Key Decisions on Dubai Property Laws

The article looks into the property regulatory decisions taken by the Emirate Of Dubai over the last several years.

In March of this year, published an article from STA Law Firm Ltd. that took a deep dive into Dubai property laws between the years of 2009 through 2013. That article, “Key Decisions on Dubai Property Laws between 2009 and 2013 by Dubai Court of Cassation,” examined how Dubai’s property market was affected by the timely financial crisis and congruent laws of the times, as well as the lasting ramifications still affecting the market today. As the authors described it: “A number of decisions were passed by courts between 2009 and 2013 and this article aims to analyze and discuss some of the key decisions.”

Seeing as how that original article was recently followed up with the publication of a “Part 2” on the Lexology website, we thought it was a good time to examine both articles a bit further in order to share some key takeaways with you.

You can find the full content of “Key Decisions on Dubai Property Laws between the years of 2009 through 2013 (Part 1)” here, and “Key Decisions on Dubai Property Laws between the years of 2009 through 2013 (Part 2)” here.

In the year 2007, Dubai witnessed the creation of Real Estate Regulatory Authority (the RERA) (as amended) pursuant to enactment of Law number 16 of 2007 effective from publication date being 30 July 2007.Constitution of RERA took place immediately following promulgation of Law number 8 of 2007 concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai. Other property related statutes were also passed in the year 2007 and 2006 which clearly attests the Government of Dubai’s intention to regulate the property market...Dubai was yet in process of implementing the law that could regulate the demand and supply inequity – Law number 13 of 2008 (the Law 13)regulating the Interim Property Register in the Emirate of Dubai (as amended by Law number (9) of 2009 regulating the Interim Real Property Register ofthe Emirate of Dubai and its amendments)...

The Dubai Court of Cassation has decided on Article 3 (1) in Case 279 of 2011 (dated 27 November 2011). In this matter, the parties to dispute had signed certain reservation agreement under the date of 22 January 2008. The sale was carried out by an agent holding power of attorney from the developer entrusting the agent to enter in to the agreement, sign the same and carry out the sale process. The Court also reviewed a letter dated 6 January 2010 issued by Dubai Land Department evidencing that the developer in the present case had failed to meet requirements imposed under Article 3 (1) being registration of units in the interim register.

There are set precedents recognizing developer’s legal right to terminate the contract such as in case 43 of 2009 (decided on 11 April 2010) by Dubai Court of Cassation wherein it was held and stated:-

“The basic rule in determining the time for payment of the price is the agreement between the developer and the buyer. If there is no agreement between them in that regard, the buyer will be obliged to pay the price upon making the contract and before requiring registration of the unit sold in his name in the preliminary register.

Read the full Part 1 text at Lexology here.

Most of the developers and investors in the 21st century insist on including an arbitration clause to their sale-purchase agreements (the Agreement) in order to avoid the impediments of the courts...The Dubai First Instance Court has taken the view that a dispute between the parties would be governed by the terms of the arbitration clause despite the non-registration of the Agreement. Hence, the lower court held that cases could be referred to arbitration even when the parties dispute the validity of an unregistered Agreement. However, the apex Court of the Emirate had a different opinion in this regard. The Court held that a claim of invalidity of an Agreement due to its non-registration cannot be referred to an arbitral tribunal as its subject matter contradicts the public order of the Emirate. Article 3 of Law Number 13 of 2008 (the Law) has provided that the sale of a real estate property would be void if it has not been entered in the interim real estate register of the Dubai Land Department (the Department). This contemplates that the sale of a real estate unit would be against public policy if it is not recorded in the interim real estate register of the authorities. Further, article 203 of Federal Law Number 11 of 1992 regarding the civil procedure code has provided that arbitration is not allowed in matters in which reconciliation is not allowed.

An investor had approached the Court in order to terminate an Agreement due to the failure of the developer to commence the construction of the project. Further, the developer contended that the provisions of the Agreement did not comprise of any explicit delivery date and therefore, the investor did not have a substantial claim. However, in accordance with articles 246, 247 and 272 of Federal Law Number 5 of 1985, the developer of a real estate has the obligation to commence the construction of a project within a period of six (6) months from the date of obtaining the approval for sale from the relevant authorities. Further, an investor is provided with the right to terminate the Agreement and claim for past payments when the developer has failed to commence the construction of the project within the specified period. Therefore, the Court held that the absence of a provision regarding the date of commencement of construction or delivery of the property was not a considerable justification for the failure of the developers to initiate the construction process. Further, the apex court observed that a default by the main developer would not exempt the sub developer from executing its obligations towards the investors. This judgment provided eminent relief to the investors and aided in strengthening the credence of potential real estate investors.

...article 11 of the Law has provided for the following procedure in the event that an investor fails to meet his obligations pursuant to the terms of the Agreement:

    • the developer should inform the Department regarding any default by the investor;
    • subsequently, the Department would furnish a thirty (30) days’ notice to the investor for fulfilling his contractual obligations;
    the developer can exercise any recourse only when an investor has failed to perform his obligations within the specified notice period.

The judgments of the Cassation Court in appeals 105 of 2011 and 106 of 2011 have substantially elucidated the interpretation of article 11. The Court observed that a developer did not have the exclusive right to terminate an Agreement without the consent of the Department or the other party. Further, a developer is required to intimate the Department when an investor is in default of the Agreement. Generally, this scenario arises when an investor delays in making his periodical payments to the developer. Ergo, developers are entitled to terminate the Agreements only after providing the investors with considerable opportunities to fulfill their obligations of making payments within the notice period...

Read the full Part 2 text at Lexology here.

RERA Regulations 2016

New regulations issued by the Real Estate Regulatory Agency (RERA) have completely changed the way properties in Dubai are marketed and advertised. The law, which came into force in October, covers both print and online, and is aimed at raising the quality of adverts and preventing spam emails and SMS services.Before going ahead with any advertising – on property portals, social media and other platforms - as requested from the broker, owners and landlords must submit the following:

•           Copy of the Title Deed

•           Copy of the registered owner/landlord's passport

•           Completed Form A or authorization letter

•           Copy of the Power of Attorney (as applicable)

The new rules also stipulate that property owners and landlords can only advertise with three real estate brokers or risk facing a AED 50,000 fine.

Mortgage  Laws

According to Decree No (31) on November 15, 2016 granted lands as the lands owned by the government and granted to the beneficiary for residential, commercial or industrial purposes can be mortgaged to any bank or financial institution registered duly in Dubai.




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