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Wed 8 Dec 2010 11:42 AM

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EXCLUSIVE: Investors should use force majeure to withhold payments – RERA

"If a developer can use it, why can't I?" - Bin Ghalaita

EXCLUSIVE: Investors should use force majeure to withhold payments – RERA
(ITP Images)
EXCLUSIVE: Investors should use force majeure to withhold payments – RERA
(ITP Images)
EXCLUSIVE: Investors should use force majeure to withhold payments – RERA
(ITP Images)
EXCLUSIVE: Investors should use force majeure to withhold payments – RERA
(ITP Images)
EXCLUSIVE: Investors should use force majeure to withhold payments – RERA
(ITP Images)
EXCLUSIVE: Investors should use force majeure to withhold payments – RERA
(ITP Images)

Investors in construction projects in Dubai in which developers are blaming delays on force majeure (an act of God) should withhold payments for the same reason, Marwan bin Ghalaita, CEO of Dubai real estate watchdog RERA, has said.

He added Dubai’s real estate sector was a lawyers’ market.

Asked if recession could be considered a force majeure, Bin Ghalaita said: “If I am an investor I will say ‘I am not paying because of force majeure’. I am not a judge. But my answer is: if I am an investor I will not pay because of force majeure. If they can use it, so can I. And this is my answer. If a developer can use it, why can’t I?”

He added that investors in projects that had been delayed beyond delivery deadlines could seek legal redress in the courts for loss of income:

“If my construction is delayed, and it is beyond my delivery date, what should I do? You have a choice to ask for liquidity damage…. I am suffering because of the delay, because I bought this apartment to move in, and now I am paying rent. You can go to a court and ask for that, for compensation. Because this is a breach of the contract.

“Because the delivery date is there…. And people should seek proper legal advice from lawyers. It was a buying market, then a selling market, then an agents’ market, then I tell people there is a period in Dubai where it is a lawyers’ market. Where lawyers make a lot of money.”

Arabian Business digital magazine: read the latest edition online

Peter Bench 9 years ago

How about the real estate watchdog saying: 'well, Mr Developer, if you don't play, you lose your rights' rather than saying everyone can play tit-for-tat.

Madloom 9 years ago

There are developers who collected 80% of the premium and not yet started construction and RERA is promising to terminate them since ever but no decision yet. This is not fair
There are developers who collected 40% of the premium on booking form but no contract is signed and yet they are refusing to pay back the 40% even though it is stiplulated in the booking form to refund it in case no contract is signed but RERA is watching and smiling without any action

alex 9 years ago

I big to differ with such statement, Force Majeure has been defined clearly in FIDIC contracts, and recession is not one of the listed force majeure.

Jon 9 years ago

Are all these comments being issued by RERA meant to bringing confidence to the market so that people can begin investing again? If so, they are having the opposite effect

Red Snappa 9 years ago

OK if Mr. Ghalaita is advocating Force Majeure as a practical and legally valid precedent for refusing to make further payments to developers against inactive projects, can he confirm that the same approach may be adopted with developers in which the Dubai Government has a stake please?

Jane 9 years ago

So basically RERA is stating instead of them enforcing any penalty on developers for delays well past anticipated completion dates that investors, who are already out of pocket due to the significant delays on their projects and lost income, have to pay more of their own money to hire a lawyer and go to court to get compensation.

M F Khan 9 years ago

Rera's preachings and practices are pole apart. Land Department cancelled units for payment default, now we're told to use Force Majeure against developers. On 1st April 2009 a petition, requesting the cancellation of a project that had become unviable, signed by 90% of its buyers was given to Mr. Ghalaita, then its Arabic Translation to Ms to Ms Khawla Madani in the legal department, now almost 2 years, no decision taken. Whatever the developer says, practically it is not possible for him to start construction and complete the project.
Investors' money is laying in the escrow account, which could be used to buy ready to move in property.

Farid 9 years ago

My advice to anyone who has invested in the RE in the UAE is this, if you have paid less than 40%, just stop payments. Don't cancel your contract, but don't make any more payments.

You might end up loosing your 40% or what ever you have paid so far(hopefully less), but compare to what you stand to loose in the next few years if you keep up the payments, you are saving money.

I stopped payments of 3 Apartments about 2 years ago when I felt like things were going south. I lost around 320K. But had I not stopped payments, I would have lost another 1.1 Million by now.

Shahdad 9 years ago

I totally agree with Mr Ghalaita. The only ones losing their shirts in Dubai real estate market were investors. No one else.

sam 9 years ago

Force Majeure cannot be applied by neither party as an excuse to break loose from contractual obligations!

Doing so will only worsen the major state of chaos the real estate market is currently in.

An attempt to restore the investos confidence in the real estate market can only come from respecting and honoring the signed contractual agreements between all invloved parties especially major stated linked master developers.

Ideally, developers should pay back investors and/or mortgage companies if they fail to deliver units according to agreed on schedule (including allowed delays typically of up to 12 months). Same applies on investors if they fail to honor payments on their units that are being built according to schedule then developer has the right to cancel the contract and withhold the monies paid by investors or stick to whatever is mentioned in the contract.

We would like to see RERA enforcing this prior to going to lawyers and this is when things can get out of control!!