A property when being purchases the purchasers usually rely on brochures, plans and SPA agreements. There have been multiple situations where there is an area shortfall. The Dubai law sets a permissible margin and explains when compensation becomes payable.

Legal Basis Under Dubai Law

Article 13 of the Executive Council Resolution No. (6) of 2010 Approving the Implementing Bylaw of Law No. (13) of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai.

The article mentions about the following matters:

  1. Net Area Will Be the Official Measurement – Article 13(1) – Dubai Land Department (DLD) adopts the “net area” for registration purposes. The net area is calculated according to the DLD standards. The registered net area becomes the legally recognised measurement.
  2. Developer Cannot Charge for Extra Area Unless Agreed – Article 13(2) – If an actual property becomes larger than agreed the developer cannot demand extra payment automatically.
  3. Buyer Can Claim Compensation for Significant Shortfalls – (Article 13(3)) – If the actual area is lesser than the agreed net area more than five percent then a compensation will be payable. Small variations are tolerated and the threshhoild for compensation is kept in five percent.
  4. How Compensation is Calculated – (Article 13(4)) – If the shortfall exceeds 5%, compensation is calculated based on the purchase price agreed in the SPA.
  5. Sale Agreement and Approved Plan Are Important – (Article 13(5)) – The measurement mentioned in the sale agreement and property plans will be used to check if there is an excess shortage.

Dubai Court of Cassation Clarification – Case No. 220 of 2018

This was an important case which states that the first 5% shortfall is treated as a margin that is permissible and it does not attract a compensation. The buyer is compensated only for the portion of decrease that exceeds the 5% threshold.

Practical Impact on Buyers and Developers

For Buyers
  1. Buyers should compare:
    • SPA measurements,
    • DLD records,
    • handover documents,
    • and actual measurements.
  2. Buyers may have a right to compensation where the shortfall exceeds the legal threshold.
For Developers
  1. Developers must ensure accurate disclosures and measurements.
  2. They may face compensation claims for substantial reductions in area.