We have seen Dubai’s off-plan real estate market flourished over the past few years. Off-plan property transactions and investors increase due to lower prices and attractive payment terms. At present, we are witnessing a lot of property supply coming into the market creating more options and investment opportunity for off-plan buyers in Dubai.
Off-plan property investment can be rewarding especially when we look at it in a long term. Unfortunately, in some cases, buyers who breach their sales contract or unable to pay the next instalment can face the recent tightened Dubai Property law.
An update issued by the Dubai Government on the Law No. 19 of 2017 partially amending Law No. 13 of 2008 related to Interim Property Registration in Dubai. The rule adjustment aims to protect property investors and developers.
Also Read: Planning to Buy Property in Dubai? Read These Top Off-plan Tips First
The new Law on Interim Property Registration in Dubai
The improved version of Article 11 of Law No. 13 of 2018 deals with breaches of sale contract by a buyer. The law stated that in such an event, the developer must notify the Dubai Land Department. Once the notification is received, the Land Department will provide a 30-day notice to the buyer in a written report and delivered to the purchaser’s registered postal address, e-mail or any other method stated by the Land Department.
If the developer and buyer reached an agreement, it must be included in the purchase contract and signed by both parties. However, if the buyer unable to fulfil contractual obligations or a settlement cannot be reached, the Department may issue an official document stating that the developer has fulfilled legal obligations, stating the percentage of completion of the property.
New Guidelines for Off-plan Developers and Buyers
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If the off-plan project is more than 80 percent complete, the developer can ask the buyer to follow the terms of the sale contract and seize the paid amount. The buyer should make the rest of the payment stated in the contract or otherwise request the Department to auction the property to collect the remaining amount. The buyer will pay all expenses arising from the re-sale.
Furthermore, the developer may also disregard the sale contract solely, retain up to 40% of the purchase contract’s value and return the remaining amount to the buyer within a year of the date of contract cancellation or within 60 days upon the re-selling of the property, whichever is earlier.
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If the off-plan project is between 60 and 80 percent complete, the developer may also disregard the sale contract solely, retain not more than 40 percent of the purchase contract’s value and return the remaining amount to the buyer within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.
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If the off-plan project is less than 60 percent complete, the developer may also disregard the sale contract, retain up to 25 percent of the sale contract’s value and return the remaining amount to the buyer within a year of the date of contract cancellation or within 60 days upon the re-selling the property, whichever is earlier.
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If the off-plan project did not push through for reasons beyond developer’s control and without negligence, the developer may disregard the sale contract solely, deduct not more than 30 percent of the payment and return the remaining amount to the buyer within 60 days upon the re-selling of the property, whichever is earlier.
As per the new Law, if the off-plan project is cancelled by a resolution from Real Estate Regulatory Agency. The developer must refund all paid amounts made by the buyer, in accordance with Law No. 8 of 2007 relating with Escrow Accounts for Real Estate Development in Dubai.
Moreover, the procedures stated in Article 11 of Law No. 13 of 2008 are not applicable to land sale contracts. Such a sale remains subject to provisions mentioned in the purchase contract.
In Conclusion
Investors who cannot fulfil their obligations can have their sales contracts null and void as per the new law update.