Introduction
A recent judgment by the Dubai Court of Cassation (Case No. 112/2025) highlights important principles regarding contractual obligations in real estate transactions. This case examines a seller’s responsibility to deliver property free from occupants and the legal consequences of failure to fulfil such obligations.
Case Summary
The case revolves around a dispute over a villa located in Wadi Al Safa 6, Arabian Ranches in Dubai. The buyers purchased the property from the seller, but upon attempting to take possession, they discovered that the villa was occupied by third parties who refused to vacate without a formal rental agreement.
Despite the property title being transferred to the buyers on April 6, 2024, they were unable to access and utilize their property. This led to legal proceedings against the seller and occupants, seeking delivery of the property free of occupants and compensation for material and moral damages.
The case traversed through multiple court levels:
1. The Court of First Instance ordered the seller to deliver the villa to the buyers in a condition that allows them to benefit from it and awarded compensation of AED 150,000 for the period from April 6, 2024, until October 24, 2024, plus 5% legal interest.
2. All parties appealed this decision. The Court of Appeal modified the judgment by increasing the compensation to AED 250,000 while upholding the rest of the original ruling.
3. The seller then brought the case to the Court of Cassation, arguing errors in application of law, insufficient reasoning, and flawed inference.
Key Legal Principles
The Court of Cassation’s analysis centered on several fundamental principles under UAE Civil Transactions Law:
1. Contracts as Law Between Parties:
The Court emphasized that a valid contract, free from defects of consent, becomes binding on both parties. According to Article 246 of the Civil Transactions Law, parties must fulfill the obligations imposed by the contract in accordance with its contents and in a manner consistent with good faith.
2. Seller’s Obligation to Deliver:
The Court affirmed that a seller is obligated to deliver the sold property in the condition and specifications agreed upon. This obligation exists even if not explicitly stated in the contract, as it constitutes a primary obligation.
3. Actual vs. Constructive Delivery:
The judgment distinguished between:
Actual delivery: Placing the property at the buyer’s disposal to enable possession and utilization
Constructive delivery: When the seller allows the buyer access to the property without legal or material obstacles, except those caused by the buyer
4. Seller’s Responsibility:
The Court noted that a seller cannot evade contractual obligations by claiming the buyers were aware that third parties occupied the property. Knowledge and acceptance of this fact by the buyers does not exempt the seller from the obligation to deliver the property vacant.
Court’s Reasoning
The Court of Cassation partially overturned the appealed judgment regarding the compensation amount, finding a deficiency in reasoning. The Court determined that the lower court failed to adequately address the seller’s defense that the continued occupancy of the property was based on an agreement between the buyers and occupants for a specified period and financial consideration.
The Court considered this a substantial defense that could potentially change the outcome if proven true, yet the lower court did not properly examine it.
Implications for Real Estate Transactions
This judgment reinforces several important principles for real estate transactions in Dubai:
1. Sellers must honor their contractual obligations to deliver property free from occupants, regardless of buyers’ prior knowledge of occupancy issues.
2. Courts will examine thoroughly any agreements between buyers and occupants that may affect the seller’s liability.
3. Compensation for inability to access purchased property can be substantial, reflecting the significant financial impact of delayed possession.
4. The burden of proof lies with the party claiming the existence of an agreement that modifies standard contractual obligations.
Conclusion
This ruling underscores the Dubai courts’ commitment to upholding contractual obligations in real estate transactions while ensuring thorough examination of all relevant defenses. It serves as an important reminder to property sellers of their duty to deliver vacant possession and to buyers of the importance of clear documentation regarding any agreements with existing occupants.
The case has been referred back to the Court of Appeal to reconsider the compensation amount after properly examining the seller’s defense regarding the alleged agreement between the buyers and occupants.
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