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Law no. 13 of 2008 governs the registration and sale of off-plan units in the emirate of Dubai. Article No. 3 of this law states that the registration of all dispositions over real estate units sold offplan must be registered with the Dubai Land Department (DLD) and that the developer is under an obligation to submit the application for registration to the DLD.
The time limit within which the developer was required to complete the registration formality was 60 days from the date of enactment of the said law as stated in Article 3(2) of Law No. 13 of 2008. In a judgment issued by the Dubai Court of Cassation, the court has extended the time limit given to a developer to register the sale of an off-plan unit in the interim registry until the Appeal Court proceedings in a case filed by the purchaser of an off-plan unit is concluded.
A delay in the registration of the off-plan unit with the developer will not render the sale of the off-plan unit as invalid or void. However, a complete failure to register the off-plan unit by the developer with the Real Estate Regulatory Authority (Rera) of the Land Department will deem the contract as null and void. Article 3 of Law No. 13 of 2008 states as follows.
1. The Interim Real Estate Register is used to record all disposal of real estate units that are marked as sold offplan. Any sale or other disposition that transfers or restricts title to any ancillary rights shall be void if not recorded on that register.
2. Any developer who made a sale or other disposition that transferred or restricted a title prior to the enactment of this law should approach the Land Department to get it registered in the Real Estate Register or the Interim Real Estate Register, as applicable, within 60 days from the date this law comes into force.
Rights and interests of the seller and purchaser
The requirement to register off-plan units with Rera is seen as an initiative to ensure that the seller secures their schedule of payment and the purchaser obtains the delivery of their property at the price and date agreed in the Sale and Purchase Agreement.
In terms of the consequences of non-registration of the unit with the Interim Registry, the transaction will be deemed as invalid and the purchaser will be required to seek recourse of the courts to obtain a refund of the funds invested by them towards the purchase of the unit. If required, the purchaser can approach the DLD directly and complete the formalities for registering the unit under its name.
In a recently concluded case before the Dubai Courts, wherein despite providing the requisite documents to the developer for the purpose of registering the unit in the interim registry of the DLD pursuant to the regulations of Law no. 13 of 2008, the developer failed to register the unit with the Rera, the court held that the failure to do so rendered the Sale and Purchase Agreement invalid and the transaction between the parties was deemed cancelled, thereby compelling the seller to refund the entire amount paid by the purchaser towards the purchase of the unit together with an annual interest.
The failure of the developer to register the off-plan unit with the DLD does not negatively affect the rights and interest of the purchaser. In fact it entitles the purchaser to approach the courts and seek a complete refund of its monies when he is able to prove to the court that the developer has not complied with its contractual obligations and has failed to complete the project within the anticipated completion date stipulated in the agreement, or the agreed time limit or the extended time limit granted by the DLD to complete the project.
If the purchaser is interested in retaining the possession of the unit, they are able to approach the courts by filing a case of specific performance of the contract by the developer wherein they can request the court to bind the developer to perform its obligations stipulated in the contract executed by both parties. In such a situation the purchaser will be required to pay the balance of the purchase price as per the instructions of the court.
There have been instances where developers have complied with the requirement of registering off-plan units in the Interim Registry with the Rera and subsequently de-registered the units due to various reasons such as non-payment of the purchase price instalments as per the payment plan stipulated in the contract executed by both parties. In such a situation, the purchaser of the off-plan unit will be notified by the DLD and provided with a time limit of 30 days to respond to the developer's contention and reasoning stated in its deregistration request submitted to the DLD.
If the developer fails to complete the project
Even if the developer's request for the deregistration of the off-plan unit is accepted by the DLD, purchasers are still entitled to file a case before the courts. They can seek either specific performance of the contract where they compel the developer to hand over possession of the unit upon completion in lieu of payment of the balance purchase price.
They can also request the court to terminate the Sale and Purchase Agreement and seek a complete refund of the funds paid towards the purchase of the unit together with interest, when they are able to prove to the court that the developer failed to complete the project within the anticipated completion date stipulated in the agreement, or the time limit agreed by both parties or the extended time limit granted by the DLD to complete the project.
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Source: Dr Reyadh Al Kabban, Special to Property Weekly
The author is founder and Managing Director of Al Kabban & Associates