Question: I am about to invest in an off-plan property in Dubai, with the handover of my unit scheduled for 2028, according to the sale agreement. What will happen if the developer delays the handover? Am I entitled to compensation, and if so, when would I receive it?
Answer: When a property is sold in Dubai, both the seller and the purchaser sign a Sale Purchase Agreement (SPA). An SPA will normally include various clauses including but not limited to the purchase price, completion date, compensation for breaches, and force majeure terms. The relationship between the purchaser and seller is then governed by the agreed terms and conditions outlined in the SPA.
An SPA will be implemented in good faith in accordance with the clauses mentioned in an SPA. 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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If any of the terms in the SPA are breached or violated, the affected party may be eligible for compensation, either as outlined in the SPA or as decided by a judge in a court which has jurisdiction in Dubai. This is in accordance with 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.”
It is an obligation of a developer to hand over a property to a purchaser once it obtains a completion certificate as long as a purchaser fulfils all his/her obligations.
This is in accordance with Article 7 (1) 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,
“Upon completion of a real property 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 purchase on the real property register, provided that the purchaser fulfils all his contractual obligations. This applies even if the purchaser owes the developer any financial dues other than in connection with the sale agreement of the real property unit.”
In the event of non-completion of the project, based on a percentage of completion as mentioned in Article 15 of Executive Resolution No. 6 of 2010, a developer may have to refund the amount to the purchaser. This is in accordance with Article 18 of Executive Resolution No. 6 of 2010, which states, “A developer must refund to the purchaser the amounts retained by him pursuant to the article (15) of this resolution no later than one (1) year from the date of termination of the agreement or within sixty (60) days from the date of sale of the real property unit, whichever occurs earlier.”
Furthermore, Article 22 of Executive Resolution No. 6 of 2020 mentions the list of omissions and negligence of a developer related to the completion of off-plan property in Dubai.
Additionally, if there is any dispute with a developer, a purchaser may approach the Dubai Land Department (DLD) to settle the matter amicably. This is in accordance with Article 14 of the Executive Council Resolution No. 6 of 2010, 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 purchaser or their respective representatives. Upon approval of that agreement by the DLD, it shall become binding on both parties.”
However, a developer may have the right to state before a competent authority or a court that it was not able to fulfil obligations mentioned in the SPA such as handing over property on time due to force majeure (reasons beyond the control of a developer). This is in accordance with Article 21 of Executive Council Resolution No. 6 of 2010.
Moreover, if a developer fails to repay a purchaser within the period set forth in Article 26 of Executive Council Resolution No. 6 of 2010(60 days), then the Real Estate Regulatory Authority (Rera) of Dubai, may refer the matter to relevant judicial authorities. This is in accordance with Article 27 of the Executive Council Resolution No. 6 of 2010, which states, “If the developer fails to refund the amounts owed to the purchasers within the period set forth in Article 26 of this Resolution, Rera must take all necessary actions to preserve the rights of the purchasers, including referring the matter to the competent judicial authorities.”
Based on the aforementioned provisions of law, if your developer delays the handover of the apartment as agreed, you may initially approach the DLD and file a complaint against the developer before approaching a court. Alternatively, you may directly approach a court which has jurisdiction in Dubai to file a civil case against the developer, seeking compensation for the delay in handover of the property to you.
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: [email protected] or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.