A law unto themselves

A law unto themselves

The Dubai Land Department has announced that it will amend Law No 13 in two weeks, although it wouldn’t elaborate on the changes…but lawyers will.

April 5, 2009 2:01 by Dana El Baltaji

An article in Emirates Business 24-7 reported on Sunday that the Dubai Land Department will amend Article 11 of the now infamous Law No 13, clarifying to investors their rights if they want to cancel their contracts with their developers.

“We will release an amendment to Article 11 in the coming two weeks. It is something good for the market as it is more comprehensive and detailed,” said Sultan Butti bin Mejren, Dubai Land Department’s director-general.

As it stands, the law provides provisions in case buyers default on payments, granting developers up to 30 percent of the value of the property if purchasers default on payments after construction begins, and up to 30 percent of the amount paid thus far if developers have not broken ground.

According to Pierre Mehawej, a legal consultant with Kanaan & Azhari Advocates and Legal Consultants, a circular distributed to consultants in Dubai suggests the government plans to amend the 30-70 rule to 25-75.

The circular was distributed in March 2009; it is unclear if the amendments detailed in the circular have been incorporated in Dubai’s property law to date.

If the circular is indeed a law, then more investors are likely to ask for contract cancellations: “Now that all the properties have been devalued by up to 35 percent, it’s better for an investor to lose 25 percent of the value of the property than to keep the property,” explains Mehawej.

The circular also mentions an interesting addition to Law No 13, which, according to Mehawej, if it is implemented, will help numerous cases: “In article 3 of this new law, the circular explains that Rera (the Real Estate Regulator Authority) may draft a report listing projects that have been cancelled. If a project has been cancelled, then the developer is required by law to give buyers full refunds,” he said.

He adds, “Rera must provide reasons for the cancellation. However, developers will be allowed to contest Rera’s decision 10 days after it is issued.”

However, the land department’s laws are one thing; getting developers to abide by them is another.

“There is little investors can do without going to court,” explains Mehawej. “Developers are not cooperating at all. They’ve simply collected buyers’ money and they’re doing nothing with it. They’re not building anything, they’re not refunding and they’re not taking any action. They’re not even going to the land department to cancel or register anything. If buyers want anything done, they will have to hire a lawyer.”

According to media reports, Rera announced that a list of cancelled projects will be published in the first week of April. Numerous lawyers confirmed to Kipp that the list is complete; however, the authority has opted to delay publishing it for an undisclosed period of time.

Nevertheless, sources at Rera have said that the list will be published by April 16.