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Attach assets over escrow shortfall

Picture used for illustrative purposes only. (GETTY IMAGES)

By Parag Deulgaonkar

A developer’s assets can be attached if the escrow account for the project does not have enough funds to pay back an investor where the court has ordered a refund, says a legal expert.

“However, the real problem arises where the developer is a special purpose vehicle (LLC) set up solely for the purpose of completing the project. In these cases, it is likely that there are no other assets in the developer company and the investor cannot recoup their losses,” Scott Hutton, Senior Counsel, Real Estate & Construction department, Habib Al Mulla & Company told Emirates 24|7.

In December, the Dubai Land Department of Dubai said that only companies formally registered as offshore entities with Jebel Ali Free Zone Authority (Jafza) will be eligible to register properties from January 1, 2011.

The move was aimed to keep track of the ownership changes, which mostly were never reported to the DLD.

Although the law firm saw more claims being filed in 2010, Hutton said investors were holding back from filing cases in hope that the market will improve or regulations will be introduced to resolve their issues.

This website reported earlier of a real estate investor protection law likely to be announced this year.

Asked how much time it takes to get a judgement from the Property Court, Hutton said: “It really depends on the case in question, but as an approximation, one year.”

The Property Court, which is an arm of Dubai's First Instance Court, was set up in August 2008. The DLD has set up a mediation committee to help resolve developer-investor conflicts, only if the parties seek an out-of-court settlement.