State-owned developer Nakheel has issued buyers on its stalled The World project with ultimatums to pay any outstanding balances on their islands or lose ownership, a source said.
The developer has changed terms on payment schedules previously agreed with buyers of islands to fast-track the collection of fees, the source said.
The new demands were allegedly issued after a revamp of Nakheel’s chairman and board in March 2010, as the developer sought to restructure $10.8bn in debt.
In a statement, a spokesperson for Nakheel said: “Payments due and remedies for default in payments are dealt with as per the terms agreed between the seller and the purchaser.”
Nakheel is embroiled in at least 12 legal cases relating to the offshore island development and 45 overall, according to court papers filed at the Dubai World Tribunal, a panel set up to hear disputes linked to Dubai World.
Former CEO Chris O’Donnell filed suit against the company on Wednesday, alleging breach of contract. A source said he is seeking a seven-figure sum in the case.
Construction on the offshore The World project ground to a near standstill in the wake of the financial crash, which saw real estate prices in Dubai fall more than 60 percent from their peak.
Almost all buyers on the project have failed to begin work, with exceptions including work carried out by Kleindienst Group, the firm behind the six-island Heart of Europe Project.
A spat between Nakheel and Penguin Marine, the company contracted to ferry goods to the islands, has also affected island owners seeking to fast-track construction on their sites.
Nakheel has said 70 percent of the 300 manmade islands are sold and that building work is the responsibility of the owners.
In February, at least five islands were advertised for sale at discounts of up to 17 percent on the initial purchase price as distressed developers cut their losses.
Austrian developer Kleindienst Group is currently being sued by Nakheel for breach of contract in a $199m action lodged on June 12, a battle that has stopped work on the firm’s $840m resort.
“There is a difference of opinion between ourselves and Nakheel… on the amount due for the islands purchased by the Kleindienst Group, and the time frame in which this is due,” CEO Josef Kleindienst said in a statement.
“We have filed the Acknowledgement of Service at the Dubai World Tribunal and look forward to finding a final solution on the matter that is stopping our progress at the moment.”
Nakheel was one of the biggest casualties of the property crash after overstretching itself with ambitious projects such as Palm Jumeirah and the offshore World island development.
The developer, which said it would be carved out of parent firm Dubai World later this month, has stalled construction on at least 100 projects in the wake of the downturn, according to data on the website of Dubai property watchdog RERA.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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