A question lawyers in Dubai commonly get whether property developers can bypass a Court order and terminate a contract. In 2017, His Highness Sheikh Mohammed Bin Rashid Al Maktoum issued Law No. 19 to grant developers the right to terminate a defaulting purchaser's sale and purchase agreement (SPA) upon satisfying certain conditions. The only exception to the application of Law 19 includes property purchases that have no off-plan sales.
Law No. 19 outlines the
procedures that a developer should follow in the event of default by a purchaser.
Here's what will happen:
1. Developer notifies the DLD
With
the help of a real estate lawyer,
the developer must inform the Dubai Land Department (DLD) of any default
committed by the purchaser following the sale and purchase agreement (SPA). The
notification should include the description of the default, details of the
property, details of the developer and purchaser, and other related information
requested by the DLD.
2. DLD notifies the purchaser
Once
the developer's request is verified, the DLD will serve a written 30 days'
notice to the purchaser via registered mail, email, or any other approved
method. The purchaser can seek guidance from a property
attorney on how to rectify the default. The DLD also can initiate an
amicable settlement between the purchaser and developer, if possible.
3. Issue of DLD report
If
the purchaser fails to rectify the default or settle the issue within the 30
days, the DLD will issue a statement. The DLD report will indicate that the
developer has satisfied its obligations under Law 19 and the property's
completion percentage. It will also state that the DLD shall deregister the SPA
upon the developer's request, without needing a Court order.
4. Developer terminates SPA
Upon
receipt of the DLD report, the developer can proceed to the termination of the
SPA. The developer can choose to exercise one of several options depending on
the property's percentage of completion. For instance, if it exceeds 80%, the
developer can (i) continue SPA with the defaulting purchaser, retain all
amounts paid, and request for the outstanding payments, (ii) ask the DLD to
sell the property through a public auction, (iii) terminate SPA and retain 40%
of the purchase price.
With
Law 19 in effect, developers are protected, and investors are encouraged to
comply with their obligations. To understand more about the application of Law
19 and other laws concerning real estate, talk to the experts at Motei & Associates, one of the leading legal firms
in Dubai. Their experienced lawyers can provide representation in all matters
of property disputes. Book an appointment today at +971 4 435 5959!
