence contact number is unchanged since the past two decades. I was also informed by the staff at the bank that they checked with immigration records if I had left the country and the result was negative. I had visited Emirates Islamic Bank in 2012 and was asked by the branch staff to update my identification and contact information. I, too, am a banker and I have reason to believe that the bank did not do a proper check in order to contact me.”

Sitting in a Dubai Police cell in handcuffs, Allan began to piece together what had gone wrong. Eventually his father made contact with the bank and after a lengthy discussion management issued a formal letter retracting its criminal case, thereby allowing him to get out of jail.

According to a statement from EIB issued to Arabian Business: “On 10 August, Mr Paris signed an addendum with Dubai Properties Group regarding amendments in property price and area variance and he contacted the handover team.

“On 15 September, the customer signed the Ijara Agreement to complete the handover process. However, as the customer refused to complete other formal documentations/requirements of the handover, the handover could not be completed and is pending till date. We have tried calling and emailing the customer regarding this issue but have not received a response till date, same as was the case in the initial months of December 2013 –August 2014.”

Allan claims the reason the handover could not be completed was the developer was refusing to issued keys as it claimed it had not received the remaining funds due to it from the bank. Email correspondence between Allan and the developer, seen by Arabian Business, back up these claims.

An independent mortgage expert spoken to by Arabian Business and who works predominantly with Islamic mortgages says it is the case that mortgage lenders cannot ask for payments to start until handover of the asset has taken place. However, the expert says he believes scenarios similar to Allan’s are becoming increasingly more frequent.

“It is noteworthy that the monthly instalment can only be billed once the final payment is paid to the developer by the bank and the developer issues the handover letter along with keys to the apartment. It is a standard practice also to charge the monthly instalments 30 days after key handover.

“As of today, I have made several requests to the bank to charge me the monthly instalments once the property key is handed over, which is the case with any home loan. However, the bank has rejected all my requests and claim that they are doing as directed by their management,” Allan says.

In a statement to Arabian Business, the developer DP said: “We can confirm that the investor was notified in writing during the month of February 2012 that the property was complete and ready for handover. However, the property is mortgaged and we are yet to receive final payment from the bank while the investor also has to start the handover formalities with the bank. Our sales department is liaising with the investor on this matter and our team is available to support him should he have any further queries on payment and handover.”

Allan has confirmed that the handover process has indeed finally begun this week but he is still yet to receive the keys and the matter is still ongoing.

EIB concluded with the following statement: “We would like to stress how much we value our customers and it is always a hard decision to file legal proceedings against any of our customers. However, sometimes it becomes a necessity to protect the rights of our depositors and shareholders in such cases of default.”

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