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Dubai: What happens if a buyer defaults on payments after buying off-plan property?

An off-plan property sold by a developer needs to be registered in the Interim Real Property Register with the Dubai Land Department

Question: I am considering buying an off-plan property in Dubai on a payment plan proposed by the developer. Since I am not taking out a bank loan, what happens if I default on the payments to the developer?

Answer: Pursuant to your queries, the provisions of Law No. 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai and Law No.19 of 2017 Amending Law No. 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai are applicable.

In Dubai, an off-plan property sold by a developer (seller) needs to be registered in the Interim Real Property Register with the Dubai Land Department (DLD). This is in accordance with Article 3(1) of the Dubai Law No. 13 of 2008 on the Interim Property Register.

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Furthermore, units of property sold off plan which is registered in the interim real property register maintained by DLD may be disposed of by way of sale, mortgage, or any other legal disposition. This is in accordance with Article 6 of the Dubai Law No. 13 of 2008 on the Interim Property Register.

In the event of non-payment of the purchase price by a purchaser to a developer (seller) may be considered a breach of terms of conditions of the Sale Purchase Agreement (SPA) signed between a purchaser and a developer (seller).

In such a scenario, a developer (seller) may notify the DLD related to non-payment of purchase price by a purchaser. The DLD on the complaint of the developer (seller) will serve a 30-day notice to a purchaser to fulfil his/her obligations and prior to serving the 30-day notice, the DLD may attempt to amicably resolve the dispute between a purchaser and a developer (seller). If a purchaser does not fulfil the obligations related to payment of the purchase price, then DLD shall issue a document in favour of a developer (seller) confirming the percentage of completion of the off-plan property sold to a purchaser. Thereafter, based on the percentage of completion of the off-plan property the developer (seller) may initiate relevant legal actions against the purchaser without approaching the courts or arbitration authority which has jurisdiction in the emirate of Dubai.

The actions which may be initiated by a developer (seller) in case of default by a purchaser on grounds of non-payment of the purchase price may include (1) retaining the amount paid by a purchaser by not terminating the SPA and claiming from a purchaser to pay the balance amount of purchase price, (2) sale of property by auction through DLD, refund of excess money to the purchaser (if any) upon sale of the auction within the stipulated time, (3) unilaterally terminate the SPA and retain a certain percentage of the purchase price based on a percentage of completion of the off-plan property and refund the balance amount to a purchaser within stipulated time as mentioned in Article 11 of Dubai Law No. 19 of 2017 on Interim Property Register.

Therefore, based on the aforementioned provisions of law and procedures laid down by DLD, your developer (seller) may initiate legal actions (execution proceedings) against you for non-payment of purchase price.

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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