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25 April 2024

Developer made to pay Dh1.4m compensation

By Mohammed El Sadafy

The failure of developers to receive municipality approval for their real estate projects does not absolve them from legal liability, according to a Court of Cassation legal principle.

The court explained that obtaining construction licence is one of the basic requirements for any project before it is presented to the public. Therefore, developers are not excused from the legal consequences of not getting such approval.

Also, the court stated that the municipality’s refusal to grant approval of buildings is not a sudden decision and, therefore, it is not subjected to force majeure.

The court issued the above principles with regards a case when a buyer filed a lawsuit against a real estate development company demanding Dh8.5million in compensation after the company failed abide by the contract and deliver the villa on time.

Based on expert report, the court asked the developer to pay Dh1.4 million as compensation.

The real estate developer claimed that the delay in delivering the villa was because the municipality did not grant approval.

The plaintiff confirmed he paid Dh3.8 million in scheduled premiums, and when the date of receiving the villa came he discovered that the company had not yet begun construction.

The plaintiff refused to buy the reason given by the developer that the hike in prices in the last two years delayed the project and caused him major loss.

Meanwhile, the developer suggested returning the amount given, but the buyer refused this offer and moved the Court of First Instance.

The court assigned a real estate expert to assess the loss incurred by the buyer by taking into account the price of the villa at the time of signing the contract and during the time of filing the lawsuit.

But both the buyer and the developer appealed the verdict at the Court of Appeals, which amended the sentence and asked the developer to pay Dh1million in compensation.

The developer moved the Court of Cassation stating that the municipality had rejected them permit, which the developer considered to be force majeure.

This prevented them from respecting the deadline, the court heard.

The Court of Cassation ruled that force majeure does not apply to this case because granting of permission to a developer does not fall within the description of force majeure.

The court based its judgment on Law 13 of 2008 of the organisation of the Land Registry in Dubai, which prohibits the sale of units on the map, before receiving the land and obtaining the necessary approvals from the competent authorities.