Its Official Now - Dubai Law No. 9 of 2009

[dubai_or_not]

http://www.thenational.ae/article/20...705069992/1005

Refund sliding scale for defaulters

Bradley Hope

* Last Updated: May 06. 2009 6:49PM UAE / May 6. 2009 2:49PM GMT

The Dubai Land Department has issued an amended law listing a sliding scale of refunds for investors who default on their payments on unfinished properties.

The law, known as Dubai Law Number 9 of 2009, sets refunds depending on the level of progress a project has reached. It shows preference for property developments that are nearly finished, a sign that the Government wants to help developers complete projects.

And the law is retroactive, meaning any other agreements spelt out in contracts and purchase documents are no longer valid, lawyers say. The law stipulates that in cases where developers have completed at least 80 per cent of construction, a purchaser who defaults on payments is liable to lose all the money paid in until that point.

If a developer has completed at least 60 per cent of the project and the buyer defaults, the developer is entitled to keep 40 per cent of the purchase price.
But if a developer has completed less than 60 per cent of the project, it can only keep 25 per cent of the purchase price.

If the developer has not been able to start construction “without any negligence or omission on the developer’s part”, the developer may keep 30 per cent of the money paid by the buyer to that point.

Nigel Knight, a founding member of the Dubai Property Investors Group, said many of the group’s members felt the law did not go far enough to protect their investments.
“Our main concern is that a developer starts construction and delays it so that buyers start to default and the developer gets the money,” Mr Knight said.

The effects of the global financial crisis have left some developers in the UAE just scraping by and unable to continue construction, a situation that the authorities have been deliberating over for months. Buyers are also having trouble making payments and are asking for revised payment plans.
In some cases, they want projects to be cancelled because they are no longer viable in the slowed market.

Mohammed Kamal, a lawyer at Lovell’s in Dubai, said the law provided “significant guidance to the property market and will clarify the uncertainty on terminations and damages”.

The law defines “starting construction” as cases where “the site of the project is handed over to the contractor and the construction works have commenced in accordance with the designs approved by the concerned authorities”.

The consequences for a defaulting purchaser are not immediate. The law requires that the developer notifies the Land Department, which then gives the purchaser 30 days to fulfil his contractual obligations. After that period, the sliding scale goes into effect.

Developers would have to refund any money due to the purchaser within one year, or within 60 days of the resale of the home.

If the Real Estate Regulatory Agency decides a project is untenable and should be cancelled, as it has been empowered to do, then buyers are refunded all money paid to the developer.

bhope@thenational.ae
Read responses to the new law on Crane Country, The National’s property blog at

The effects of the global financial crisis have left some developers in the UAE scraping by and unable to continue construction, a situation that the authorities have been deliberating over for months.

Mohammed Kamal, a lawyer at Lovell’s in Dubai, said it provides “significant guidance to the property market and will clarify the uncertainty on terminations and damages”.

Law No 9 introduces a sliding scale for purchasers who default.

For instance, it stipulates that in cases where developers have completed at least 80 per cent of construction, a purchaser who defaults on their payments is liable to lose all the money they paid until that point.

If a developer has completed at least 60 per cent of the project and the buyer defaults, the developer is entitled to keep 40 per cent of the purchase price. But if a developer has completed less than 60 per cent of the project, it can only keep 25 per cent of the purchase price.

If the developer has not been able to start construction “without any negligence or omission on the developer’s part”, the developer may keep 30 per cent of the money paid by the buyer to that point.

The consequences for a defaulting purchaser are not immediate. The law requires that first the developer notify the Land Department, which then gives the purchaser 30 days to fulfil his contractual obligations. After that period, the sliding scale goes into effect. Developers would have to refund any money due to the purchaser within one year, or within 60 days of the resale of the home.

One of the most important aspects of the law is the fact that it is retroactive, meaning that any other agreements spelt out in contracts and purchase documents are no longer valid, lawyers said.