Recently, the UAE legislator made several legislative amendments to clarify some of the outstanding problems between the buyer and the real estate developer about the real estate unit that is still under construction, and as a result, he amended Article 11 of Law No. 13 of 2008 in Amendment No. 19 of 2017 and Amendment No. 19 for the year 2020.
The amended article set strict controls and transparent procedures that must be followed in case the buyer breaches his obligation towards the real estate developer who sold him a real estate unit off-plan.
Where the developer was required to notify the Lands and Properties Department of the buyer’s breach according to a modified form with the department for this purpose that includes information about the buyer and developer and also the specifications of the property in dispute, in addition to an accurate description of the obligation that the buyer breached.
As soon as the Department of Lands and Properties verifies the buyer’s breach, it notifies the buyer of fulfilling his contractual obligations with the real estate developer within 30 days from the date of the notification, provided that the notification is in writing and fixed on the date. Or any other means determined by the department, bearing in mind that the department has the right to make an amicable settlement between the buyer and the developer, if possible, and prove it in the contract appendix.
The mentioned period shall apply unless the buyer submits a written objection based on one of the reasons why he did not comply with the terms of the contract, which are:
- Non-delivery of the buyer the final contract for the sale of the real estate unit.
- If the developer refrains from linking the payments to the construction stages of completion.
- If the developer has fundamentally changed the specifications of the real estate unit agreed upon in the contract.
- If construction work on the project has been suspended for more than six months.
- Not registering the real estate unit in the department.
If the buyer does not object and it is proven that he has breached his obligations after the expiration of the notification period or that an amicable settlement has been reached with him, the department has the right to issue an official document to be given to the developer stating the real estate developer’s commitment to legal procedures and determining the percentage of the developer’s completion of the real estate unit subject of the off-plan sale contract following the standards and rules Accredited by the Real Estate Regulatory Agency.
Therefore, the law empowered the developer to have the right, after receiving the document, to take the necessary measures against the buyer who violated the terms of the contract without resorting to court or arbitration. A request for the Department to intervene to sell the real estate unit under dispute in a public auction to meet the value of the amount, with the buyer bearing the expenses.
Among the measures that the real estate developer can take against the buyer, the contract is terminated according to the law:
- Termination of the contract unilaterally if the above-mentioned breach conditions are met and deduct 40% of the value of the real estate unit stipulated in the off-plan sale contract, and more than that is returned to the buyer within a year from the date of rescinding the contract or within 60 days from the date of returning the contract or selling the real estate unit to another buyer, whichever comes first.
- If the real estate developer begins work on the real estate project by receiving the construction site and starting construction work following the designs approved by the competent authorities, and the completion rate is less than 60% of the real estate unit, he has the right to terminate the contract by his unilateral will, and deduct what No more than 25% of the value of the real estate unit stipulated in the off-plan sale contract, and the excess of that was returned to the buyer, within a year from the date of the contract termination, or within 60 days from the date of reselling the real estate unit to another buyer, whichever comes first.
- If the real estate developer does not start working on the real estate project for any reason beyond his control, and without negligence or negligence on his part, he has the right to terminate the contract at his own will and deduct no more than 30% of the value of the amounts paid to him by the buyer Anything more than that shall be returned to the buyer within 60 days from the date of termination of the contract.
- If the real estate project is cancelled by a reasoned decision from the Real Estate Regulatory Agency, the real estate developer must return all amounts received from buyers, following the procedures and provisions stipulated in Law No. (8) of 2007 regarding escrow accounts for real estate development in the Emirate of Dubai.
We note that these rules in the above-mentioned article do not apply to the contract of sale of land in which the off-plan sale has not taken place, and this sale remains subject to the provisions stipulated in the contract concluded between its parties.
In this way, we recommend that the buyer: secure the contract with precautionary conditions to guarantee a right in case the developer breaches his obligations and to specify the completion period in anticipation of future disputes.
Eman Jad
Legal counsel
