Dubai Land Department (DLD) has issued a decision to seize the land, real estate and escrow funds registered to developer Schon Properties to safeguard the rights of investors.
The decision was made to allow the Public Prosecutor’s Office and the Dubai Courts time to complete legal procedures against the real estate group, Dubai Media Office said on Twitter.
#Dubai @Land_Department issues a decision to seize the properties&land plots registered to Schon Properties &its funds deposited in Escrow account until Dubai Public Prosecution&Dubai Courts complete legal procedures to secure the rights of all investors & other parties.
— Dubai Media Office (@DXBMediaOffice) August 2, 2018
“The step is aimed at protecting the rights of investors in light of Schon Properties’ actions of exploiting investors by refraining from depositing their money in escrow (guarantee) account,” a DLD statement read.
“The department explained that the move is part of its efforts to effectively contribute to sustaining a well-regulated and transparent investment environment that provides necessary protection for all parties and safeguard their rights.”
Furthermore, DLD called on investors to deposit funds into an escrow account under the emirate’s real estate laws, which see funds transferred to the developer in parallel to the completion rate of the project.
“Buyers are not advised to make payments to developers outside Escrow accounts,” the organisation warned.
Schon launched the Dhs7bn ($1.9bn) Dubai Lagoon project in Dubai Investments Park (DIP) in 2005 but work halted before the property market collapsed in 2008.
In February last year, the company said it was transferring half of the project to another developer to speed up delivery, under plans reportedly first brokered by DLD to restart projects stalled during the financial crisis.
Xanadu Real Estate Development, which became involved in Dubai Lagoon in 2014 through a Dhs339m ($92.2m) investment and arrangement for its PGS Gulf Contracting arm to receive a Dhs678m ($184.5m) construction contract, received 2.33 million square feet of the 4.3 million sqft project.
The company was made responsible for completing three of the seven phases, comprising 17 buildings with 1,300 apartments, The National reported at the time.
Schon then launched the Dhs3.2bn ($870m) iSuites in DIP in June 2017 under a joint venture with construction company Al Hamad Group.
The five-acre development comprises 21 buildings with 2,550 hotel apartments, 52 restaurants, 125,000sqft of shopping mall space, a manmade beach and a lagoon, according to the company’s website.
Main construction was due to begin in January with handover intended to take place before the fourth quarter of 2020.
Dubai’s real estate market has seen residential sales prices and rents slump over the last two years.
Data from listings site Bayut.com showed rental rates down up to 15 per cent in some areas from the second half of last year to the end of the first half of 2018.
Sales prices were also down up to 8.8 per cent in some areas during the same period, according to the company.
Credit ratings agency S&P said in a February report that it expected Dubai’s real estate slump to continue for another two years.