By Soren Billing
Dubai ruler issues decree in bid to settle disputes over bounced cheques in property sector.
Dubai ruler Sheikh Mohammed has issued a decree to set up a judicial committee that will settle disputes over bounced cheques in the real estate sector.
The committee will settle cases related to dud cheques whether issued by the buyer to the developer or from tenants and beneficiaries of long term units, state news agency WAM reported on Thursday.
Judgments pronounced by the committee will be decisive and unchallengeable, and the committee will be granted “a set of powers in order to discharge its duties properly”, the report said.
Under UAE law bouncing a cheque is a criminal offence, which carries a prison sentence, although most instances involving small amounts are settled out of court.
A total of 544,196 cheques issued in the UAE bounced because of insufficient funds between January and May this year, according to the Ministry of Justice.
The figure is equivalent to about one in 18 of the 9.75 million cheques issued in the emirates during that time. Court records show that in Dubai almost 11,000 monetary crimes were recorded last year compared with 8,081 in 2007 and 7,550 in 2006.
Bounced Cheques is one side of the problem facing the real estate sector, as it maybe related to a real insufficient funds situation in the issuer bank account or, the other side of the problem, is issuer decided to bounce back his cheque rather than paying a developer who is still executing and promising future dates of a project delivery to investor started really long back. In the later case, if some one takes money from someone in return of a promise (in fact it is obligation) to deliver a good/asset and he doesn't execute then he is not entitled for additional future payments and he is should be forced to return back the present value of the money he took.
From what I understand, the tribunal will adjudicate in cases where a cheque issued to a developer has bounced. However it is not clear whether the tribunal will also have jurisdiction to hear cases where a purchaser has written a blank cheque to a bank to cover interest under construction etc and where that cheque bounces due to the interest in question being much higher than originally anticipated due to the property being delayed or the investor being in a dispute with the developer ?
I believe it's a very positive move and it could help an endless amount of cases, even if it is a temporary fix and limited to real estate. Previously, creditors could, by threat of imprisonment, unduly demand payment that may no longer be legally owed. I hope this development at least leads to settlements being negotiated in a more rational and equitable way by providing a more balanced platform. However, the competence of the committee in handling such cases remains to be seen.
Why do we need another committee that is 'unchallengeable', if all we need are clear laws? If the law clearly states that developers have the obligation to deliver a project exactly as outlined in the contract at the exact time and what the penalties are if they do not, then the issue of paying for something that has not been delivered would not arise. What has prevented the government from issueing such laws BEFORE the first villa /apartment was sold? It is high time for the government to stop procrastinating and protecting 'their own'. It is alarming to have committees replace the courts.
SINCE IT IS A CRIMINAL OFFENSE TO ISSUE CHEQUES WITHOUT ADEQUATE FUNDS IN THE ACCOUNT, THEN HOW THIS COMMITTEE WILL TAKE A DECISION, FOR EXAMPLE IF SOME ONE HAS RENTED A FLAT WITH POST DATED CHEQUES AND THOSE CHEQUES BOUNCED THEN THE FLAT OWNER HAS TO GO THRU SEVERAL DIFFICULTIES TO VACATE THE TENANT BY APPOINTING A LAWYER, AND PAYING RENTAL COMMITTEE FEES AND THEN GOES ON, UNTIL THE DECISION THE TENANT STAYS IN THE FLAT FREE OF CHARGE? IN THIS CASE THE TENANT SHOULD BE PUNISHED THRU A CRIMINAL CASE ONLY NOT THRU COMMITTEES? SECONDLY, IF A CHEQUE IS ISSUED TO A DEVELOPER AND THE DEVELOPER DOES NOT HAND OVER THE PROPERTY ON TIME USING THE CONTRACT TERMS "AS DETERMINED BY SELLER" BUT KEEP ON ASKING FOR PAYMENTS WITHOUT GIVING EXACT DATE OF COMPLETION BUT USING THE FAMOUS SENTENCE "AS DETERMINED BY SELLER" THIS IS USED BY OMNIYAT AND DAMAC WHO HAS NOT DELIVERED ONE SINGLE PROPERTY ON TIME BUT TOOK OUR MONEY, LIKE OMNIYATS THE BINARY, THE GEMINI, THE PAD AND SO ON AND FOR DAMAC THE LOTUS ETC. HOW CAN THE COMMITTEE PUNISH THE CHEQUE ISSUER IF HE DOES NOT WANT TO PAY SINCE THERE ARE SO MUCH DELAYS IN HANDOVER THUS LOSING THE OPPORTUNITIES OF RENTING OR SELLING? EVEN LAND DEPT ISSUE NOTICES TO BUYERS GIVING ONE MONTH NOTICE TO TERMINATE THE CONTRACT IF THE AMOUNTS ARE NOT PAID, WITHOUT SEEING THE DELAYS CAUSED BY DEVELOPERS THUS SUPPORTING DEVELOPERS, THIS HAS LOST THE CONFIDENCE OF BUYERS WHICH IS WHY DUBAI LOST ITS CHARM AND PRICES ARE DECLINING, HOW CAN WE INVEST MONEY WHEN THE DEVELOPERS TAKES FULL ADVANTAGE OF BUYERS, LIKE OMNIYAT FOR THE SQUARE PROJECT ARE ASKING THE BUYERS TO PAY DHS 17,000 PER YEAR FOR MAINTENANCE AND LAND CHARGES (SOMETHING NEWLY ADDED) FOR A STUDIO FLAT WHILE THE RENTAL VALUE FOR A STUDIO IS DHS 25,000 IS THIS FAIR? WHEN QUESTIONED THEY DICTATE TERMS RUDELY THREATENING TO CANCEL THE CONTRACT EVENTHOUGH WE HAVE PAID FULL AMOUNT FOR THE LEASED PERIOD? WHEN APPROACHED TO RERA THEY SAID GO TO DUBAI COURT, NOW WE HAVE TO SPEND HUGE LEGAL FEES ETC TO SORT OUT. I SINCERELY HOPE THE GOVT OF DUBAI WITH THEIR SUCH GOOD REPUTATION START TO SUPPORT BUYERS FAIRLY OTHERWISE THE MARKET WILL NEVER BOOM AGAIN. UNHAPPY INVESTOR
it is a very good law if it covers, cheques given in relation to rental properties which have been taken on a long term lease (3-5 years) i have a situation where i have taken a 3 year lease on a commercial office space, my company has closed own yet the land lord is asking for the full 3 years rent - even though i have given him almost a year as compensation. its come to the stage where he has complained to the police and i have been given 2 choices, 1) pay the full 3 years or what remaining or 2) leave the country. ive lived here for almost 10 years and call dubai my home so why should i leave because of a greedy landlord. He has had more than enough compensation from me, yet he is not satisfied! i hope this new law can apply to my case, as people like this landlord are giving dubai a bad name, which is doesnt deserve.
Tom: You have a legal contract with your landlord!!!! How can he be greedy when he is simply asking for what is rightfully his? Something that YOU agreed to give him when the times were good? Im starting to question the validity of this 'greedy landlord' claim if there are more people like you out there!! You signed a 3 year lease, pay the man for 3 years! I think its people like you who give Dubai a bad name, agreeing to a contract then reneging on it when its convenient. You signed the dotted line, man up and hand over your cash.
Mounir: Thank you for your words of wisdom if i had the money mate i would pay him but i dont, what i am highlighting is that there is no help gievn by landlords in these situations. i paid the rent unto date to the day i moved out and addition to this i paid the landlord and extra 1 year as compensation ( over 500k) i also spent over 500k on the office as it was a shell, A.C/electricty metre/cable/ decoration ect ect which again cost me over 500k.This is a benefit to him i know youll go back to your " you signed an agreement" yes im not disputing this, but unlike many lord lords in dubai who have ask for a few months compenation or even to pay until they find another tenant i was given no options or understanding under these current hard times in Dubai. what this boils down to for me is that i have been left 3 options - one - go to jail , two leave the country? or three pay him - which i have no means to do so. i am hopefully that this law will change this as if a person loses his job and cant sustain his long term apartment or office agreement, what does he do? im not infavour of people living or USING a property and not paying their dues and leaving (ie if they have lived there and not paid) but its a bit tough and unfair if you are being punished for time you have not been there and cant afford to pay. i wish it was as easy as "pay the man", if you dont have the money, what do you do ? unless you want to lend me some money lol Tom