By Claire Ferris-Lay
Spanish investor nets court ruling in contract row over delayed $1.4m villa: lawyer
A Spanish investor won a court order to seize the head offices of Emaar Properties, builders of the world’s tallest tower, after its subsidiary failed to deliver an AED5.3m ($1.4m) villa on time, his lawyer has claimed.
The Dubai Court of Cassation issued an order on Nov 29 to allow representatives for Carlos Jose Periera to seize Emaar’s Dubai offices in an attempt to recoup AED3.4m, reflecting his villa payments to date and a sum of interest, said Fareya Azfar, partner at The Legal Group.
Periera had paid more than AED2.9m for a villa in the Warsan Estate in Dubai in a deal with Mrasem LLC, a unit of Emaar Properties. The 3.4 million sq ft development is billed as “an exclusive community” on Dubai’s Al Awir Road and includes 500 townhouses.
The villa was scheduled for completion in October 2010, but the developer failed to hand over the property, Periera’s legal representative told Arabian Business.
Following a court battle, Mrasem was found to be in breach of contract and was ordered to repay the villa payments in addition to nine percent interest.
“In order to expedite the execution procedure, we obtained an approval from the Court of Execution to seize the offices of Mrasem, which was also the head office of Emaar Properties,” said Azfar.
“As soon as the court granted us the permission [to seize the offices] the amount of money was deposited into the court. We don’t know whether it was deposited to the court by Emaar or Mrasem, which is owned by Emaar, but we immediately got the money back.”
In an emailed statement, a spokesperson for Mrasem said: "A seizure is standard wording in court orders, and is applicable only if the party refuses to execute the order. Here, the payment was made immediately, and there was no seizure of office.”
The company said the construction delays at Warsan Estate were the result of rescheduling to secure better negotiations with contractors.
Periera is understood to have paid 55 percent of the total value of the AED5.3m villa by July 2009. As the property was still in the early stages of construction, this was in breach of rules laid down by Dubai’s real estate watchdog that tie payments to building milestones, Azfar said.
The developer had also failed to register the Warsan Estate project with the Dubai Land Department or RERA, and had not set up an escrow account to hold investor funds, she added.
"They were in breach of all legal obligations including,
but not limited to, not obtaining the necessary approvals from the authorities
for this project. The project was neither approved nor registered."
Emaar tried to register the villa in Periera’s name in March 2010 but was unable to do so because it could not provide all the required documents, Azfar said.
Dubai saw a surge in legal disputes between investors and developers in the wake of the financial crisis that saw house prices in the emirate slump 60 percent from their late-2008 peak.
The total number of construction projects canceled and delayed in the UAE rose to $170bn in August, Citigroup said in last month. The Gulf state accounts for 56 percent of the total cancelled and delayed projects for the main regional markets, Citi said.
This is EXCELLENT.
There are hundreds of others similar where other developers have not delivered so far and the completion dates have long expired. Can we expect a similar ruling?
The Editor @ Arabian Business
Can you please tell me the name of the lawyer who handled this case for the Client?
There are many cases like this in Dubai with other developers.
At last it showed the power of Investor, Investor is King.
Second paragraph, last line
Fareya Azfar, partner at The Legal Group
And yes, if this is for real it is really great news. At least for those who can afford the legal fees.
GREAT NEWS indeed.
This shows that there is after all a degree of proper laws and regulation in place and the Courts will clamp down.
Obviously this will set a precedent, however bad news is that takes you 2-3 years in Court to reach Cassatioon and Execution, then again if the investors get 9% interest it is not that bad after all.
Yes indeed the cost of the legal process remains a big ask and there appears to be no mention of whether Mrasem were directed to pay the legal costs. If the precedent is now created as in Pereira versus Mrasem and can be cross referenced in other cases then there is no reason why the process cannot be fast tracked to chalk some refund points up for other purchasers in a similar situation. They do run into the thousands!
Fact is that, fanboys notwithstanding, enforcing contracts in Dubai is slow and expensive by any international standard.
As we are seeing with nakheel in the palm the legal warranties for foreign investors are very weak; unless that us fixed Dubai is gone as an investment (real estate or other kind) destination.
Unfortunately many people will prefer to think that someone spending $105k in champagne means that there is no need to make any reforms.
Let see how2012 goes.
What about Umm Al Quwain Marina projects which qot delayed by almost 3 years and the owners of these villas did not get even a penny from Emmar. On top we ended up paying extra building cost fee to the finance company that arranged for the mortgage.
Three reasons for this verdict:
1) The project was not registered with RERA. Had the project been registered, Emaar could have used some of the clauses in the contract to protect itself including force maejure which the majority of the developers have used successfully in the court hearings
2) The buyer continued paying the instalments even after it was very well established that the project will not see the light!. This was a big gamble and most of the investors cannot afford to play it!
3) The completion date had expired.
So any investor who wants to take this route should be willing to invest significantly in the project knowing it would never be built and wait for the completion date to expire