- Broker Directory
- My Tools
- News & Advice
- Market Trends
- Other GN Sites
Dubai offers a variety of property options to cater to all tastes and needs. It attracts buyers and investors from all over the world who are looking to reap the lucrative rewards of its burgeoning real estate sector.
As market activity continues to increase, government authorities have tightened regulatory controls to protect the industry, secure the rights of all stakeholders and make property transactions in the emirate a hasslefree process. However, even when a transaction seems to be cruising along smoothly, there are occasions when glitches occur, putting buyers and sellers on opposite sides of an argument or even a court case. Here are some of the most common issues that they could face when involved in the buying and selling of property.
Off-plan is back in business. Developers are launching new projects and luring buyers with attractive payment schemes. These deals appeal especially to investors who prefer to snap up units for less to maximise their gains. However, purchasing property based on a blueprint has its own set of challenges.
1) Unit size
A developer delivering a unit of a different size than what is in the contract can be a source of major disagreement. Conflicts also arise when developers seek additional money from buyers for completed units that are larger than the size mentioned in the contract, or do not compensate the purchaser when the delivered unit is smaller, says Brent Baldwin, Partner at Hadef and Partners.
“However, Article 12 of Law No (13) of 2008 regulating the Interim Property Register in Dubai states that developers may no longer claim additional monies if the unit turns out to be bigger than that agreed in the contract. If the unit turns out to be smaller, the developer is liable to compensate the purchaser for the difference unless it is marginal.”
2) Delivery delays
Disputes arise when developers change or extend the completion date of the project. But buyers must understand that completion dates can change.
“There is the so-called reasonable/allowable delay in any real estate project, where the seller or developer is allowed to extend the completion date for a maximum period of one year,” says Naser Muheyeldin, Partner at Al Riyami Advocates and Legal Consultants. “Failure to deliver or complete the construction of the project after the allowable delay can hold the seller liable for breach of contract.
“The law allows the buyer to terminate/rescind the agreement and ask for damages as determined by a court of law. The UAE’s laws are well drafted to specifically grant the buyer the option of terminating the contract in case of a breach. However, it is up to the buyer and a legal representative to formulate a cohesive claim against the developer or seller. A lawyer will play an important role in explaining the merits of the case to the client.”
3) Force majeure
Another case commonly brought to the Dubai Courts is the correct interpretation of the definition of force majeure in the contract.
“Force majeure, as properly defined, constitutes any act of god, which is beyond the reasonable control of any individual such as, but not limited to, flood, typhoon, storm, tornado, earthquake or any other natural disaster that can delay the project,” says Muheyeldin.
“However, it is unfortunate that some developers use different definitions of force majeure.”
Some developers add certain events or acts of third parties to define force majeure, he adds. “A third-party contract is entered into by the developer with the contractor of the project, and this is where most of the problems occur, including delays in constructing the development, building the utilities and other matters,” says Muheyeldin. Moreover, some items included by developers in a contract might not be covered by the official definition of force majeure, so a buyer should insist on excluding them.
4) Standard of quality
On certain occasions, the delivered property is not of the standard stated in the contract. In such a case, the buyer has the right to take legal action against the developer, says Rebecca Davies, Associate at Hadef and Partners.
There have been many cases in which a developer has used low-quality materials or has compromised on the quality and appearance of common facilities or removed them altogether, she says. “However, depending on the severity of the problem, the purchaser can negotiate a rectification of the issue with the developer at no additional charge, or a reduction in the purchase price.
“The role of the lawyer is to analyse the contract carefully and advise the purchaser of the strength of the case and most effective course of action.”
Ready unit purchases
Ready units are a more common choice among end users who prefer property that suits their work and lifestyle requirements. There are also investors who purchase ready units in bulk to put them on the rental market.
These buyers are more in control as they can view and check the units before purchasing them. However, they are not completely free of problems and buyers can encounter issues such as a lien on the property, ownership problems, illegal settlers, unpaid dues, and maintenance charges and other fees.
1) Legal infirmity
Due diligence is vital when purchasing ready property and this should cover document examination and verification, visual inspection and status report application at the Dubai Land Department (DLD). “By doing this, buyers will be informed of the legal infirmities over the title of the property and its status,” says Muheyeldin. It will also save the buyer the hassle of having to bring the matter before a court.
A lawyer in this matter is, crucial. “It is the lawyer’s responsibility to evaluate and scrutinise the documents presented by both parties,” says Muheyeldin. “The lawyer can conduct due diligence on behalf of the client, and after studying all the papers and documentation, tender a legal opinion as to the extent of legal infirmities, probability of bringing the matter before a court of law in case of legal impediment, reasonableness of buying or selling the property and other important matters.
“The lawyer will help the buyer or seller to facilitate the transaction and assure that the property being purchased or sold is free of any impediments.”
2) Owners association
Issues regarding maintenance of co-owned areas in a building, collection of monthly dues and calculation of fees are some of the key responsibilities of an owners association (OA). “If the property is part of a multi-owned building, Law No. 27 of 2007 concerning jointly owned property in Dubai and its implementing directions [JOP Law] is likely to apply, meaning that the purchaser will be liable for service charges incurred from the date of ownership,” says Davies. She advises purchasers to obtain a service charge clearance certificate from the developer or the acting OA to certify that all accrued sums have been paid up to date and that the seller is permitted to sell the property. “Without this certificate the DLD is unlikely to progress with the purchaser’s registration as the owner of the property. Final bills for all utilities should also be provided to the purchaser.”
Davies also says that purchasers should have their lawyers check compliance with the JOP Law. “The lawyer can request copies of jointly owned property declarations, master community declaration and building and community rules, review minutes of meetings to see the development’s issues —there could be many that would cost the purchaser a significant sum later — and generally check its legal status and management.”
There are a few things to watch out for to avoid conflict with neighbours, such as encroaching property, making excessive noise and creating nuisance. Baldwin explains that multi-owned villa and apartment evelopments are usually governed by a set of community rules. “Owners who have issues with neighbours that they cannot resolve directly can seek recourse via the OA and ask its manager to enforce the rules.”
If the association or its manager fail to resolve the problem, the owner can take the matter to the Real Estate Regulatory Agency or file a complaint with the Dubai Police if the issue involves a criminal act. “If there is a breach of municipality regulations, an owner can get the Dubai Municipality involved,” says Baldwin.
4) Property warranty
Buyers should review and understand the terms and conditions of the purchased unit’s warranty. Muheyeldin says, “When it comes to warranty, the buyer should conduct a site inspection with an expert engineer to assess the property accordingly.” This includes assessing a property’s lifespan, valuation and any major defects.
5) Property sale
Real estate transactions in Dubai are now more convenient, although this is only in cases when all documents have been reviewed before signing the sale contract, says Muheyeldin.
“The issues that the parties to the sale of a property would have to deal with include the availability of funds, validity and authenticity of the title deed, transfer documents such as a no-objection certificate from the developer and other certificates regarding maintenance fees, and the sale and purchase agreement,” he says. “Each element should be properly inspected by a law firm to avoid legal infirmity.”
More advice on buying property.
Source: Hina Navin, Special to PW