Buying a property in Dubai is a major financial decision. For many buyers, the expected handover date is just as important as the price of the property. A buyer may have planned to move into the property, rent it out, sell it or use it as an investment. When the developer fails to hand over the property on time, the delay can therefore create financial and practical difficulties.
Dubai has established laws to protect purchasers of off-plan properties. The rights of a buyer in such circumstances are governed by the terms of the Sale and Purchase Agreement (SPA), Dubai’s real-estate legislation and the general principles of the UAE Civil Transactions Law.
What Should a Buyer Do When Handover Is Delayed?
The first step is to carefully review the SPA. The buyer should check the agreed completion or handover date, any grace period given to the developer and the provisions dealing with extensions or delays.
A buyer should not assume that every delay automatically gives a right to cancel the purchase. The reason for the delay, the contractual terms and the actual status of the project are all important.
If the agreed handover date has passed, the buyer may formally communicate with the developer and request an explanation and a confirmed handover date. Where the delay continues, a formal legal notice may be issued requiring the developer to comply with its contractual obligations and reserving the buyer’s rights to claim appropriate remedies.
Compensation for Loss Caused by Delay
One of the main concerns for a buyer is the financial loss caused by a delayed handover. For example, a buyer may have to continue paying rent while waiting for the purchased property, incur additional financing expenses or suffer other losses directly connected with the delay.
Under the UAE Civil Transactions Law, compensation may be available where an obligation is not performed, is performed late, partially or defectively, subject to the requirements of the law. The law generally requires the debtor to be formally placed in default before compensation becomes due, unless the law or the agreement provides otherwise.
Accordingly, buyers should keep proper records of their losses, including tenancy agreements, rental payments, bank statements, correspondence with the developer and other documents that may help establish the actual damage suffered.
The SPA should also be checked for any agreed compensation or delay-related provision. Whether such a provision can be enforced, and the amount recoverable, will depend on the contract and the applicable law.
Can the Buyer Ask for Termination?
In some circumstances, a buyer may prefer to terminate the transaction rather than continue waiting for the property.
Dubai’s Executive Council Resolution No. (6) of 2010, which provides the implementing regulations for Dubai Law No. (13) of 2008, allows a purchaser to approach the competent court for termination in specified circumstances. These include material deviation from the agreed specifications, certain failures by the developer concerning the sale agreement or payment arrangements, material construction defects and other circumstances where termination is justified under general legal principles.
However, delayed handover should not automatically be treated as an unconditional right to cancel the SPA. The buyer’s circumstances and the terms of the particular transaction must be examined before taking such a step.
Role of the Dubai Land Department and RERA
The Dubai Land Department (DLD) and Real Estate Regulatory Agency (RERA) have an important role in regulating Dubai’s real-estate sector.
Dubai Law No. (13) of 2008 regulates the Interim Property Register and provides a framework for the registration of off-plan property transactions. It also requires developers to register completed projects and the relevant units in the names of purchasers who have fulfilled their contractual obligations.
Where a dispute arises between a developer and a purchaser, the DLD may undertake conciliatory efforts and propose solutions aimed at resolving the dispute. If the parties reach an amicable settlement and it is approved by the DLD, the settlement becomes binding on them.
This can provide a practical option for a buyer who wishes to resolve the dispute without immediately commencing court proceedings.
What if the Developer Claims Force Majeure?
Developers may sometimes explain a delay by referring to circumstances beyond their control. Such circumstances must, however, be considered carefully.
The Dubai implementing regulations identify certain events that may be regarded as being beyond the developer’s control, including government suspension of a project for replanning, expropriation of the project land and the discovery of certain structures or utility lines at the site. At the same time, the regulations identify certain unjustified delays and failures by developers as negligence or omission.
Therefore, a general statement that the project has been delayed is not necessarily sufficient. The actual reason for the delay and its connection with the developer’s contractual obligations should be examined.
What if the Project Is Cancelled?
A more serious situation arises where the project itself is cancelled. Under the Dubai regulatory framework, RERA may cancel a project in specified circumstances, including failure to commence construction without valid justification, gross negligence, bankruptcy or circumstances indicating that the developer does not genuinely intend to implement the project.
The regulations also provide mechanisms for auditing the project’s financial position and refunding amounts due to purchasers following cancellation.
This is different from an ordinary delay in handover. A buyer should therefore distinguish between a delayed project and a formally cancelled project.
Conclusion
A delayed handover can be frustrating, particularly when a buyer has already paid substantial amounts and made personal or financial plans based on the promised handover date. However, buyers in Dubai are not without legal protection.
Depending on the circumstances, a buyer may seek completion and handover, compensation for proven losses, enforcement of contractual rights, termination of the SPA or appropriate regulatory intervention.
The most important step is to examine the SPA and establish exactly what the developer promised, when the property was supposed to be handed over and whether the developer has a valid contractual or legal basis for the delay. The buyer should also maintain proper records of all communications and financial losses.
Ultimately, the appropriate remedy will depend on the individual circumstances of the transaction. A buyer should therefore obtain legal advice before taking serious steps such as terminating the SPA or commencing legal proceedings, particularly where substantial amounts have already been paid.