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Dubai: Will I get compensated if my developer does not deliver the property on time?
A KT reader asks if he can add a compensation clause to the agreement pertaining to this
Question: I am planning to invest in an off-plan property in Dubai. Will the contract specify when the property will be delivered? What happens if the developer fails to deliver it in the stipulated period? Am I entitled to compensation? Can I add a compensation clause to the agreement specifically pertaining to this?
Answer: Pursuant to your queries, it is understood that you intend to invest in an off plan property in Dubai. Therefore, the provisions of Law No. 13 of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai, Law No. 19 of 2017 Amending 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 the Emirate of Dubai are applicable.
A developer (seller) in Dubai should register any property sold off-plan to a purchaser in the Interim Real Property Register of the Dubai Land Department (DLD). This is in accordance with Article 3(1) of the Dubai Interim Real Property Register Regulations, which states "Any disposition in respect of a Real Property Unit sold off-plan must be registered on the interim Real Property Register. Any sale or other legal disposition involving the transfer or restriction of ownership, or any of its associated rights, shall be null and void unless it is registered on the Interim Real Property Register."
Further, it is an obligation of a developer to hand over a property to a purchaser on completion, provided a purchaser has fulfilled all the financial obligations to a developer. This is in accordance with Article 7(1) of the Executive Council Resolution No. 6 of 2010, which states, "Upon completion of a Real Property Project and obtaining its completion certificate from the competent entities, the Master Developer or Sub-developer may not refuse to hand over any Real Property Unit or register it in the name of its purchaser of the Real Property Register, provided the purchaser has fulfilled all its financial obligations"
In the event of a dispute between a developer and a purchaser, both parties or one of them may approach the DLD and the DLD may settle the matter amicably by documenting the settlement in the form of an agreement. This is in accordance with Article 14 of the Executive Council Resolution No. 6 of 2010, which states, “Where any dispute arises between a Developer and a purchaser, 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 purchaser or their respective representatives. Upon approval of that agreement by the DLD, it shall become binding on both parties.
However, if a developer breaches the terms of the sale purchase agreement (SPA) signed with a purchaser, a purchaser may approach the court which has jurisdiction to hear the matter in Dubai. This is in accordance with Article 20 (5) of the Executive Council Resolution No. 6 of 2010, which states, “A purchaser may resort to the competent court to seek termination of his contractual relationship with a Developer:
- In any other circumstances that require the termination of the agreement in accordance with the general legal rules.”
Moreover, under certain circumstances, a developer may have immunity for non-fulfilment of the terms and conditions of the SPA with a purchaser due to force majeure events in accordance with Article 21 of Executive Council No. 6 of 2010. The force majeure events may include a project where the property is situated expropriated for the public interest, relevant authority suspending the project for re-planning and any other reasons determined by the authority.
Based on the aforementioned provisions of law, you as the purchaser may sign the SPA with the developer and may verify the contents of the SPA related to the obligations of a developer in the event of default of the terms and conditions of the SPA especially with regards to delay or non-handover of the property after the completion date.
The SPA should also include the anticipated completion date of the property. Also, it is recommended that you as a prospective buyer of a property may seek a legal opinion from a legal practitioner related to the inclusion of monetary compensation clause in the SPA in the event of a breach of terms and conditions.
In the event the developer does not hand over the property on or after the anticipated completion date you may request the DLD to register the property in your name. This is in accordance with Article 7(3) of the Executive Council No. 6 of 2010. You may also consider registering a complaint against the DLD and if required filing a civil case against the developer in the court which has jurisdiction in the emirate of Dubai.
Alternatively, if the project is cancelled as per the decision of Rera or the Dubai Court, the developer should refund all the payments made by you. This is in accordance with Article 11 (b) of the Dubai Amended Interim Real Property Registration Regulations of 2017 which states, “Where the Real Property project is cancelled pursuant to a reasoned decision of Rera, the developer must refund all payments made by the purchasers in accordance with the procedures and rules stipulated in the above-mentioned Law No. (8) of 2007 Concerning Escrow Accounts for Real Property Development in the Emirate of Dubai.”
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