On 18th October 2017, His Highness Sheikh Mohammed Bin Rashid Al Maktoum issued Law No. 19 of 2017, amending Article 11 of Law No. 13 of 2008 concerning the Interim Real Estate Register in the Emirate of Dubai “ Law 19”. Khairallah Law Firm, a real estate development lawyer, is committed to safeguarding the developer’s interests, advising on Law 19, and ensuring that the front-end developer has complied with its provisions and requirements. Front-end developers have established procedures that they must follow upon an off-plan investor’s default, leading to the SPA’s termination and SPA de-registration by the Dubai Land Department “ DLD .” The procedures for developer claim processing are public policy, and developers cannot be absolved from performing them.

Given that Law 19 came into force on 18th October 2017, it is retroactive. The only exception is the sale of land without off-plan sales (non-residential), which remains governed by the then SPA provisions. Furthermore, the SPA does not explicitly or implicitly assert DLD’s power to deregister off-plan SPAs in case of termination but does expressly refer to the contract. Therefore, property developers in UAE should consider the foregoing in relation to the law.

Developer Termination Methods: Explained

Further, Law 19 provides for certain specific undertakings by the developer with timelines before terminating the SPA of a defaulting off-plan purchaser as follows:

Developer notification to DLD: 

The developer must notify the DLD about the default done by the off-plan purchaser under the SPA terms. The notification must inform the DLD of the default’s nature and must include purchaser and developer details, property description, and any other information as requested by the DLD.

DLD Notice to the purchaser: 

After being notified by the developer, the DLD shall consider the request and will send a written notification to the defaulting purchaser upon being satisfied with the required verification. This notification, called the “DLD Notice” provides the purchaser with 30 days to cure the default. Moreover, the DLD has the authority to arrange an amicable settlement between the parties involved. If an amicable settlement is reached the parties shall agree to a settlement agreement. Consulting a real estate developer lawyer who specializes in real estate development will be helpful through these steps.

Developer’s Termination Rights: Options and Procedures with a Real Estate Development Lawyer in Dubai:

Upon receiving the DLD Report, the developer can terminate the SPA of the defaulting purchaser without requiring any further court order or arbitration.

If the completion exceeds 80%, the developer has the right to choose from three options.

1. The developer can choose to continue with the SPA with the defaulting purchaser, retaining all amounts paid and requesting outstanding payments. 
2. Alternatively, they may ask the DLD to sell the property via public auction, collecting the
   proceeds to offset the outstanding balance purchase price due from the purchaser. 
3. Another option is to unilaterally terminate the SPA without needing to obtain a prior court order, retaining 40% of the purchase price and returning excess amounts to the purchaser within one year of the termination date or within sixty days of a successful resale of the property to a third-party purchaser, whichever occurs earlier. Real estate developers in Dubai should consider these options carefully when dealing with defaulting purchasers.

Termination Options Based on Completion Status

If completion is between 60 to 80%, the developer can unilaterally terminate the SPA without the need for further court orders. They may deduct no more than 40% of the purchase price and refund the remaining amount to the purchaser either within one year of the termination date or within sixty days of the successful resale of the property to a third-party purchaser, whichever occurs earlier. Dubai development real estate developers should consider these options carefully when dealing with varying completion statuses.

If completion is less than 60%, the developer can unilaterally terminate the SPA without needing further court orders. They may deduct no more than 25% of the purchase price and refund the remaining amount to the purchaser either within one year of the termination date or within sixty days of the successful resale of the property to a third-party purchaser, whichever occurs earlier. Real estate development lawyers can offer guidance on these options.

If construction has not commenced, the developer has the right to unilaterally terminate the SPA without requiring further court orders. They can deduct no more than 30% of the amount paid by the purchaser and refund the remaining amount within sixty days of the termination date. This is applicable if the developer has not initiated construction due to reasons beyond its control and without any negligence on its part.

Legal Remedies for Cancelled Real Estate Projects: Guidance from Real Estate Development Lawyers

If RERA cancels a real estate project, Law 19 requires the developer to refund all paid monies to its purchasers, following Law No. 8 of 2007 concerning real estate development trust accounts in Dubai.

If the defaulting purchaser believes that the developer terminated the agreement unfairly, Article 11 (4f) of Law 19 permits them to seek recourse through the courts or arbitration to challenge the termination. Dubai development real estate lawyers can guide in such situations.

Conclusion

However, it is important to note that Law 19 led to some optimistic developments in Dubai’s real estate investment world, acting as an essential legislative lever. Indeed, developers now have the right to enforce the decision to cancel the Purchaser’s SPA and remove their name from DLD’s interim real estate register. Moreover, considering the essence of Dubai’s off-plan regime, Law 19 can be viewed as an effective tool for Dubai developers as they no longer have to engage in costly and timely disputes as a result of the Purchaser default. Thus, it would be beneficial to consider guided advice in the UAE through Khairallah Law Firm, Best Lawyers in Dubai.