Thursday, June 21, 2012

New investor-friendly law helps claim damages, complete refund from developers

In case developers’ fail to complete or handover a property within scheduled time frame as specified in the sales contract, or if there is a deliberate intention of defrauding an investor, or altering specifications of the unit without the requisite permission, investors can recover all amount from the developer.
The draft law to this effect was released in Dubai yesterday for the first time. The department is expecting feedbacks until 29th June.  However it is now yet known, if the law will actually be implemented. 
The Director General of Dubai Land Department, Sultan Bin Mejren, in April, mentioned that the law will be implemented by the end of the month. 
The real estate investors will be eligible for cancellation of contracts, and can seek complete refunds, in case the developer fails to deliver the unit or services within the stipulated timeframe.
The Article (36) of the draft law explains that the following circumstances will entitle the investor to terminate the contract for sale and recover all amounts paid by it.
1. In case the developer fails to complete the unit, or handover possession to the investor within the timeframe specified in the contract, or for sale, as estimated or agreed date for handover, or whether or not the contract for sale includes provision, permitting the developer to delay completion and handover under any circumstances. 
2. In case the real estate unit, as built, is materially different from the specification of real estate unit, as specified under the contract for sale, including fall of 30 percent or more in the net area. 
3. In case, the developer, deliberately, with the intention of defrauding the investor, fail to comply with real estate unit’s specification of common areas and other amenities, under the contract for sale, there are some missing at the time of handover.
4. If the developer alters the specification of real estate unit, without obtaining the requisite permit from the competent authority to such change in violation of applicable rules, as a result of which, the investor is likely to suffer material loss, then in such cases, the investor can claim repayment of all amounts paid to the developer.
Further, if the Article (36) is not applicable, the draft law stipulates that Article (37) shall be applied under the following circumstances to claim compensation by the investor.
1. Breach of warranty or undertaking contained in the contract for sale by seller and broker.
2. Misrepresentation by developer, investor or broker.
3. Specifications in violation of contract for sale, after obtaining an expert report to that effect.
4. Delay for a period of more than a month, and less than a year.
The draft law also suggests that the investor shall be entitled to recover compensation from the developer, broker or investor who caused the loss. In case, the person responsible for the loss is more than one, it will be (jointly and severally) liable for and bound by the information and data provided to the investor prior to the sale, irrespective of whether such information was provided by means of letter in writing, email or announcement.
Under Article (15), the proposed law puts the developer as responsible in providing the buyer with correct information in relation to common areas within the Jointly Owned Property.

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