Thursday, May 28, 2009

New rule bans buyers from terminating off-plan sale contract

According to legal experts, the Law No.9 of 2009 does not permit buyers to terminate contracts. The only way an investor can terminate a contract is to go via the court and present a strong termination case, or go directly to Dubai's RERA (Real Estate Regulatory Authority) and seek for project cancellation.

The Partner at Hadef and Partners, Michael Lunjevich, said preventing buyers from cancelling their contracts will help in ensuring that people do not take advantage of a down market. If the law permits the investors to cancel, there will be a huge influx of people intending to cancel projects.

With the developers being permitted to cancel contracts under the Law No.9 of 2009, the law indicates sympathy towards developers, the legal experts say.

The Law No.9 was implemented only recently, and relates to cancellations of all off-plan sale contracts, irrespective of when the contract was signed, which makes the amendment more retroactive.

When the law was first read, it seemed very developer-friendly, but in reality it also favours the buyer a lot, Lunjevich pointed out.

Currently, three new regulations for Law No.9 are awaiting approval, including one which the developer says will not be able to cancel contract without a letter from Land Department, else, the cancelled contract will not have any value in court.

Secondly, the Land Department should attach a letter supporting technical aspects from the site.
Finally, although the investors seeking cancellation of projects must do so only in court, the Investors Group have desired to be able to cancel in the Land Department.

If an investor seeks cancellation at the last minute, and if the developer has already completed 80 percent of a project, it can keep the full amount paid, and ask the purchaser to settle the remaining amount of the contract price. If this is not possible, the developer can request the property be sold at auction.

If the project is atleast 60 percent complete, the developer can revoke contract and deduct upto 40 percent of the purchase price of the unit, as stipulated in the contract. If the developer has completed less than 60 percent of the project, it can revoke contract and deduct 25 percent of purchase price as stipulated in contract.

If the construction is yet to commence, the developer can revoke contract and deduct up to 30 percent of the amount paid by developer.

5 comments:

Anonymous said...

This will shake investors confidence and no investor will in future trust policies of Dubai govt. because they are changing laws everyday.When I purchased property the law said that in case of my default the developer can keep 30% of whatever amount I have paid and return 70% to me, it won't be fair with me if implication of new law effects me.

ADENIJI said...

With the present meltdown,this will leads to worst scenario as the Dubai govt.are over protecting the Developers,and the Court should be the hope of an average investors with trust that the Court Decision will be fair ,but this may be bias,Investors must take a proper look at weekly laws that are being passed.Hence, Implications will be very bad.Govt should uphold her integrity on this matter.

Yousef said...

It seems crazy that an investors can lose up to 30% of what has been paid if the project has not even started. Investors lose money even though they have done nothing wrong. They would have paid a lot of money in good faith. Why should a developer gain the 30% if they have not even started the project. The developer should pay back all the money they collected from investors. This unjust law will frighten off investors and encourage developers to collect money and then cancel the project and benefit from taking up to 30% of what investors have paid. I used to think that Dubai Government wanted to protect investors!!

Kami said...

I believe it is quite unfair to charge 30% the investor because of developer default, in this case not only the developer should refund the investor money, but the developer should also pay an interest for the period that he has kept the money in his account.

Regards,
Kamran

Anonymous said...

We are the clients of TANMIYAT REAL ESTATE INVEST. DEV. LLC. By the documents the company had had to start the DUBAILAND project in 2007 and had finished it in the end of 2008. Three years pass but the company didn't stars the construction. Also the company adopted a new payment plan that is different than the previous one and is contrary to the contract.By the first payment plan the company provided a financing company to their clients. But the second prvides fool remuniration on completion. We did not agree with the changes and began negotiations with the company refund. The company refused to return the money immediately and said that would return only after the full completion of construction when the apartment will be sold with a net 30%.The completion data is not known. Suppose we are not the first and nor the last deceived customers.