Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister, in his capacity as Ruler of the Emirate of Dubai, has issued Law No. (19) of 2017, amending certain provisions of Law No. (13) of 2008 regarding the regulation of the preliminary real estate registry in the Emirate of Dubai, with the aim of protecting real estate sector stakeholders from investors and real estate developers, and ensuring the accurate understanding and proper application of its provisions.
The new law provides for the amendment of Article (11) of Law No. (13) of 2008, with a new text that includes the rules and procedures to be followed in the event that the buyer breaches his obligations to execute the off-plan sales contract concluded between him and the real estate developer, including: the requirement that the real estate developer notify the Land and Property Department of the buyer’s breach of contractual obligations, in accordance with the form prepared by the Department for this purpose, provided that this form includes the details of the real estate developer and the buyer, a description of the real estate unit that was the subject of the off-plan sales contract, a clear description of the contractual obligations breached by the buyer, and any other information specified by the Department.
The procedures and rules also stipulate that the Land and Property Department, upon receipt of the notification, and after verifying the buyer’s breach of contractual obligations, shall notify the buyer to fulfill their contractual obligations to the real estate developer within 30 days from the date of notification, provided that this notification is in writing and dated, and the Department must serve this notice on the buyer either in person, by registered mail with return receipt, by email, or by any other means specified by the Department.
The Dubai Land Department may facilitate an amicable settlement between the real estate developer and the buyer, if possible. This settlement shall be documented in a contract addendum signed by the real estate developer and the buyer.
However, if the aforementioned deadline expires without the buyer fulfilling their contractual obligations or reaching an amicable settlement with the real estate developer, the Department shall issue an official document in favor of the real estate developer stating the developer’s commitment to legal proceedings and specifying the developer’s percentage of completion of the real estate unit subject to the off-plan sales contract, in accordance with the standards and rules adopted by the Real Estate Regulatory Agency in this regard.
The law stipulates that the real estate developer, upon receipt of the official document issued by the Dubai Land Department, and based on the percentage of completion, take the following measures against the buyer without resorting to litigation or arbitration, namely that if the real estate developer has completed more than 80% of the real estate unit subject to the off-plan sales contract, he may either: maintain the contract concluded between him and the buyer and retain all amounts paid to him, while demanding that the buyer pay the remaining balance of the contract, or request that the Dubai Land Department sell the real estate unit subject to the contract at public auction to recover the remaining amounts due to him, with the buyer bearing all costs incurred by such sale, or terminate the contract at his sole discretion, and deduct no more than 40% of the value of the real estate unit specified in the off-plan sales contract, and returning any excess amount to the buyer within one year from the date of termination of the contract, or within 60 days from the date of resale of the real estate unit to another buyer, whichever comes first.
Among the measures that a real estate developer may take against the buyer, according to the law, is that if the developer has completed between 60% and 80% of the real estate unit, he may terminate the contract at his sole discretion and deduct no more than 40% of the value of the real estate unit stipulated in the off-plan sales contract, and any amount exceeding that shall be refunded to the buyer within one year from the date of termination of the contract, or within 60 days from the date of resale of the real estate unit to another buyer, whichever comes first.
The law also stipulates that if the real estate developer commences work on the real estate project by taking possession of the construction site and beginning construction in accordance with the designs approved by the competent authorities, and the completion rate is less than 60% of the real estate unit, he shall have the right to terminate the contract at his sole discretion and deduct no more than 25% of the value of the real estate unit stipulated in the off-plan sales contract, and any amount exceeding that shall be refunded to the buyer within one year from the date of termination of the contract, or within 60 days from the date of resale of the real estate unit to another buyer, whichever comes first.
However, if the real estate developer has not commenced work on the real estate project, for any reason beyond his control and without negligence or default on his part, he shall have the right to terminate the contract at his sole discretion, and deduct no more than 30% of the amounts paid to him by the buyer, and refund any excess to the buyer within 60 days from the date of termination of the contract.
According to the law, if the real estate project is canceled by a reasoned decision of the Real Estate Regulatory Agency, the real estate developer must refund all amounts received from buyers, in accordance with the procedures and provisions set forth in Law No. (8) of 2007 regarding real estate development guarantee accounts in the Emirate of Dubai.
In accordance with the law, the procedures and rules stipulated in Article (11) of Law No. (13) of 2008 do not apply to a land sale contract where the sale was not made off-plan, and such sales remain subject to the provisions set forth in the contract concluded between the parties. These procedures apply to all off-plan sales contracts, whether concluded before or after the entry into force of this Law.
The procedures and rules set forth in this article are considered matters of public policy, and failure to comply with them shall result in nullity; these rules shall not preclude the buyer’s right to resort to the courts or arbitration in the event that the real estate developer abuses the powers granted to him under this article.
Any provision in any other legislation is repealed to the extent that it conflicts with the provisions of this Law. This Law shall enter into force on the date of its issuance and shall be published in the Official Gazette.
