Can Developers in Dubai Terminate without a Court Order?

 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!