Dubai Law 19 of 2017, amends Article 11 of Law 13 of 2008, (which was previously amended by Law No 9 of 2009), will affect those purchasers who, having purchased a unit off plan, breach the sale agreement. The new law has provided further requirements and more detail to the procedures which a developer is required to follow in order to enforce the sale agreement or cancel it, depending upon the circumstances.
What does the update to the off-plan property purchasing law mean for people who have bought off plan?
For a purchaser, who has bought off-plan and not complied with his contractual obligations to the developer, this new detailed procedure is as follows:
The developer shall notify the Land Department of the purchaser’s non-compliance, using the standard template for such notice, which shall include the required information of the parties, the description of the real property unit (‘the unit’) and the details of the non-compliance committed by the purchaser.
The Land Department is then required to assess the details of the non-compliance and be satisfied that the Purchaser is in fact in breach of his obligations under the sale agreement.
The Land Department will then send a notice to the purchaser, to be delivered personally, by registered mail with an acknowledgment of receipt, email or any other means determined by the Land Department, setting out the details of the non-compliance and give the purchaser 30 days to rectify it. It appears that the Land Department will require proof that the purchaser has in fact received the notice.
During the 30-day period, the Land Department is required to attempt to reach a settlement between the developer and the purchaser. If a settlement is achieved it is required to be recorded in writing and annexed to the sale agreement and is likely to be considered an amendment to the original agreement.
If the 30-day period expires and the purchaser has not rectified his non-compliance or a settlement agreement has not been reached, the Land Department shall issue a declaration (formal notice) in favour of the developer, confirming that the developer has complied with the procedures (set out above) and also confirming the percentage of completion of the construction of the unit, in accordance with the standards and rules of the Real Estate Regulatory Agency.
The developer shall then have the right, without having to obtain a court order, to either enforce the sale agreement and claim the balance of the amount owing (if the construction of the unit is more than 80 per cent complete) or to cancel it.
Under the new Article 11, a developer, which has completed more than 80 per cent of the construction of the unit, will also have the right, if it does not wish to enforce the sale agreement or to instruct the Land Department to sell the Unit by way of a public auction, to instead cancel the sale agreement and retain an amount equal to 40 per cent of the value of the unit under the sale agreement, with the balance to be repaid to the purchaser.
In respect of units that have not reached 80 per cent completion, the respective amounts (percentages) which the developer may retain upon the cancellation of the sale agreement, have not been amended and remain as they were under the previous Article 11.
Will it change the way off-plan properties are purchased in the UAE in the future?
No, this amendment to the law should not have any effect on the way real property units are purchased as the change affects the situation where the purchaser has not complied with the sale agreement. It is essentially aimed at facilitating a more certain and transparent procedure for the enforcement of the developer’s rights.
Will it help people who have bought off plan but feel the developer hasn’t delivered on their promises?
No, the amendment does not change the ambit of the law or the applicable provisions in the situation where the developer has not complied with the sale agreement.
Why is this change being made now?
The previous Article 11 did not contain the practical measures or detailed procedure for dealing with the manner in which the developer was to enforce its rights as set out in the law. The amendments have introduced greater certainty in the procedure, which is in the interests of the parties and the Land Department.
Is there anything else we need to know?
The amended Article 11 states that the procedures and rules set out therein are issues of public order. Any non-compliance with the provisions and rules will result in the actions taken pursuant thereto being void and therefore of no force or effect.
The purchaser is not prevented from having recourse to the court or to arbitration procedures if there is any abuse of power by the developer in carrying out the procedures set out in Article 11.
Robert Mitchley is an associate with the corporate, M&A and real estate practices at BSA Ahmad Bin Hezeem & Associates LLP