By Shane McGinley
Investors to demand Golden Mile developer Souq Residences hands over completed units or issues refunds
Investors in Palm Jumeirah’s Golden Mile complex will this week serve the developer behind the project with a legal ultimatum to hand over their units or issue them with a refund.
Up to ten investors in the luxury complex plan to issue Souq Residences with legal notice in a bid to force a resolution to a dispute that has been ongoing for more than a year.
The group is caught in a legal feud between Souq Residence, a joint venture between Kuwait's Ifa Hotels and Resorts and a unit of Dubai World, and Palm Jumeirah developer Nakheel that has stalled the handover of their completed, paid-for apartments.
“Most of us purchased these properties back in 2004, we paid for them in full back in August 2009,” investor Martin Lawrence told Arabian Business.
“The properties have been fit to live in since April 2010, but yet we still have no idea when we get the keys if ever.”
Nakheel last year sued Ifa for the return of AED100m in advance payments for the purchase of retail units in the ground floor Golden Mile. The state-backed developer claimed it had cancelled the purchase agreement and should receive a refund.
Ifa disputes the agreement was ever cancelled and has countersued Nakheel in the Dubai World Tribunal for the remainder of the payment, which amounts to around AED1bn.
Despite the completion of Golden Mile’s residential apartments, Ifa has claimed it is unable to release the units to investors as Nakheel has blocked the certificates needed for handover.
In some cases, apartments were scheduled for handover more than a year ago.
The Kuwait company 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 investors, a claim rejected by homeowners.
“Ifa/SR are claiming Force Majeure and we the investors say that an act of Nakheel is not an Act of God,” said investor Rahul Khanna. “Joint Venture partners fighting at our cost – it’s ridiculous.”
The dispute reflects the ongoing impact of the Gulf-wide real estate crash that saw the cancellation of more than half of planned real estate projects in Dubai. Property prices in the emirate declined more than 60 percent from their 2008-peak amid a global economic crisis that caused lending to dry up and speculative demand to decline.
Hundreds of investors have been hit by stalled construction, delayed projects and cancelled real estate developments.
Golden Mile buyers now say that legal action may be their only way to resolve the situation, after appealing to government departments for help.
“The communication between Ifa, RERA (Real Estate Regulatory Authority) and Dubai Land Department has been simply awful,” Lawrence said. “It sheds a very poor light on Dubai itself. Intervention from a higher authority is what is needed to protect all us innocent victims.”
Ifa and Nakheel both declined to comment while the case is ongoing.
If the claim by IFA that the refusal of Nakheel to enable them to handover properties to paying clients for whatever reason constitutes force majeure (act of God) does not stand up in court, then that is going to create a legal precedent which runs across many other developments.
For example all the 3rd party developers at Jumeirah Golf Estates (JGE) are claiming force majeure with their clients because the villas are finished, but JGE/Nakheel have still not provided infrastructure like components like power which allows the government certificates to released to enable handover to end users. There is also an online forum running between unhappy JGE customers about potential court action against their developers on that project. The Palm Jumeirah scenario well prove to be the trigger for a 'money back' series of legal actions against JGE devlopers as well.
Also is it true that outstanding Tribunal cases have to be settled before the Nakheel debt restructure can be formerly approved?
This is a classic case of " Conflict of Interest" , where the master developer, who is an approval authority, is also a party with a commercial interest. It is unfair for any approval agency to use it's powers for the benefit of their commercial interest.
1. Golden Mile - would like to get in touch with Mr Martin Lawrence and Mr Rahul Khanna
2. Interested also at the site for JGE - can someone help.
This whole issue is appalling. If the approving authorities also have a commercial interest in the developments how can this not be a conflict of interests? Clearly they are witholding units from release onto the market so to maintain current rental prices but at the expense of investors who are losing valuable potenital income from leasing these units out. By failing to issue permits for such things as power this means final handover certificates cannot be released and these authorities know this. Its a shame there isn't an over-ruling neutral power that can intervene....in theory this should be RERA's job but they don't seem to be doing this.
it is again a simple case of business ethics which have been inculcated in the local businesses.
Why is it that when a consumer is not able to pay a mere AED 500 on his credit card he is put in jail (you want to be fare then why is there no bankruptcy law in this country) whilst these companies who owe millions of dollars are still enjoying the benefits whilst the investors who have put in their life savings are suffering.
This is an unacceptable situation and should be rectified immediately or else whatever little consumer confidence which is left will no longer exist.
its difficult to understand, how did all these master developers who made so much money during the high period, out of selling desert sand (as no buyer owns the land below his house in the UAE, only the structure above) and also made 2% every time someone bought/sold and did the transfer, they still charge the same, and with construction cost fully paid for by the investor's first installment of 10% of total cost? how? even today they are charging hefty maintenance costs, for the unfinished landscaping and infrastructure that is half complete. It is obvious that the law is on their side, but please can someone explain me how they have incurred so much loss when they had made so much money in the first place.
I am assuming that a developer first sold the land, then it changed many hands, everytime it got sold Nakheel made commission or fees for transferring the name, one page in the that document and in their computer, and this flipping happened at least 10 times, so Nakheel made....
(continued from above) .... so Nakheel made more than the original cost by just doing transfers. (2% x 10 times = 20%) so how did they land up in such a bg mess? Same goes for Emaar, and other master developers.
Its the private developer who got caught between the master devlpr and the investor. He is had bought land at the inflated price after paying all that premium and tranfers fees, and had construction contracts signed at high price, and then when the market crashed, the investors stopped paying, (the banks still continue to pay even today, at the cost of poor salaried investors who are dying a slow death everyday), but still the master developer gets his money, even it is half the price, he still got much more than he ever imagined, without any input, just selling sand (with the exception of Palm where the sand was imported), why is it that they are giving such tough time to the rest of the investor community?