The Dubai Land Department has drawn up new property laws to clarify how much money developers and investors are due when an investor defaults on their payments, it was reported on Sunday.
The revised law will see refunds for defaulting investors calibrated to the amount of building progress that has already been made on the project, according to information from lawyers briefed in the matter, reported in UAE daily The National.
Details of the amendment have come to light following comments in a previous article in UAE daily the Xpress by Emad Eldin Farouq, a senior legal counsel with the Dubai Land Department.
In the article he revealed the amendment to article 11 of the current Dubai Law 13 of 2008, had been drawn up and signed off.
The amendment would “maintain the confidence of investors and safeguard the real estate of Dubai”, Farouq said.
The move comes in the wake of a property slowdown in Dubai, brought on by the credit crunch, which has seen investors default on loans and construction grind to a halt in the past six months.
The amendment stipulates that investors who default will lose all their paid-in money if 80 percent of the project has been built – the developer can then auction off the property to compensate for the rest of the costs.
When 60 percent of a construction has been finished the developer can claim 40 percent of the purchase price, and when less than 60 percent has been completed the developer can only retain 25 percent of the purchase price.
Where the developer has failed to start construction through “no negligence or omission” on their part they may keep 30 per cent of the money paid by the buyer to that point.
All money due to the investor will have to be refunded by the developer within 60 days of the resale of the home, according to lawyers.
Under the current law buyers who default on payments to a developer are able to recover 70 percent of any money handed over to that point.
However, when the property bubble burst, Dubai’s Real Estate Regulatory Agency issued an emergency interpretation of the law to stop more defaulters that that said developers could retain 30 percent of the total price of the property – that in some cases meant all the money paid by an investor.
The new amendment called, Dubai Law No. 9 of 2009, “provides much anticipated clarification regarding the procedures required to be followed by developers in respect of defaulting purchasers, as well as the rights of developers to retain purchaser monies upon cancellation”, said a legal briefing from the law firm Clyde & Co.
The amendment will be retroactive for all property contracts signed in Dubai and any contract between a buyer and a developer that has a contrary clause will be rendered void, according to the Clyde & Co.
However, some investors said the amendment did not go far enough in protecting investors from developers who had delayed construction indefinitely.
“It is taking away our rights from the way the law was originally written,” said Nigel Knight, a homebuyer and member of the Dubai Property Investors Group who petitioned the Land Department last week to discuss the amendment.
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