What can a buyer do in Dubai when faced with a Cancelled Off-Plan Real Estate Project?


On 23 July 2013, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai and Prime Minister of the United Arab Emirates, issued Decree N0 (21) of 2013 concerning the creation of a special judicial committee for the liquidation and settlement of cancelled real estate projects in the Emirate of Dubai (Committee on Cancelled Real Estate Projects). When it was published in the Official Gazette on 10 September 2013, the Decree came into effect.

As such, specialized laws dealing with such cases exist in the Emirate. In addition, the law refers to investments of real estate occurring both in the onshore and free zone areas of the Emirate.

Nonetheless, a buyer will first have to determine if the project at issue is genuinely cancelled or whether the problem he faces is a pause or of a different type. The decree initially creates the competent authority for the cancellation of real estate projects, the Real Estate Regulatory Authority (RERA).

How does RERA declare a real estate project as cancelled?

Article 23 of Resolution No (6) of the Executive Council of 2010 lays down the nine grounds on which RERA may cancel a project, including, but not limited to, events where the developer has obtained all the required approvals to commence construction work and has not yet done so; instances where the developer has mismanaged the project in violation of Article 16 of Law No. 8 of 2007;
Once a resolution to cancel the project under Article 24 of Resolution No (6) of the Executive Council of 2010 has been passed by RERA, the applicant has seven working days to appeal the termination resolution. RERA will write new terms and conditions in the case that the appeal is successful, which the developer must consent to in writing. However, if the appeal is denied, RERA will continue with the project's cancellation.

Following the termination of the project, RERA shall prepare a report setting out the reasons for the cancellation of the project and shall submit it to the developer. In exchange, the escrow account will be checked by a RERA named auditor and the developer or escrow agent will be asked to allocate the available funds to buyers within 14 days of the cancellation. As provided for in Article 25 of the Decree, the auditor's fees will be charged by the developer.

Article 26 of the Resolution states that, in the case of a shortfall between the money reimbursed to the purchasers and the money originally charged, 60 days from the date of the termination, extendable at the discretion of RERA, the developer will be liable to pay the shortfall. The section of the Dubai Courts Execution would have the power to enforce the committee's decisions as provided for in Article 5 of the Decree.

The Powers of the Committee

This decree specifies that all projects cancelled by RERA, the Real Estate Regulatory Authority of the Government, shall be subject to review by the Committee, which shall be composed of at least one panel of at least three judges from the Dubai Courts. The committee's decision would be binding and difficult to appeal.

At the Dubai Trials, the Committee works. According to the Dubai Courts, the buyer can contact the Dubai Land Department (DLD) to understand when such projects will be transferred to the Committee if a certain development has not been identified by the Committee.

What are the buyer’s rights in this respect?

If a project has been cancelled, investors or customers are rarely put on alert. They are therefore asked to consult the website of the Dubai Land Department or to visit their offices to assess the progress of their project. Once it has been confirmed that the project has been cancelled, investors can, by means of sales and purchase agreements, proof of amounts paid and any other appropriate documentation needed by the regulators, contact the Land Department and provide proof of interest in the project.

The next move would enable the investor to file a petition with the DLD department, which will forward the application to the committee in turn. The latter shall then notify the investor in order to accept the petition and remind him of the date of the hearing before the courts of Dubai in order to seek compensation of the sums paid from the project's escrow account or from any other executable proceeds of the cancelled project.

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