Monday, June 04, 2012

Property investors can cancel contracts if developers violate terms

The latest draft of Real Estate Investor Protection Law stipulates that real estate investors will be given the right to withdraw their contracts and claim back their money, if developers violate the terms and conditions.

According to Sultan Butti bin Mujren, the Director of Dubai Land Department (DLD), this is a clear legislative tool, wherein the contract can be broken, and compensation can be granted to investors when the developer tries to breach the contract.

Besides getting back their money, investors can claim additional compensation, and the developer can be fined, he revealed.

The law has been under consideration for some time now, and is likely to be implemented by the department shortly. It aims to protect investors from delays in handover of projects, or unilateral changes in size or other such specifications of properties.

The draft law states that investors have the right to cancel the contract in cases of delay in completion of property, or delay in handover for more than a year. In fact, investors are eligible for compensation even if the handover is delayed by more than a month but, less than a year.

In the event of any defects, the law offers investors recourse, apart from undocumented claims and charges from developers, and other such provisions.

The new law pays more attention to observatory, regulatory, technical, executive role to protect the rights of investors. More attention will be paid to details of service agreements, maintenance contracts and property registration.

The law is the first of its kind on the regional and international level, and not only protects the investor rights, but, also brings in transparent business relationship between developers and investors, said Majida Al Rashid, Director of Center for Investment Management at the department.

However, there are concerns that the new law may not be applicable to existing disputes between developers and investors, and will be applicable only to new contracts.

The new law comes as a useful resource, particularly to non-resident investors, who have no access to monitor their investments directly, says Dr. Ahmed Belhasa, Chairman of large developer in the UAE.

RERA has already ordered cancellation of projects that are no longer viable. The new law further provides for the agency to pair up approved developers and banks to fund the completion of the projects. The new law also mandates that real estate agents and brokerage companies be licensed by and registered with RERA. The brokerage is not allowed to get commission unless the property is transferred to the investor.

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