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Dubai: Can a buyer sue developer for delayed handover, claim rents paid during the delay?

A sale purchase agreement between two parties includes clauses about purchase price, completion date, compensation for breaches, force majeure terms

Question: I bought an apartment from a private developer in Dubai. The project was delayed, and I got the handover of my apartment more than a year after the commitment date. I never delayed my EMIs during the 4-year payment plan. In fact, I had to pay rent for over a year due to the delay. How can I claim compensation and rent that I paid for over a year from the developer?

Answer: In Dubai, a purchaser and a developer will enter into a Sale Purchase Agreement (SPA) for an apartment sold on an off-plan basis. The SPA will include clauses about purchase price, completion date, compensation for breaches, force majeure terms (beyond the control of the parties to the agreement) etc., and the SPA will be implemented by the clauses mentioned in it with good faith. This is in accordance with Article 246 (1) of the Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates, which states, “1. The contract shall be implemented according to the provisions contained therein and in a manner consistent with the requirements of good faith.”

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In the event of a breach of any of the clauses in the SPA, one of the parties may be entitled to compensation as mentioned in the SPA or as decided by a judge in a court which has jurisdiction in Dubai. This is under Article 295 of the UAE Civil Transactions Law, which states, “Damages will consist of a money payment. Upon request of the victim, however, the judge may, in accordance with the circumstances, order that the damage be made good by restoring the parties to their original status or by performing, in compensation, a specific matter connected with the prejudicial act.”

Additionally, if a developer has a dispute, the buyer may approach the Dubai Land Department (DLD) to settle the matter amicably. This is under Article 14 of the Executive Council Resolution No. 6 of 2010 Approving the Implementing Bylaw of Law No., 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai, which states, “Where any dispute between a developer and a purchase, the DLD may undertake conciliatory efforts to preserve their contractual relationship and may propose any solutions it deems appropriate to achieve this objective. Where the developer and the purchaser reach an amicable settlement, that settlement shall be documented in a written agreement executed by the developer and the buyer or their respective representatives. Upon approval of that agreement by the DLD, it shall become binding on both parties.”

Furthermore, based on the complaint made by the buyer, if the DLD is satisfied that the developer has breached the SPA, it may prepare and report the complaint and refer it to competent authorities for further actions or decisions. This is under Article 13 of Law No. 13 of 2008 regulating the Interim Real Property Register in the Emirate of Dubai, which states, “Where it is established to the satisfaction of the DLD that the developer or broker has committed any act or omission in violation of the provisions of this law, or any other legislation in force, the Director General of the DLD must prepare a report on the same and refer the case to the competent entities for investigation.”

However, a developer may have the right to state before a competent authority or a court that it could not fulfil obligations mentioned in the SPA related to the handover of property due to force majeure (reasons beyond the control of a developer). This is under Article 21 of Executive Council Resolution No. 6 of 2010.

In addition, the buyer may also claim damages or profits lost and caused by a developer's actions. This is in accordance with Article 292 of the UAE Civil Transactions Law, which states, “Damages shall, under all circumstances, be assessed to cover the prejudice sustained and the lost profit provided it is a natural consequence of the prejudicial act.”

Based on the aforementioned provisions of law, as there is a delay by your developer in handing over the apartment to you, which has also caused additional financial expense to you by way of residing in a rented apartment in Dubai for another year, you may initially approach the DLD and file a complaint against the developer before approaching a court. Alternatively, you may directly approach a court that has jurisdiction in Dubai to file a civil case against the developer seeking compensation for the delay in the handover of the apartment to you. The court may decide your case whether you are entitled to compensation based on the provisions of the SPA.

For further clarifications on this matter, you may seek independent legal advice from a legal practitioner in Dubai.

Federal Law No. (5) of 1985 On the Civil Transactions Law of the UAE; Article 13 of the Law No. 13 of 2008 regulating the Interim Real Property Register in the Emirate of Dubai; and Executive Council Resolution No. 6 of 2010 Approving the Implementing Bylaw of Law No., 13 of 2008 Regulating the Interim Real Property Register in Dubai are applicable in this case.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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