Mod: If reposting is not permitted, pls delete. I cannot post the URL, so did a cut and paste.
This is an interesting piece - from Wadi online - Story #6842.
(news - wadionline - com)
Disparate circulars add to confusion
Publish Date: 2008-11-24 02:00:05 Story Code: 6842
This article, the latest in a series of articles we have published regarding aspects of Dubai's legal regime, aims to answer some questions created in the wake of certain recent real estate legislation in Dubai. This legislation was issued in order to organise Dubai's real estate legal regime, but has instead opened the door to disparate circulars designed to clarify, modify or amend existing legislation, thereby exacerbating the confusion and deepening the chaos.
The latest contribution to the recent real estate legislation was the Administrative Circular issued on November 10, 2008 explaining inter-alia Article 11 of Law No. 13 in relation to the Organisation of the Preliminary Land Register in the Emirate of Dubai for the year 2008.
Article 11 provides that:
"1 - In case the Buyer violates any of the terms and conditions of the real estate unit sale agreement entered into with the Developer, the latter should notify the Department of the same. Then the Department shall give the Buyer, whether in his presence, by registered mail or by e-mail, a deadline of (30) days to fulfil his contractual obligations.
2- In case the deadline indicated in Paragraph (1) hereof expires without fulfilment by the Buyer of his contractual obligations, the Developer may revoke the agreement and return the amounts received from the Buyer after deducting maximum 30 per cent of the amounts paid by him."
Clarification needed
Article 11 contravenes the UAE Civil Transactions Law, which provides that monetary compensation for damages should be in direct relation to damages incurred. Therefore, according to Article 389 of the UAE Civil Transactions Law, it is left to the discretion of a judge to assess monetary damages. Article 11 mandates liquidated damages in favour of developers, limiting the judge's discretion in assessing the damages, in direct violation of the UAE Civil Transactions Code. This situation begs legislative clarification. However, instead of waiting for such clarification, the Land Department issued the Administrative Circular.
For the sake of argument the second clause of the Administrative Circular provides that "in case the contract is cancelled, the developer may retain 30 per cent of the contract's value, and the rule of (30 per cent-70 per cent of the money paid) shall be applied on amounts exceeding 30 per cent". Article 11 is clear when it states that if the buyer does not fulfil its obligation under the agreement, then the developer has the right to cancel the agreement and "return the amounts received from the Buyer after deducting maximum 30 per cent of the amounts paid by him".
In contrast, the Administrative Circular interprets Article 11 as follows: "in case of cancelling the contract, the developer may retain 30 per cent of the contract's value, and the rule of (30 per cent - 70 per cent of the money paid) shall be applied on amounts exceeding 30 per cent". In examining this clause and comparing it to Article 11, it is clear that the Administrative Circular has the effect of amending and adding to Article 11.
In our view, Article 11 is very clear and the Administrative Circular contradicts Article 11's intent. Article 11 was issued by the highest authority in Dubai. By law, an administrative decision may explain the law but may not amend it or add to it. Therefore, the Administrative Circular is, in our opinion, illegal. In addition Article 15 of Law No. 13 states that "this Law shall be published in the Official Gazette and come into force from the date of its publication". On the other hand, clause 5 of the Administrative Circular stipulates that "Law number 13 shall be implemented with immediate effect, therefore the contracts executed prior to the Law shall be subject to the terms of the contract entered by the developer and the purchaser, but the contracts executed after the enactment of the Law shall be subject to the rules of the Law." The law cannot come into force with immediate effect when its basis must necessarily follow publication. The Administrative Circular cannot amend Law No. 13 and enlarge the scope of Article 15 beyond its legislative intent.
The Land Department should have waited to issue administrative circulars till the requisite Executive Orders are issued. Laws exist to further justice and not to give a party such as the developer or the buyer an advantage over the other.
If the implementation of laws and regulations grant advantages to the developers at the expense of buyers and/or investors, it would likely discourage investors and buyers, which in turn would negatively impact the economic boom that Dubai is experiencing.
- The writer is managing partner of Dubai-based Habib Al Mulla & Co law firm
© Gulf News 2008. All rights reserved.
