By Shane McGinley
Investors have been unable to gain access until ongoing court cases are resolved
Investors in two Nakheel projects have been unable to gain ownership of their completed apartments for nearly two years due to ongoing legal battles between the state-backed developer and third party contractors, Arabian Business has learned.
Sao Paula Development, the owner of one of the islands on ‘The World’ manmade development, is currently suing Nakheel, claiming the state-owned master developer backed out of an agreement to transfer the funds it had paid into plots in Jumeirah Village.
The plots were originally reserved by a third party firm named Diamond Developers, who is a joint plaintiff in the case. Due to the ongoing legal battle, more than 250 investors in the project have been unable to gain ownership of their units until the case is resolved.
“I don’t care who wins I just want this issue to be resolved so I can get hold of my property,” one of the investors told Arabian Business.
“I have paid everything… The property has been sitting ready there for two years. Whatever the issue, why does the investor have to suffer?” he added.
According to court documents, Diamond claimed it has "been unable to issue completion certificates or secure payment of final instalments from purchasers of over 253 property units… The direct financial exposure of Diamond is approximately AED45m (US$12.3m) due in payments obligated to contractors and other third parties".
The Sao Paula and Diamond case is currently before the Dubai World Tribunal but it is not the only case where investors in Nakheel properties have been shut out of their properties due to ongoing third party legal battles.
Nakheel is also facing a court battle with Souq Residence, a joint venture between Kuwait's Ifa Hotels and Resorts and a unit of Dubai World. Last year, investors in Palm Jumeirah’s luxury Golden Mile complex threatened to move to terminate their contracts after battling for more than two years to gain access to their completed apartments.
Nakheel is suing Ifa for the return of about AED100m in advance payments for the purchase of retail units in the ground floor Golden Mile. The developer, which is seeking to alter terms on US$10.8bn of debt, claimed it had cancelled the purchase agreement and should receive a refund.
Ifa disputes the agreement was ever cancelled and has countersued Nakheel for the remainder of the payment, which amounts to around AED1bn.
While Golden Mile’s apartments are completed, Ifa said it is unable to release the units to investors as Nakheel has withheld the certificates needed for handover. The firm has claimed Force Majeure – a clause that allows it to rescind its contractual obligations in the event of extraordinary circumstances – as justification for its refusal to issue a refund to homeowners.
Both cases have gone to trial at the Dubai World Tribunal and verdicts are pending.
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What business future has the firm got, there is no way it can pay off US$ 16.1 billion of debt from earnings, the property sector is simply no longer a prolific money spinner and is likely to remain in that state for many years to come. It can only survive by the government pumping in more money, there is simply no longer enough demand to launch large residential projects in the future.
I was in Spain recently and down near the Portuguese border, great climate 27/28 degrees in mid-June, you can pick up a fabulous 3 bedroom golf-side townhouse in somewhere like Islantilla for 120,000 euros (556,000 Dirhams), compare that to the cheapest offering at Jumeirah Golf Estates!