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Jerry Parks

Jerry Parks

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Author
Jerry Parks

Jerry Parks

Partner

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26 April 2021

Middle East update – April 2021 – 3 of 4 Insights

Five things you should know about buyers’ and developers’ rights in Dubai

  • Briefing

From the rights of developers to repossess to the increased protection afforded to buyers in the event of a liquidated project, we cover five topics the real estate community in Dubai should know more about.

1. What rights do expats have to purchase and lease property in Dubai?

Freehold

The number of designated areas where freehold title is available to expatriate residents is rapidly expanding. Under Regulation No.3 (2006) Determining areas for Ownership by Non-Nationals of Real Property in the Emirate of Dubai, foreign ownership is limited to certain designated areas. There are now over 60 such designated areas in Dubai, including premium locations such as Emirates Hills, The Palm Jumeirah, Dubai Marina and Jumeirah Bay. Purchasing a freehold property confers ownership rights in perpetuity, enabling the owner to deal with the property however they like.

Leasehold

Expatriate residents may also acquire short and long leasehold rights.

Short leases:

  • run up to 10 years
  • must be registered with RERA (ejari)
  • are subject to the Landlord & Tenant Law
  • are subject to the jurisdiction of the Rental Disputes Committee in the event of dispute, and
  • can apply to property anywhere in Dubai.

Long leases:

  • run from 10 - 99 years
  • must be registered with the Dubai Land Department (DLD)
  • are not subject to the Landlord & Tenant Law
  • are subject to the jurisdiction of the Dubai Courts in the event of dispute, and
  • can apply to properties anywhere in Dubai for UAE and GCC nationals, and to properties in designated areas for expatriates.

Usufruct and musataha

These are rights granted under the Civil Code that are akin to leasehold rights. Under the usufruct arrangement the property cannot be altered, whereas under the musataha scheme it can be developed. The term of both is usually restricted to 50 years.

Whatever ownership vehicle you chose, the scope of rights and range of properties available in Dubai is constantly expanding. 

2. What is the role of Dubai’s Supreme Committee for Real Estate Planning?

The overarching aim of Dubai’s Supreme Committee for Real Estate Planning (the Committee) is to increase competitiveness and ensure that future projects planned by the government and government-related entities do not compete with private investment in the Dubai real estate sector.

The Committee is led by HH Sheikh Maktoum bin Mohammed Al Maktoum and the counsel is made up of members from the Executive Council, the DLD and the Dubai Municipality, as well as leading real estate developers such as Wasl Properties, Meraas, Nakheel and Meydan. This plethora of experience from both the public and private sectors is designed to allow the Committee to both safeguard market regulation and provide knowledgeable insights into the expansion of the Dubai real estate sector. 

The Committee monitors and evaluates the needs of the market and regulates the pace of projects, with the aim of achieving a balance between supply and demand. We welcome this centralised approach.

3. How is a real estate project cancelled?

If you are a developer and the project is in a freehold area and registered with the DLD, the process of cancellation starts with an application to deregister the project, which is submitted to the DLD on the Oqood portal. The application must include the reasons for cancellation and de-registration. It should be supported by:

  • an undertaking agreeing to refrain from selling any of the units off-plan
  • a copy of a newspaper article in both Arabic and English announcing the cancellation and de-registration (to be published for a period of three days)
  • a recent financial report issued by a Real Estate Regulatory Agency (RERA) auditor
  • a list of contacts details for all individuals involved in the development
  • a copy of the signed and stamped memorandum of association (MOA), and
  • any other documents or undertakings requested by the DLD.
  • Once this has been completed, the DLD will issue a certificate of de-registration. 

Furthermore, under Article 23 and Article 24 of Executive Council Resolution No.6 of 2010, RERA have the right to cancel projects under the following circumstances:

  • the developer fails to commence construction, despite obtaining approval from the relevant authorities
  • the developer acts without a licence, submits false or misleading documents to the authorities or an auditor, knowingly sells false developments, embezzles, or deals as a broker without a licence
  • it can be proven that the developer has no intention of implementing the project
  • the land plot is revoked due to a breach of contractual obligations to the master developer
  • the plot is substantially affected by the planning or re-planning of projects
  • the developer fails to implement the project due to gross negligence
  • the developer justifies their intention not to implement the project to RERA
  • the developer is declared bankrupt, or 
  • for any other reason outlined by the RERA.

4. What rights do you have, as a developer, if an off-plan purchaser breaches the terms of a property sale and purchase agreement?

Where a purchaser breaches any of the terms of a freehold property sale and purchase agreement, under Law No.19 of 2017, once notified, the DLD will give the them 30 days to fulfil their contractual obligations. If those obligations are not met after this period, the following will apply:

Where at least 80% of the project has been completed, the developer may confirm the sale and purchase agreement, retain all the amounts paid and request that the purchaser settle the balance of the contract price. Alternatively, the developer may terminate the sale and purchase agreement and retain 40% of the purchase price, refunding the balance when the unit is re-sold or a year after termination (whichever is earlier). Finally, the developer may sell the unit by public auction and settle any outstanding sums from the proceeds of sale.

Where 60% - 80% has been completed, the developer may terminate the sale and purchase agreement and retain 40% of the purchase price, refunding the balance when the unit is re-sold or a year after termination (whichever is earlier).

Where the project has commenced but less than 60% has been completed, the developer may terminate the sale and purchase agreement and retain 25% of the purchase price, refunding the balance when the unit is re-sold or a year after termination (whichever is earlier).

Where the project has not yet commenced due to reasons beyond the developer’s control and without negligence or omission on the developer’s part, the developer may terminate the agreement and retain up to 30% of the amounts paid by the purchaser.

The DLD may also, based on a reasoned report, decide to revoke a project, in which case the developer must refund all payments received from the purchasers in accordance with Law No.8 of 2007 Concerning Escrow Accounts for Real Estate Property Development in the Emirate of Dubai. 

5. Which authority regulates liquidated, cancelled and suspended projects in Dubai?

Under Decree No.33 of 2020 updating the law governing unfinished and cancelled real estate projects in Dubai (the Decree) a Judicial Committee has been established to regulate the liquidation and cancellation of real estate projects in Dubai.

The Judicial Committee has the authority to review and settle all disputes, grievances and complaints and their powers include:

  • considering and adjudicating on cases that did not reach a final decision or judgement under the previous regime
  • considering and adjudicating on unfinished or liquidated real estate projects
  • issuing resolutions necessary to complete unfinished real estate projects
  • considering appeals and determining the rights of developers who will complete unfinished projects
  • issuing temporary and preliminary orders and resolutions obliging developers or investors from completing or refraining from work
  • proposing reconciliation between parties
  • forming sub-committees to determine the tasks and powers of developers and investors
  • appointing auditors to determine the value of cancelled real estate projects, and
  • issuing orders to the trustees of the real estate projects’ escrow accounts, requesting that they pay the amounts deposited into those accounts, or paid to real estate developers, to the rightful owners.

The Judicial Committee oversees all unfinished or cancelled real estate projects in Dubai. All courts and judicial authorities in Dubai, including the DIFC, must refrain from considering any claim that should fall under the jurisdiction of the Committee. Furthermore, all decisions of the Judicial Committee are final and unchallengeable. 

Here to help

Our Real Estate & Infrastructure team can provide guidance and support on any of the issues raised in this FAQ.

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