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Xpress: News | Rera: Dealing with defaulters
Rera: Dealing with defaulters
By Awad Mustafa, Staff Reporter
The number of property-related cases has jumped significantly this year – many of which involve off-plan sales, cases of investors withdrawing and illegal provisions in purchase agreements, Real Estate Court’s top judge said.
Abdul Qader Mousa Moham-mad, Chief Justice of Dubai Real Estate Court, said from September 1 to December 31, 2008, the number of cases filed was 173. But, in just three months – from January 1 to March 30 this year – 267 cases have been filed. Investors not paying
“Some investors do not make the payments or refrain from making further payments due to fears that developers may fold up or run away,” Mohammad said.
The Real Estate Court, a civil court, was created in September last year to deal with property disputes arising in the wake of Dubai’s property boom.
Most of the cases involve buyers who have stopped paying for units booked with developers.
“In this case, the developer has to alert Real Estate Regulatory Agency (Rera),which then informs the investor that he has a 30-day period to fulfil his contractual obligations. “If the investor does not fulfil his obligations, the developer has the right to cancel the contract and return the money paid, minus 30 per cent of the amount already paid – and not of the total contract value,” he said.
Pay back clause
“A number of investors wish to discontinue payment and are trying to get back 70 per cent of the amount they paid. As per law, developers are supposed to retain 30 per cent of the amount already paid by the investor,” he added.
The judge’s explanation puts to rest confusion surrounding this clause. Developers used to claim that they may keep 30 per cent of the total contract unit’s price and not 30 per cent of the amount paid, in case an investor withdraws.
The judge also explained that when a purchase agreement signed by the buyer and seller contains provisions that contradict the law, those provisions stand null and void.
“Property laws in Dubai contain general laws. Provisions in the purchase contract are accepted as legal if they do not breach the law,” Mohammad said. Other cases involve delays in construction and hand-over of properties sold off-plan, he explained.
Developers at fault
“We have cases lodged against developers who did not hand over projects on time or have not even started building. In such cases, we look at the contracts individually and then the court decides. If the developer is found to be at fault, we then nullify the contract and order them to repay investors the full amount paid by them.”
Many of the cases lodged by investors have to do with properties sold off-plan, he added.
“A lot of complainants come to the court without purchase contracts. They present only booking forms issued by either developers or property brokers. The court settles contractual disputes. So, in case of booking forms or instalment receipts issued to buyers, these documents are viewed as contracts, but disputes arising out of clauses not mentioned in these documents need to be proved in court,” he said.
He also stressed that the law on escrow account is clear.
The Escrow Law
“Law No 8 of 2007 [the Escrow Law] states that a project developer has to place a deposit or financial collateral of equal value of the property at Rera.
“This is why every buyer has to be registered in the Real Estate Registry in order to guarantee his rights.”
The court demonstrated its strict adherence to the law last month when it ordered a Dubai developer to pay over Dh8 million to an investor after it deemed the purchase contract the company gave to the buyer invalid as the developer failed to register the land with the Land Department.
Advice to buyers and investors
Under Law No 13, 2008, the developer has no right to ask buyers to pay extra money for any increase in the size of the unit, if the project is completed
Service charges must be Rera- approved. Before paying service charge, the buyer must register his unit with the Dubai Land Department and wait for approval
Go to the Land Department directly to register the unit; don’t pay the excess charge if the unit is ready (Law No 13, 2008)
Charges for utilities should be imposed by the utility provider; a developer has no right to charge unit buyers for chiller connection unless the provider allows the developer to do it contractually
The property registration fee is two per cent, to be paid to the Land Department by the owner (one per cent) and the developer (one per cent)
Buyers are not obliged under the law to sign anything they don’t agree on
(Additional inputs from Mohammed N. Al Khan)
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Rera: Dealing with defaulters
By Awad Mustafa, Staff Reporter
The number of property-related cases has jumped significantly this year – many of which involve off-plan sales, cases of investors withdrawing and illegal provisions in purchase agreements, Real Estate Court’s top judge said.
Abdul Qader Mousa Moham-mad, Chief Justice of Dubai Real Estate Court, said from September 1 to December 31, 2008, the number of cases filed was 173. But, in just three months – from January 1 to March 30 this year – 267 cases have been filed. Investors not paying
“Some investors do not make the payments or refrain from making further payments due to fears that developers may fold up or run away,” Mohammad said.
The Real Estate Court, a civil court, was created in September last year to deal with property disputes arising in the wake of Dubai’s property boom.
Most of the cases involve buyers who have stopped paying for units booked with developers.
“In this case, the developer has to alert Real Estate Regulatory Agency (Rera),which then informs the investor that he has a 30-day period to fulfil his contractual obligations. “If the investor does not fulfil his obligations, the developer has the right to cancel the contract and return the money paid, minus 30 per cent of the amount already paid – and not of the total contract value,” he said.
Pay back clause
“A number of investors wish to discontinue payment and are trying to get back 70 per cent of the amount they paid. As per law, developers are supposed to retain 30 per cent of the amount already paid by the investor,” he added.
The judge’s explanation puts to rest confusion surrounding this clause. Developers used to claim that they may keep 30 per cent of the total contract unit’s price and not 30 per cent of the amount paid, in case an investor withdraws.
The judge also explained that when a purchase agreement signed by the buyer and seller contains provisions that contradict the law, those provisions stand null and void.
“Property laws in Dubai contain general laws. Provisions in the purchase contract are accepted as legal if they do not breach the law,” Mohammad said. Other cases involve delays in construction and hand-over of properties sold off-plan, he explained.
Developers at fault
“We have cases lodged against developers who did not hand over projects on time or have not even started building. In such cases, we look at the contracts individually and then the court decides. If the developer is found to be at fault, we then nullify the contract and order them to repay investors the full amount paid by them.”
Many of the cases lodged by investors have to do with properties sold off-plan, he added.
“A lot of complainants come to the court without purchase contracts. They present only booking forms issued by either developers or property brokers. The court settles contractual disputes. So, in case of booking forms or instalment receipts issued to buyers, these documents are viewed as contracts, but disputes arising out of clauses not mentioned in these documents need to be proved in court,” he said.
He also stressed that the law on escrow account is clear.
The Escrow Law
“Law No 8 of 2007 [the Escrow Law] states that a project developer has to place a deposit or financial collateral of equal value of the property at Rera.
“This is why every buyer has to be registered in the Real Estate Registry in order to guarantee his rights.”
The court demonstrated its strict adherence to the law last month when it ordered a Dubai developer to pay over Dh8 million to an investor after it deemed the purchase contract the company gave to the buyer invalid as the developer failed to register the land with the Land Department.
Advice to buyers and investors
Under Law No 13, 2008, the developer has no right to ask buyers to pay extra money for any increase in the size of the unit, if the project is completed
Service charges must be Rera- approved. Before paying service charge, the buyer must register his unit with the Dubai Land Department and wait for approval
Go to the Land Department directly to register the unit; don’t pay the excess charge if the unit is ready (Law No 13, 2008)
Charges for utilities should be imposed by the utility provider; a developer has no right to charge unit buyers for chiller connection unless the provider allows the developer to do it contractually
The property registration fee is two per cent, to be paid to the Land Department by the owner (one per cent) and the developer (one per cent)
Buyers are not obliged under the law to sign anything they don’t agree on
(Additional inputs from Mohammed N. Al Khan)
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