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Dubai Real Estate Alert: Dubai Law 13 Amendment IssuedWritten by Abigail Kay and Will Grinter
An important and much anticipated amendment to Article 11 of Dubai Law 13 of 2008 (“Article 11”) has been issued. Dubai Law No. 9 of 2009, which describes the amendment, is expected to be published in the Government Gazette shortly and will have effect from the date of publication.
Article 11, as amended, will set out:
the procedure that must be followed in the event that a developer wishes to cancel an off plan sale contract by reason of purchaser default; and
monies that a developer may retain in such circumstances.
Application
Importantly, Article 11 (as amended) will apply to all cancellations of all off plan sale contracts irrespective of the date on which the relevant contract was signed. The indication is that contrary provisions in sale contracts will be void.
It appears that sales of land which are not made “off plan” will not be caught by the amended Article 11, and will remain subject to the provisions of the relevant contract.
Background
Dubai Law 13 of 2008 came into effect on 31 August 2008. The existing Article 11 provides that in the event of cancellation of a sale contract due to the default of the purchaser, the developer may retain 30% of monies paid by the purchaser.
The existing Article 11 concerned many developers in light of recent economic conditions. In addition, there has been considerable uncertainty regarding the application of the existing Article 11 to contracts entered into prior to 31 August 2008.
The amendment to Article 11 is intended to address these issues and uncertainties.
Amendment
Article 11 (as amended) will provide the following:
1.
Before taking any cancellation action, a developer must notify the Land Department if a purchaser is in default of a contract for sale. The Land Department will then give the purchaser a notice providing a 30 day period within which the purchaser must fulfil its obligations.
2.
If at the end of the 30 day notice period the purchaser has not fulfilled its obligations, the following rules will apply:
(a) Where the developer has completed construction of at least 80% of the project, the developer may retain all monies paid and request that the purchaser settle the remaining amounts. If this is not possible, the developer may request that the property be auctioned in order to collect the outstanding monies.
(b) Where the developer has completed construction of at least 60% of the project, the developer may revoke the contract and retain 40% of the purchase price stipulated in the contract.
(c) Where construction has commenced but construction of less than 60% of the project has been completed, the developer may revoke the contract and retain 25% of the purchase price.
(d) Where construction of the project has not yet commenced for reasons beyond the developers control, without any negligence or omission on the developer’s part, the developer may revoke the contract and retain an amount equal to 30% of all monies paid by the purchaser. Commencement of ‘construction’ is defined as meaning handover of the site by the developer to a contractor and commencement of construction works in accordance with designs approved by relevant authorities.
3.
For the purposes of paragraphs (b),(c) and (d) above, the developer shall return any monies due to the purchaser within one year from the date of revocation or within 60 days from the date of a resale of the property by the developer, whichever is earlier.
4.
The Real Estate Regulatory Agency may cancel a project following consideration of a status report, in which case the developer must return all monies paid by purchasers and the provisions of Dubai’s escrow laws will apply.
Conclusion
The amendment provides much anticipated clarification regarding the procedures required to be followed by developers in respect of defaulting purchasers, as well as the rights of developers to retain purchaser monies upon cancellation. We expect further clarification and guidance regarding the implementation of the changes to be provided by the Dubai Land Department in due course.
Published on 15 April 2009 | Jurisdiction: Middle East Areas of expertise: Real estate and construction
Contact us Accessibility Legal notice Privacy policy © 2008 Clyde & Co LLP. All rights reserved.
MY RESERVATIONS FOR THIS ARTICLE.
Many developers are not cancelling contract fo their clients with rera because they wants to get benefit's from clause a,b,c,d which will goes in the favour of developers after some time.What they wants actually,according to my thoughts they wants to fortfeit all their dafaulters money after clause a,b,c,d will be implemented after completing the requirements which is clearly states in that clauses.I think time is in favour of us but after they starts their project's it will goes in the favour of the developers.Its time to take action now or u will loose your life saving like a wind.
Dubai Real Estate Alert: Dubai Law 13 Amendment IssuedWritten by Abigail Kay and Will Grinter
An important and much anticipated amendment to Article 11 of Dubai Law 13 of 2008 (“Article 11”) has been issued. Dubai Law No. 9 of 2009, which describes the amendment, is expected to be published in the Government Gazette shortly and will have effect from the date of publication.
Article 11, as amended, will set out:
the procedure that must be followed in the event that a developer wishes to cancel an off plan sale contract by reason of purchaser default; and
monies that a developer may retain in such circumstances.
Application
Importantly, Article 11 (as amended) will apply to all cancellations of all off plan sale contracts irrespective of the date on which the relevant contract was signed. The indication is that contrary provisions in sale contracts will be void.
It appears that sales of land which are not made “off plan” will not be caught by the amended Article 11, and will remain subject to the provisions of the relevant contract.
Background
Dubai Law 13 of 2008 came into effect on 31 August 2008. The existing Article 11 provides that in the event of cancellation of a sale contract due to the default of the purchaser, the developer may retain 30% of monies paid by the purchaser.
The existing Article 11 concerned many developers in light of recent economic conditions. In addition, there has been considerable uncertainty regarding the application of the existing Article 11 to contracts entered into prior to 31 August 2008.
The amendment to Article 11 is intended to address these issues and uncertainties.
Amendment
Article 11 (as amended) will provide the following:
1.
Before taking any cancellation action, a developer must notify the Land Department if a purchaser is in default of a contract for sale. The Land Department will then give the purchaser a notice providing a 30 day period within which the purchaser must fulfil its obligations.
2.
If at the end of the 30 day notice period the purchaser has not fulfilled its obligations, the following rules will apply:
(a) Where the developer has completed construction of at least 80% of the project, the developer may retain all monies paid and request that the purchaser settle the remaining amounts. If this is not possible, the developer may request that the property be auctioned in order to collect the outstanding monies.
(b) Where the developer has completed construction of at least 60% of the project, the developer may revoke the contract and retain 40% of the purchase price stipulated in the contract.
(c) Where construction has commenced but construction of less than 60% of the project has been completed, the developer may revoke the contract and retain 25% of the purchase price.
(d) Where construction of the project has not yet commenced for reasons beyond the developers control, without any negligence or omission on the developer’s part, the developer may revoke the contract and retain an amount equal to 30% of all monies paid by the purchaser. Commencement of ‘construction’ is defined as meaning handover of the site by the developer to a contractor and commencement of construction works in accordance with designs approved by relevant authorities.
3.
For the purposes of paragraphs (b),(c) and (d) above, the developer shall return any monies due to the purchaser within one year from the date of revocation or within 60 days from the date of a resale of the property by the developer, whichever is earlier.
4.
The Real Estate Regulatory Agency may cancel a project following consideration of a status report, in which case the developer must return all monies paid by purchasers and the provisions of Dubai’s escrow laws will apply.
Conclusion
The amendment provides much anticipated clarification regarding the procedures required to be followed by developers in respect of defaulting purchasers, as well as the rights of developers to retain purchaser monies upon cancellation. We expect further clarification and guidance regarding the implementation of the changes to be provided by the Dubai Land Department in due course.
Published on 15 April 2009 | Jurisdiction: Middle East Areas of expertise: Real estate and construction
Contact us Accessibility Legal notice Privacy policy © 2008 Clyde & Co LLP. All rights reserved.
MY RESERVATIONS FOR THIS ARTICLE.
Many developers are not cancelling contract fo their clients with rera because they wants to get benefit's from clause a,b,c,d which will goes in the favour of developers after some time.What they wants actually,according to my thoughts they wants to fortfeit all their dafaulters money after clause a,b,c,d will be implemented after completing the requirements which is clearly states in that clauses.I think time is in favour of us but after they starts their project's it will goes in the favour of the developers.Its time to take action now or u will loose your life saving like a wind.
