Ask the Law - Residential : April 2011
Every month, Property Magazine invite readers to have their legal questions answered by one of our experts.
This month, Jerry Parks tackles the task.
Q We purchased two office units off plan under two reservation agreements in Business Bay in March 2007. Although a draft SPA was sent, it hasn’t been signed. The units are registered in our individual names and the escrow accounts are in place although no funds have been transferred to or from the account.
The reservation agreements do not contain any substantive contract provisions relating to this property, for instance, default on the part of the seller. Also there is no completion date but the last instalment before completion in the payment plan was scheduled for January 15, 2009, bringing total payment to 70 per cent. The remaining 30 per cent is due on completion.
On February 8, 2009, the developer issued a notice (force majeure) stopping payments while payment plans were revised in accordance with the anticipated completion date. Another letter was sent on April 30, 2009, confirming work on the project had restarted (although this appears not to be true) and stating a revised payment plan had been submitted to Rera and the master developer for approval. The draft SPA doesn’t contain any provision for termination of the agreement by the buyer in the event of default by the seller.
Construction has recommenced with work on the piling and shoring substantially complete. The substructure building permit has been obtained. Piling foundation has been completed and pile caps are under preparation. However, the contractor only recently remobilised and there is only limited machinery on site.
We have tried to get in touch with the developer to negotiate and come up with a solution but they are refusing to communicate with us. They sent us final payment notices twice (according to a supposed Rera-linked payment plan), one last year and another one this year. We sent them two responses via our lawyers requesting for clarification as well as the SPA but they have failed to respond.
Can we ask the court to cancel the contract for this reason? Instead of going to the courts, will Rera or the Land Department assist us in this issue? If we were to stay in the project, how can we ensure our payments are protected? Do you think we are in a position to enforce some kind of guarantee agreement?
Lawyers Jerry Parks
This article was first published in Property Magazine and is reproduced with the kind permission of the editors.
