RERA freezes escrow accounts of major developers
Saturday, May 30, 2009
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Dubai Real Estate Regulatory Authority (RERA) has frozen the accounts of several major property developers, until such time that they prove that construction is in progress, and that the land has been properly registered.
This move by RERA to freeze escrow accounts of developers is being done in the interest of property market, as it is grappling with fall in prices and shortage of lending.
All money made from the sale of off-plan properties must go into an escrow account, and be used solely for property construction.
The Chief Executive of RERA, Marwan bin Ghalita, said that the developers will have to provide technical reports detailing the progress of construction prior to withdrawing money from the accounts. Payments will be linked to progress made in construction.
The developers will also have to prove to RERA that they have registered investors' rights with the Land Department.
RERA is yet to reveal the number of accounts frozen.
This move by RERA to freeze escrow accounts of developers is being done in the interest of property market, as it is grappling with fall in prices and shortage of lending.
All money made from the sale of off-plan properties must go into an escrow account, and be used solely for property construction.
The Chief Executive of RERA, Marwan bin Ghalita, said that the developers will have to provide technical reports detailing the progress of construction prior to withdrawing money from the accounts. Payments will be linked to progress made in construction.
The developers will also have to prove to RERA that they have registered investors' rights with the Land Department.
RERA is yet to reveal the number of accounts frozen.
Labels: Dubai Real Estate, Off-plan
New rule bans buyers from terminating off-plan sale contract
Thursday, May 28, 2009
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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.
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.
Labels: Off-plan, Property Law
Sale of off-plan properties are defunct, says developer
Thursday, April 09, 2009
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Major property developer in Abu Dhabi has termed the off-plan sales model as "defunct", which implies that the companies will have to push in more money during the early stages of projects, in order to gain confidence of the buyers.
This off-plan model has triggered-off the construction and property prices boom in the Emirates, as Dubai was the first to begin selling off-plan homes about a decade ago. However, the buying interest has now dried up, due to lack of mortgage and the confidence levels have dropped, affecting several projects.
For instance, Capitala, a joint-venture between CapitaLand of Singapore and Mubadala Real Estate and Hospitality, is also the developer of 147 hectare site on the Abu Dhabi Island. The company is considering a plan to make most of buyers' payments that are due, after the completion date.
The Deputy Chief Executive of Capitala, Peter Wilding, said that the sale of off-plan model is basically defunct, and that the company is yet to make any official changes, but it is currently being reviewed to change the payment plans.
The first project of Capitala, Arzanah, is a development which focuses on health and active lifestyle. The project includes 9000 homes, a mall, three medical centers, and 7km bike tracks and the existing Sheikh Zayed Stadium and other recreational amenities.
Although Capitala has sold 86 percent of its apartments during its first phase, including 14 villas, the challenge remains as to how to find buyers for unsold units, while also trying to maintain the payment schedule of earlier buyers.
Wilding revealed that the company has planned to begin offering homes that are inline with market demand. For instance, the next phases are more affordable set of buildings, called The Lofts'
Changing payment plan to have the most of money due after construction will help in convincing buyers to make investment, Wilding said. After discussing with the Urban Planning Council, some of the heights aspects of the buildings have been altered to prevent them from blocking views of the Sheikh Zayed Mosque and Sheikh Zayed Stadium.
In short, developers across the country are trying to put up with the fewer sales and reduced cash flow affecting their operations. This impact has even touched the contractors.
This off-plan model has triggered-off the construction and property prices boom in the Emirates, as Dubai was the first to begin selling off-plan homes about a decade ago. However, the buying interest has now dried up, due to lack of mortgage and the confidence levels have dropped, affecting several projects.
For instance, Capitala, a joint-venture between CapitaLand of Singapore and Mubadala Real Estate and Hospitality, is also the developer of 147 hectare site on the Abu Dhabi Island. The company is considering a plan to make most of buyers' payments that are due, after the completion date.
The Deputy Chief Executive of Capitala, Peter Wilding, said that the sale of off-plan model is basically defunct, and that the company is yet to make any official changes, but it is currently being reviewed to change the payment plans.
The first project of Capitala, Arzanah, is a development which focuses on health and active lifestyle. The project includes 9000 homes, a mall, three medical centers, and 7km bike tracks and the existing Sheikh Zayed Stadium and other recreational amenities.
Although Capitala has sold 86 percent of its apartments during its first phase, including 14 villas, the challenge remains as to how to find buyers for unsold units, while also trying to maintain the payment schedule of earlier buyers.
Wilding revealed that the company has planned to begin offering homes that are inline with market demand. For instance, the next phases are more affordable set of buildings, called The Lofts'
Changing payment plan to have the most of money due after construction will help in convincing buyers to make investment, Wilding said. After discussing with the Urban Planning Council, some of the heights aspects of the buildings have been altered to prevent them from blocking views of the Sheikh Zayed Mosque and Sheikh Zayed Stadium.
In short, developers across the country are trying to put up with the fewer sales and reduced cash flow affecting their operations. This impact has even touched the contractors.
Buyers can approach Property Court for terminated off-plan contracts
Saturday, January 31, 2009
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A senior government official has revealed that property buyers can contest their "terminated" off-plan contracts signed after 31st August 2008 in the newly established Property Court, by going through the Dubai Land Department (DLD).
The buyers can also claim compensation from the Property Court, if he establishes a ground for the termination, said Emad Eldin Farouq, Senior Legal Counsel at the DLD. The Land Department, issued a circular, which states that developers, and not buyers, will have to initiate the official procedure to cancel the off-plan transactions.
However, for sales contracts signed prior to 31st August 2008, the terms of the contract would be applicable to both the parties involved, as per the UAE Civil Code. But, these need not go through the DLD.
Detailing the meaning of the Article 11 under Law No.13, the department said that in case of termination of an off-plan contract, the developer will be entitled to 30 percent of purchase value plus 30 percent of any further investment paid over and above the purchase price.
In case of a buyer intending to contest this, the buyer could approach the Property Court, which would apply the civil jurisdiction on this. The Property Court may agree or disagree with this and the court has the right to choose to adopt or cancel these terms or apply any other rules to this. The Property Court will abide by the regulations under the Civil Code Law, clarified Farouq.
Any agreement can be terminated in a legal manner, either voluntarily, amicably or through a court order depending on the facts.
As per the Civil Coder, the buyer has the right to terminate the contract, in case of a breach by the seller. Farouq also said that investors facing cash-flow constraints can approach the Dubai Land Department for re-scheduling payments for their properties.
The buyers can also claim compensation from the Property Court, if he establishes a ground for the termination, said Emad Eldin Farouq, Senior Legal Counsel at the DLD. The Land Department, issued a circular, which states that developers, and not buyers, will have to initiate the official procedure to cancel the off-plan transactions.
However, for sales contracts signed prior to 31st August 2008, the terms of the contract would be applicable to both the parties involved, as per the UAE Civil Code. But, these need not go through the DLD.
Detailing the meaning of the Article 11 under Law No.13, the department said that in case of termination of an off-plan contract, the developer will be entitled to 30 percent of purchase value plus 30 percent of any further investment paid over and above the purchase price.
In case of a buyer intending to contest this, the buyer could approach the Property Court, which would apply the civil jurisdiction on this. The Property Court may agree or disagree with this and the court has the right to choose to adopt or cancel these terms or apply any other rules to this. The Property Court will abide by the regulations under the Civil Code Law, clarified Farouq.
Any agreement can be terminated in a legal manner, either voluntarily, amicably or through a court order depending on the facts.
As per the Civil Coder, the buyer has the right to terminate the contract, in case of a breach by the seller. Farouq also said that investors facing cash-flow constraints can approach the Dubai Land Department for re-scheduling payments for their properties.
Labels: Off-plan, Real Estate News
Developers waive-off 30 percent payment before re-sale of units
Thursday, November 27, 2008
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Emaar Properties has waived off the clause of paying 30 percent of the total property value before sale of their units in the markets.
According to the Chief Executive of Blu Realty International, Amr Soliman, the restriction of 30 percent payment of total property value before sale of units, no longer exists. Yet, another realty agent is also said to have waived off the clause.
The transfer and sale of off-plan properties was so far permitted only after the 30 percent of total property value had been paid, and no transfer was permitted until the payment was done. According to Emaar, this move was adopted to ensure that the investors and end-users purchasing their properties are genuine.
Early this month, Emaar launched two more payment schemes. One of the schemes permitted property payments for more than five years after handover. Another allowed potential investors to rent a property before they take a decision on whether to purchase it or not. This was done to offer investors with more options and revive property sales.
Property developer, Union Properties, however, has not announced any change, but, has stated that the company will not permit buyers to re-sell their units until they have paid atleast 20 percent of their property value.
On the other hand, Deyaar Development Company, revealed that the company has never insisted on any percentage payment before permitting resale, rather, it emphasizes on certain amount of down payment only.
According to the Chief Executive of Blu Realty International, Amr Soliman, the restriction of 30 percent payment of total property value before sale of units, no longer exists. Yet, another realty agent is also said to have waived off the clause.
The transfer and sale of off-plan properties was so far permitted only after the 30 percent of total property value had been paid, and no transfer was permitted until the payment was done. According to Emaar, this move was adopted to ensure that the investors and end-users purchasing their properties are genuine.
Early this month, Emaar launched two more payment schemes. One of the schemes permitted property payments for more than five years after handover. Another allowed potential investors to rent a property before they take a decision on whether to purchase it or not. This was done to offer investors with more options and revive property sales.
Property developer, Union Properties, however, has not announced any change, but, has stated that the company will not permit buyers to re-sell their units until they have paid atleast 20 percent of their property value.
On the other hand, Deyaar Development Company, revealed that the company has never insisted on any percentage payment before permitting resale, rather, it emphasizes on certain amount of down payment only.
Labels: Off-plan, Real Estate News
RERA announces new online software for off-plan sales transactions
Tuesday, November 25, 2008
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Dubai's RERA (Real Estate Regulatory Authority) announced that all real estate companies in Dubai should henceforth use the new online software 'Oqood' for off-plan property sales and transactions.
Any off-plan property sales through registered agents or brokers with RERA should be done online using the software through the agency. The software will offer a unified template of property sales contracts between sellers and buyers, duly designed and approved by the Agency.
The property developers are given a time period of three months to train their employees on this new system. The training will be provided by Emirates Real Estate Solutions (ERES), who designed the software.
In the opinion of Sultan Butti bin Mijrin, Director General, Land Department, and developer of the Oqood system, this is an important tool to regulate the property market.
Any off-plan property sales through registered agents or brokers with RERA should be done online using the software through the agency. The software will offer a unified template of property sales contracts between sellers and buyers, duly designed and approved by the Agency.
The property developers are given a time period of three months to train their employees on this new system. The training will be provided by Emirates Real Estate Solutions (ERES), who designed the software.
In the opinion of Sultan Butti bin Mijrin, Director General, Land Department, and developer of the Oqood system, this is an important tool to regulate the property market.
Labels: Latest News, Off-plan
Registration deadline extended for off-plan properties in Dubai
Monday, November 10, 2008
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The last date for registration of off-plan properties, under the pre-registration system, by the Dubai developers has been extended till the year-end. Earlier the first week of November was declared as the deadline for registration of off-plan properties.
According to a senior government official, the projects launched prior to introduction of pre-registration system, being sold as off-plan now, will have to register by the year-end. Stringent measures would be taken against those failing to do so, the official warned.
The Assistant Director-General of Dubai Land Department, Mohammed Sultan Thani, said that following the issuance of Law No.13 of 2008, developers are required to register all their units before launch with the Land Department, and only then proceed with their sales.
The Law No.13 regulates initial property registration in Dubai, and aims to create further safeguard consumer interest in the Dubai property market through introduction of mandatory system of pre-registration at the Land Department for off-plan sale contracts of property units.
As per the new regulation, any off-plan sales without registration will remain invalid. Off-plan sale implies the sale of real estate units on the basis of architectural plan of the property prior to building the structure. The registration has to be done by the developer and not the first purchaser.
During the secondary sale, the seller will have to keep the department informed and register the deed by paying necessary charges. In case of home mortgages, banks will have to register the deals and not the mortgagee, Thani said.
According to a senior government official, the projects launched prior to introduction of pre-registration system, being sold as off-plan now, will have to register by the year-end. Stringent measures would be taken against those failing to do so, the official warned.
The Assistant Director-General of Dubai Land Department, Mohammed Sultan Thani, said that following the issuance of Law No.13 of 2008, developers are required to register all their units before launch with the Land Department, and only then proceed with their sales.
The Law No.13 regulates initial property registration in Dubai, and aims to create further safeguard consumer interest in the Dubai property market through introduction of mandatory system of pre-registration at the Land Department for off-plan sale contracts of property units.
As per the new regulation, any off-plan sales without registration will remain invalid. Off-plan sale implies the sale of real estate units on the basis of architectural plan of the property prior to building the structure. The registration has to be done by the developer and not the first purchaser.
During the secondary sale, the seller will have to keep the department informed and register the deed by paying necessary charges. In case of home mortgages, banks will have to register the deals and not the mortgagee, Thani said.
Labels: Latest News, Off-plan, Property Law
New law ensures that Dubai is a safer place for investment
Wednesday, September 03, 2008
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With the new law emphasizing that all its off-plan units be registered with the Dubai Land Department, the real estate market in Dubai is a far safer place for investment now, reveal legal consultants.
"The law is a step ahead in the vision of Dubai to develop a well-regulated property market, with particular emphasis being laid on consumer confidence and transparency"said Will Grinter, Legal Consultant, Clyde &Co., an international law firm.
Law No.14 will become effective in Dubai on the publication of next issue Government Gazzette. With large numbers of complaints pouring in from investors, in the off-plan market in particular, this new law will boost the security aspect in investments, and will a shot of much-required confidence in the market as a whole.
Apart from offer protection to off-plan investors, the new law will also enhance transparency in dealings of the secondary markets in off-plan property, and will also facilitate the registration process upon completion of development.
Grinter also warns that the new law does not include any special provision regarding project delays or cancellations, although RERA holds investigative powers.
A property court, due to begin operations soon, will deal with real estate disputes and is another positive step to ensure complete transparency in the market. Grinter also revealed that the new law would bring in a mandatory procedure that needs to be followed by any developer looking to end sale and purchase agreement.
"The law is a step ahead in the vision of Dubai to develop a well-regulated property market, with particular emphasis being laid on consumer confidence and transparency"said Will Grinter, Legal Consultant, Clyde &Co., an international law firm.
Law No.14 will become effective in Dubai on the publication of next issue Government Gazzette. With large numbers of complaints pouring in from investors, in the off-plan market in particular, this new law will boost the security aspect in investments, and will a shot of much-required confidence in the market as a whole.
Apart from offer protection to off-plan investors, the new law will also enhance transparency in dealings of the secondary markets in off-plan property, and will also facilitate the registration process upon completion of development.
Grinter also warns that the new law does not include any special provision regarding project delays or cancellations, although RERA holds investigative powers.
A property court, due to begin operations soon, will deal with real estate disputes and is another positive step to ensure complete transparency in the market. Grinter also revealed that the new law would bring in a mandatory procedure that needs to be followed by any developer looking to end sale and purchase agreement.
Labels: Dubai Real Estate, Off-plan, Property Law
Dubai mandates registration of off-plan property sales
Tuesday, August 26, 2008
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It has been made mandatory that off-plan property sales in Dubai be registered with the Land Department of the emirate, and no developers will be permitted to charge transfer fee on such sales, according to a new law announced yesterday.
The Law No.13 of 2008 aims to regulate off-plan sales, and mandates registration with the land department, said Emad Eldin Farouq, Senior Legal Advisor, Land Department.
The practice of marketing residential or commercial units based on an architectural plan of the property, prior to building the structure, is termed as 'off-plan sales'.
"Any sale or disposition that transfers or restricts title will be void, if not registered in the interim real estate register," states the new law.
Hence any developer, who markets or sells other disposition prior to implementation of the law, will have to register it within 60 days, Farouq clarified.
The law also states that master developers and sub-developers will not be permitted to charge transfer fee on off-plan sales, henceforth. However, they will be permitted to accept administrative charges once it has been approved by the Land Department.
The Chief Executive Officer of Dubai Properties Group, Mohamed Binbrek, agreed that this is surely good news, as the interest of small investors and buyers will be protected, and that the Land department will now regulate the market. The new law is likely to add credibility to the market.
Last week, Dubai passed on a new mortgage law, which states that mortgage contracts need to be registered with the Land Department, and specified the size of the loan, the repayment period and the value of the property to which the loan is linked.
However, developers say that they will insist payment of a minimum of 20 to 30 percent of the property value prior to transferring to a second buyer under a resale transaction. They will also screen customer profiles prior to selling the property off-plan.
"he initial transfer and sale of off-plan properties will be permitted only after payment of 30 percent of total property value,"said an Emaar spokesperson.
The Law No.13 of 2008 aims to regulate off-plan sales, and mandates registration with the land department, said Emad Eldin Farouq, Senior Legal Advisor, Land Department.
The practice of marketing residential or commercial units based on an architectural plan of the property, prior to building the structure, is termed as 'off-plan sales'.
"Any sale or disposition that transfers or restricts title will be void, if not registered in the interim real estate register," states the new law.
Hence any developer, who markets or sells other disposition prior to implementation of the law, will have to register it within 60 days, Farouq clarified.
The law also states that master developers and sub-developers will not be permitted to charge transfer fee on off-plan sales, henceforth. However, they will be permitted to accept administrative charges once it has been approved by the Land Department.
The Chief Executive Officer of Dubai Properties Group, Mohamed Binbrek, agreed that this is surely good news, as the interest of small investors and buyers will be protected, and that the Land department will now regulate the market. The new law is likely to add credibility to the market.
Last week, Dubai passed on a new mortgage law, which states that mortgage contracts need to be registered with the Land Department, and specified the size of the loan, the repayment period and the value of the property to which the loan is linked.
However, developers say that they will insist payment of a minimum of 20 to 30 percent of the property value prior to transferring to a second buyer under a resale transaction. They will also screen customer profiles prior to selling the property off-plan.
"he initial transfer and sale of off-plan properties will be permitted only after payment of 30 percent of total property value,"said an Emaar spokesperson.
Labels: Dubai Real Estate, Off-plan, Property Law
