How to convince developers to restructure the installments?

[financier888]

1. I booked a 2 bedroom flat in The Garden City (Al Jurf) Ajman, Mandarine Tower M1. (Developer is Real Estate Investment Est.)

2. I started paying my monthly installments since Dec 2007. After paying the booking charges and advance in Nov 2007.

3. After every six months I visit them and give them 6 cheques for 6 monthly installments. So I have given them cheques till May 2009.

4. Till May 2009 I have paid Dhs. 125,082/-

5. Now, the contract clearly states completion date to be Dec 2009.

6. The tower M1 comprises of G+3P+12 Typical Floors and uptill now the have just put one ceiling of the ground floor (3P and 12 Floors are yet to be built).

7. Which means the completion date of Dec 2009 is impossible to be achieved (Also Seeing their progress of 19 months we can make out we can make out what they could do in the next 7 months.

8. The Contract binds both the parties, the buyer and the seller, to stick to all the clauses.

9. We are, on our part sticking to all the clauses of the Contract. But if the do not complete by Dec 2009, then this would clearly be against the contract.

10. The contract only allows them a delay in handing over if the authorities like FEWA etc. delays. But does not permit them a delay in construction.

11. On the basis of the above can I give a gap of 6 months in my installments to make my payments in line with their progress of work.

12. At the time of purchase of this property, they confidently told me that after Dec 2009 I can give the apartment on rent and pay the future installments with the rent amounts.

13. Is there any authority who can check the developers for abidig by the contract clauses.

Best Regards.

Hatimk

Hi Hatim

1) When it comes to May '09 - DO NOT GIVE THEM ANY MORE POST DATED CHECKS
2) Were you issued a SPA? (if so, the SPA should contain a provision for 'penalty' if the construction is delayed 'X'Time after original projected completion timeline
3) what % is your AED 125, 082 of the purchase price? 30 -40 -50% ?? (this is important
4) have they opened-up their escrow acct in Ajman yet?
5) be happy that the construction has started!! (many have not nor probably ever will!!!!) - you may be surprised how qiuckly the others floors can go up - as fast as one floor per 1 or 2 weeks depending on the amount of sq ftg... and the quality of their labour and if they will run two shifts....

Your only leverage will be when it comes to issuing the post dated checks - so dont....

 

[hatimk]

Thanks for your detailed reply. I appreciate your help. May God reward you for that.

1) If I don't give them more PDCs I am afraid they will penalize me with interest for delaying payments. You know "Might is Right". Is there any body or department who can help me to reschedule my payments to match with their pace of work.

2) (Does SPA stands for Sales Purchase Agreement; if so then yes have got it) But there is no penality on the developer except if the project is not completed within 6 months after the stipulated completion date. Then the buyer has right to claim back his investment and cancel the agreement.

3) I am supposed to pay a total of Dhs 561,006/- which includes Dhs 30,000/- for Parking Space. This amount is divided as below
Before handing over till Nov 2009= Dhs. 155,076/-
(Out of which I already paid Dhs. 125,082/- until May 2009)
At handing over = Dhs. 79,650/-
After Nov 2009, 36 Monthly installment of Dhs. 8,230 which is Dhs. 296,280/-.

But instead of mentioning
"After handing over, 36 equal installments of Dhs. 8,2320"
they have very cleverly or cunningly mentioned in the contract
"from Dec 2009, 36 equal installments of Dhs. 8,2320).
But they have a clause saying "completion date" is Dec 2009.
In this clause also they used the words "completion date" instead of "handing over date"


4) How shall I know that they have an Escrow Account or not. If I give them a cheque how would I know that they are depositing this cheque in the escrow account or they are putting it in their regular account? Should we believe and trust what they tell us?

5) Ok I'll try to make a happy face; at least the construction has started, it is so kind of them!!

6) I understand and appreciate your advice of not issuing them any more PDCs but what if they penalize me for that. (Might is always Right).

Thanks & Best Regards.

Hatimk

Hi Hatim

1) When it comes to May '09 - DO NOT GIVE THEM ANY MORE POST DATED CHECKS
2) Were you issued a SPA? (if so, the SPA should contain a provision for 'penalty' if the construction is delayed 'X'Time after original projected completion timeline
3) what % is your AED 125, 082 of the purchase price? 30 -40 -50% ?? (this is important
4) have they opened-up their escrow acct in Ajman yet?
5) be happy that the construction has started!! (many have not nor probably ever will!!!!) - you may be surprised how qiuckly the others floors can go up - as fast as one floor per 1 or 2 weeks depending on the amount of sq ftg... and the quality of their labour and if they will run two shifts....

Your only leverage will be when it comes to issuing the post dated checks - so dont....

 

[financier888]

Thanks for your detailed reply. I appreciate your help. May God reward you for that.

1) If I don't give them more PDCs I am afraid they will penalize me with interest for delaying payments. You know "Might is Right". Is there any body or department who can help me to reschedule my payments to match with their pace of work.

DO NOT give them anymore PDC's = as under the new Ajman law - they MUST open an escrow acct in the Ajman bank AND - ARERA will tie payments to construction.... tell them you will simply tendor them a check monthly - once you are convinced that the construction is proceeding... rather than them holding your PDC - YOU WILL HOLD YOU OWN CHECK AND TENDOR IT TO THEM - or more precisely - THE ESCROW ACCT - they cannot penalize for you NOT giving them the PDC's - provided of course, you still intend to keep making the payments...

2) (Does SPA stands for Sales Purchase Agreement; if so then yes have got it) But there is no penality on the developer except if the project is not completed within 6 months after the stipulated completion date. Then the buyer has right to claim back his investment and cancel the agreement.

OK good - Yes, the SPA is for the Sales Purchase Agreement.... too soon to say as to whether or not they will finish within 6 months of Dec 09 - or June '10 - they could possbily finish as the building is not a tall tower....

3) I am supposed to pay a total of Dhs 561,006/- which includes Dhs 30,000/- for Parking Space. This amount is divided as below
Before handing over till Nov 2009= Dhs. 155,076/-
(Out of which I already paid Dhs. 125,082/- until May 2009)
At handing over = Dhs. 79,650/-
After Nov 2009, 36 Monthly installment of Dhs. 8,230 which is Dhs. 296,280/-.

But instead of mentioning
"After handing over, 36 equal installments of Dhs. 8,2320"
they have very cleverly or cunningly mentioned in the contract
"from Dec 2009, 36 equal installments of Dhs. 8,2320).
But they have a clause saying "completion date" is Dec 2009.
In this clause also they used the words "completion date" instead of "handing over date"

Ok - you have paid 125,082 and your contract calls for you to pay 155,076 - which means a balance of 29,994 - this is the ONLY amount you owe till 'hand-over' or as they say 'completion date' -

(they were indeed quite clever in changing the language because - they may 'complete' the building in time but it may be delayed in handover IF THERE IS NO ELECTRIC OR WATER - WHICH HAS HAPPENEDE IN AJMAN>... So - with this change of language - you will have to continue making your payments and not be able to take actual possession of your unit !!!

INSIST that the balance of the29,994 (in how ever amount of payments / installments - be made into their escrow account !! You may tell them, that you have been advised by ARERA and this is the new law in Ajman - (if they are smart and honest - they should have started the filing to open the escrow acct and probably have....)


4) How shall I know that they have an Escrow Account or not. If I give them a cheque how would I know that they are depositing this cheque in the escrow account or they are putting it in their regular account? Should we believe and trust what they tell us?

DO NOT GIVE THEM A CHECK !!!! THEY MUST SUPPLY YOU with the name of the bank and escrow acct number and you arrange the transfer yourself directly - I repeat - DO NOT GIVE THE MONEY TO THEM!! Many buyers in Dubai have made this mistake and regret it !!! YOU make the payment DIRECTLY into the escrow account... In real estate and especially in Ajman - TRUST NO ONE !! (sorry to say,....) ARERA will have the list of registered buildings and know if the escrow has been opened..
5) Ok I'll try to make a happy face; at least the construction has started, it is so kind of them!!

Yes, kind indeed but at least - you will actually get the unit you are paying for !!! hard to collect rent for tent space in the desert !!!!

6) I understand and appreciate your advice of not issuing them any more PDCs but what if they penalize me for that. (Might is always Right).

Might is always Right in dictatorships but not when there is a rule of law - the Ajman authorities are serious about getting their laws up to speed and protecting the investors - you should visit ARERA offices and speak to someone there - at least you'll have a name and contact person should the need arise....

good luck!

Thanks & Best Regards.

Hatimk

Good that you have provided more details - let's examine this in more detail - responses in BOLD (see Above)

 

[hatimk]

Good that you have provided more details - let's examine this in more detail - responses in BOLD (see Above)

Thanks very much for your email. I am feeling strong after your mail.

Do you suggest that I should visit ARERA office in Ajman. Where is it location. Is it on Al ittihad Road Old Imigration Building B Block Tel 067444 144, Fax 067444145.

Please guide.

Hatimk

 

[hatimk]

Thanks very much for your email. I am feeling strong after your mail.

Do you suggest that I should visit ARERA office in Ajman. Where is it location. Is it on Al ittihad Road Old Imigration Building B Block Tel 067444 144, Fax 067444145.

Please guide.

Hatimk

IMPORTANT:

The Garden City Comprise of a total of 24 buildings (12 buildings are 6 floors) and (12 buildings are G+3P+12Floors). The small buildings are almost done like there structure is almost finished and now interiors are being done. For the other 12 buildings some have reached till the ground floor ceiling, some first parking floor ceiling and some first parking floor ceiling. My apartment is in Mandarine Tower M1 which is only constructed till the ground floor ceiling.

The reason for telling you all this is I have just found out in ARRA LAW that

"According to Arra, those developers who have completed 50 per cent of the construction on existing projects will not have to open an Escrow account for the project."

Now if they consider all the buildings as one project then they might prove that they have touched the 50% mark. But if they consider my tower then it is only 5% done.

In that case can I insist on Escrow account

Regards

Hatimk

 

[financier888]

M1 Ajman

You have to check with ARERA and see if ALL the buildings are registered as ONE project as individually - best to go up and try to sort out in person rather than over the phone.... It sounds like the developer will finish the job and they sound responsible... many have not even started! - better clarify the individual project with ARERA as the previous pointed out. I was not aware of this 'exception' to law as it relates to the 50% rule - you may not have much choice - but also - you should ask ARERA if the electric is scheduled to be there within 9 months for handover...

good luck