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22 June 2024

Buyers may move court for cancelled contracts

Buyers have the right to terminate the contract if there is a breach by the seller (IMAD ALAEDDIN) 

By Anjana Kumar

Property buyers can contest their "terminated" off-plan contracts, signed after August 31, 2008, in the newly set-up Property Court, but will have to go through the Dubai Land Department (DLD), a senior government official said.

"The purchaser will be further able to seek compensation from the Property Court if he establishes a ground for the termination," Emad Eldin Farouq, Senior Legal Counsel, Dubai Land Department, told Emirates Business.

In November 2008, the Land Department in an administrative circular, said developers – not buyers – would have to initiate the official procedure to cancel the off-plan transactions. But for sales contracts, signed before August 31, 2008, the terms and conditions of the contract will be applicable for the two parties under the UAE Civil Code. However, these would not have to go through the DLD.

In the internal administrative circular, the department gave the interpretation of the meaning and practical application of Article 11 of the Law No.13 regulating the interim real estate registration. According to this circular, in case of a termination of an off-plan contract, the developer shall be entitled to 30 per cent of the purchase price plus 30 per cent of the any further monies paid above 30 per cent of the purchase price.

"In case of a cancellation of an off-plan contract where the purchase price is Dh1 million and the purchaser has paid 40 per cent of the property value, then the maximum claim the developer can make is of Dh330,000 (30 per cent of Dh1 million and 30 per cent of the remaining 10 per cent)," he said.

"If a buyer wants to contest this, he can go to the Property Court which shall apply the civil jurisdiction on this. Nobody can prevent the buyer from going to the court. Further, the Property Court may or may not agree with this and they can choose to either cancel these terms or they can adopt it or they can apply any other rules to this. The Property Court will look at it based on the rules and regulation in place under the Civil Code Law," added Farouq.

Legally any agreement can be terminated either amicably, voluntarily or can be terminated by a court order based on the facts.

Under the Civil Code, the purchaser has the right to terminate the contract if there is a breach by the seller. The purchaser is entitled to refer the matter to the appropriate court with jurisdiction (which is now the Property Court)

Mohammad Kawasmi, Senior Associate Al Tamimi & Company, said: "We are not aware if the administrative circular issued by the DLD will hold true in the Property Court and they can choose to override the circular."

Earlier this week, Farouq told this newspaper that investors facing cash-flow constraints can approach the Dubai Land Department for rescheduling payments for their properties.

Register online

Developers will have to register their off plan and completed units through the Dubai Land Department's online registration system, said Farouq.

Called Oqood, the new system will enable effective implementation of Law No13 of 2008 for regulating the interim real estate register in the emirate.

Developed by Emirates Real Estate Solutions for the Dubai Land Department, the Oqood online interim registration process will lead to minimising conflicts arising between developers, investors and sellers, while contributing to cutting down the escalating off-plan selling and reselling costs.

Charges will be the same as levied by the Dubai Land Department – one per cent of the total value paid by the seller and one per cent to be paid by the consumer. Following the issuance of Law No 13, developers now have to register all their units prior to launch of the project and only then can they proceed with their sales.

The law aims to create further consumer ease and protection within the Dubai realty market.