Professional Speak - Legal safeguards when investing in property

Margarida Narciso and Zisha Rizvi - Partners, Sunil Thacker AssociatesMargarida Narciso and Zisha Rizvi - Partners, Sunil Thacker Associates

Margarida Narciso, partner-litigation and Zisha Rizvi, partner-corporate commercial and arbitration at Sunil Thacker Associates, provide some tips on how to ensure legal safeguards are in place when booking a house.

Legal safety net

Lack of prior knowledge or experience in dealing in property can raise several questions for prospective investors. As a consequence of the last financial downturn, investors and other key players in the field have become more cautious. Failure to exercise a reasonable degree of caution on the part of the buyers can invite significant legal hurdles. For instance, investors should ensure that the copy of the agreement to be signed should be legally reviewed by their attorneys to avoid future litigation and to buy peace of mind. The agreed size of the property, completion and handover, materials and finishes to be provided by the developer, management and operation of property post-handover, provisions with regard to common areas and compliance with strata guidelines, defaults, repairs and warranty undertakings need careful attention at the time and during the course of property purchase.

Off-plan property

Buyers should clearly understand from their attorneys whether the property in question should be acquired in their personal names or under the name of a registered company. They should carefully review the contractual terms, specifically payment terms, completion and handover, buyer’s obligations, default by seller in handover on time and list of items, finishes and supplies that form part of the unit. In cases where financing options are available, buyers should get the terms reviewed by their attorneys. Prior to handover, clients must appoint a snag and inspect company to carry out a detailed snag including measurements, ascertaining leakages and other key aspects to ensure the property is habitable and worth occupying. Buyers should raise the necessary questions concerning maintenance and service charges, the manner in which these are payable, and compare them with other properties in nearby areas or with their lawyers.

Tackling delays in property handover

The rights and obligations of parties are covered under the contract. That said, the Dubai property regulations confer protection to parties. To avoid disputes and litigation, parties are advised to negotiate the contract in advance and obtain proper undertakings and receipts from developers. For instance, buyers may insist the developer to stop requesting payments in the event of handover delay. Buyers may also request compensation for such delay. The amount of compensation depends on the payments already made by the buyer. Buyers should obtain the right legal advice before taking any such steps.

Secondary market

Investing in the secondary market calls for a higher degree of caution given that such dealings may be with individuals. In the past, parties were hesitant to close transactions on a quicker note and consequently signed memorandums of understanding or basic documents without carefully understanding the legal implications. In the current investment climate, parties should approach their lawyers and ensure that the transaction is securely handled. Snagging/inspection plays a key role in buying ready properties since the occupation of property takes place immediately. When the seller has an existing mortgage, buyers (or their lawyers) should ensure that the seller is not in default of the mortgage; the seller’s bank is ready and willing to cooperate; and the necessary documents are obtained from the seller’s bank on time. Time is of the essence; hence, necessary compliance before the developer and/or the master developer, Dubai Land Department and related authorities should be concluded within the time frame. If the property has been leased to a third party, the seller (acting through his lawyer) should get the lease contract reviewed in addition to getting it amended and/or terminated by signing a settlement agreement in accordance with the prevailing laws of Dubai and the UAE

The road ahead

• From a legal standpoint, coherent steps may need to be taken to curb speculative buying and selling (flipping) of properties. Current rental regulations aim at regulating existing occupiers/tenants and new regulations providing for rent caps for new tenants will deliver more stability to tenants. The escrow law has served its primary objective of regulating off-plan investments, but further directions are needed to protect interests of off-plan property buyers. Although the strata law and new guidelines have been issued, additional rules and policies to be applied to homeowners associations are expected.Margarida Narciso and Zisha Rizvi Partners, Sunil Thacker Associates

Source: S. Dhar, Special to Freehold

The writer is a freelancer

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