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Developers issue termination notices to defaulters

dubai3By Parag Deulgaonkar

An increasing number of developers in Dubai are issuing final termination notices to investors before their properties are foreclosed for non-payment of dues.

Since the beginning of the year, developers such as Damac Properties, Time Properties, The Wave LLC, Triplanet International and ETA Star have issued notices, asking defaulters to rectify their status by paying the monies due. These notices are mandatory according to the law issued by Dubai Land Department (DLD) before it cancels the contract and hands over the unit to the developer.

One of the notices, issued by Damac Properties, reads: “The above mentioned developer claims that you have defaulted in payment of installment/installments of the price for unit no (LGA/18/187)… in Lago Vista project.

“In accordance with Law No.13 of 2008 as amended, and its executive regulations and pursuant to notification/s no: (8174/2013), dated: 03-Dec-2013 issued by the Dubai Land Department, we hereby notify you to rectify the default within 30 days as of the date of publication of the notice.

“If you fail to pay the amount due within the specified period, DLD shall take the necessary legal proceeding pursuant to clause 11 of the aforesaid.”

Purchasers  have the right to challenge the notice with DLD mediation committee attempting to resolve the matter only if the parties (developer/investor) agree to reach a settlement, otherwise the investor can move the court.

Last year, Mizin, a subsidiary of Dubai Properties Group, and Emaar Properties, Dubai’s largest developer, had issued similar notices to defaulters.

During 2008-09, a number of developers had offered investors payment moratorium or flexible payment options. Industry participants say that the notices are being sent to these investors who took the above options then to save their monies put into the project, but failed to pay thereafter.

Market optimism also has driven a number of developers to revive their projects as in 2013 the market saw a broad-based recovery with prices rising by over 20 per cent. This year prices are expected to rise by another 10 to 15 per cent, according to UK-based Knight Frank.

What the law says

Law No (9) of 2009 amending certain provisions of Law No (13) of 2008 regulating the interim real estate register in Dubai

Article (11)
1. In the event the purchaser shall be in default of any of the terms and conditions of the contract for the sale of a real estate unit entered into with the developer, the developer must notify the department of such default. Thereupon, the Department shall give the purchaser, by hand, registered post or e-mail, a 30-day notice to fulfill his contractual obligations.

2. If at the end of the notice period stipulated in the preceding paragraph the purchaser has not fulfilled his contractual obligations, the following provisions shall apply:

a. in case the developer has completed at least 80 per cent of the project, the developer may keep the full amounts paid and request the purchaser to settle the remaining amount of the contract price. If this was not possible, the developer may request that the property be auctioned in order to collect the remaining amounts due to it.

b. in case the developer has completed at least 60 per cent of the project, the developer may revoke the contract and deduct up to 40 per cent of the purchase price of the real estate unit stipulated in the contract.

c. in case of projects where construction commended but did not reach 60 per cent, the developer may revoke the contract and deduct up to 25 per cent of the purchase price of the real estate unit stipulated in the contract;

d. in case of projects where construction has not yet commenced for reasons beyond the developer’s control without any negligence or omission on its part, the developer may revoke the contract and deduct up to 30% of the total amounts paid by the purchaser.

3. For the purposes of paragraphs (c) and (d) of this clause 2, the term “construction” shall refer to cases where the site of the project is handed over to the contractor and the construction works have commenced in accordance with the designs approved by the concerned authorities.

4. For the purposes of paragraph (b), (c) and (d) of the foregoing clause, the developer shall return the amounts due to the purchaser within a period not exceeding one year from the date of revocation or within a period not exceeding sixty days from the date of resale of the real estate unit, whichever comes first.

5. Notwithstanding the provisions of clauses 1 & 2 of this Article, the agency may, following a grounded report, decide to cancel a real estate project, in which case the developer must return to the purchasers all the amounts paid by them in accordance with the provisions of Law No (8) of 2007 concerning Escrow Accounts of real estate developments in the emirate of Dubai.

6. The provisions contained in this Article shall not be applicable to contracts of sale of lands where sales were not made off-plan as they shall remain governed by the provisions contained in the contract entered into between the two parties thereto.

7. The provisions of this Article shall apply to all contracts entered into prior to the entry into force of this Law.-Emirates 24/7