In a significant ruling that reinforces buyer protections in Dubai’s real estate sector, the Dubai Court of Cassation recently dismissed an appeal filed by a real estate development company and its director against a judgment holding them jointly liable for contract termination damages.

Case Background

The case (Appeal No. 104/2025, judgment dated April 21, 2025) centered on a property unit in the “Marina Star” project. The original purchase agreement, dated May 14, 2007, saw the buyer paying AED 1,994,971 as the unit price. However, the original developer failed to complete the project, leading to intervention by the Judicial Committee for Cancelled Real Estate Projects in Dubai.

Pursuant to Judgment No. 30/2021 issued by the Committee, the project was assigned to a new developer (the appellant company), which assumed all rights and obligations of the original developer. The new developer was granted authority to sell unregistered units on the project master plan once construction had reached 40% completion.

Legal Issues and Court Findings

The Court of Cassation upheld the lower courts’ findings that:

1. Developer Succession and Liability: Under Articles 151 and 252 of the UAE Civil Transactions Law, when a special successor acquires rights over property, they assume related obligations. The Court confirmed that the new developer, upon taking over the project through the acquisition judgment, assumed all legal obligations toward existing buyers.

2. Contract Rescission: The Court ruled that the contract was rescinded due to impossibility of performance after the developer’s director (second appellant) transferred the property through gift to his daughter and registered this transfer with the Dubai Land Department on May 31, 2024, despite having knowledge of the existing sale contract.

3. Joint Liability: The Court established joint liability between the developer company and its director based on the director’s bad faith and fraudulent actions, affirming that a company director can be personally liable beyond corporate limited liability when engaging in fraudulent conduct.
4. Compensation Assessment: The Court upheld a compensation award of AED 1 million for material and moral damages suffered by the buyer due to loss of investment opportunity and emotional distress, in addition to refunding the AED 1,755,573 original payment and AED 239,458 in related costs.

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Key Legal Principles Established

This judgment reinforces several important legal principles in UAE real estate law:

1. Developer Succession: A new developer taking over a project assumes all contractual obligations of the previous developer toward existing buyers.

2. Property Registration Requirement: Sale contracts for off-plan properties create personal rights until formal registration in the Land Department’s initial registry.

3. Director’s Personal Liability: Corporate directors can be held personally liable beyond the company’s limited liability when engaging in acts involving fraud, misrepresentation, or gross negligence.

4. Damage Assessment: Courts have broad discretionary authority to assess appropriate compensation for both material and moral damages resulting from contractual breaches.

Implications for the Real Estate Sector

This ruling sends a strong message to developers and their directors about their obligations toward property buyers. It confirms that the corporate veil can be pierced when directors act in bad faith, and that contractual obligations persist despite changes in project ownership.

For buyers, this judgment reinforces protections against developers attempting to circumvent their obligations through property transfers or corporate restructuring. It also establishes that comprehensive damages, including moral damages for distress and disappointment, are recoverable in real estate disputes.

The Court of Cassation’s decision reaffirms the judiciary’s commitment to maintaining stability and fairness in Dubai’s real estate market, ensuring that contractual obligations are honored and that buyers’ rights remain protected throughout the development lifecycle.

This case serves as an important reminder that even when projects change hands through judicial intervention, the rights of existing buyers must be respected and enforced by successor developers.

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