Contracts out the window as gazumping rips through Dubai property market
When the price of a two-bed house increases Dh500,000 in six months, those trying to get on the Dubai property ladder realize a contract to buy isn't worth the paper it's printed on.
July 1, 2008 8:32 by kippreport
So you’re buying a house in Dubai, that pretty villa with a view of a lake, backyard gazebo and 20 minutes to the office. Before you start popping the bubbly though, just one question: at which point in the transaction would you say the house was undeniably, irrevocably yours? When the owner signed an MOU to transfer the house to your name? Or when your bank transferred the full agreed value of the house to the previous owner’s account? Maybe when you finally sat down to sign the transfer papers in court?
In Dubai, today, it might be none of these.
The Nettletons, a British couple living in Dubai since 2004, first set out to buy a house in October 2007. Renting, they’d received an ‘eviction notice’, something that is becoming standard practice when owners believe they can get higher rent by getting in new tenants. A working couple, they wanted a house in the Springs area because it offered both a convenient location.
Trying to find a real-estate agent who had the time to entertain their Dh1.7 million purchase was not quite so convenient. After struggling for a few months, in March they identified the perfect two-bedroom villa, priced at Dh1.8m, slightly higher than their initial estimate. They signed an MOU to buy the house but by the time they did the paperwork to get their mortgage arranged, the price had gone up and the seller backed out.
Three weeks later they found another house owned by a local lady who agreed to sell for Dh2m. Once again, by the time they got around to signing the papers, prices had inched up, and she refused to sign, saying she wanted Dh100,000 more.
We’re now in April 2008. The Nettletons then found a house at Dh 2.2m. In the six months between October and April, prices had gone up by half a million, an increase of almost 30 per cent. This time, the Nettletons made sure the seller signed off the MOU first, so that he could not back out later.
Little did they know what a battle lay ahead.
“The MOU was on the estate agent’s letterhead, and stated they were the owners of the property, and authorized to sell,” explains Mr Nettleton. “Turns out, not only were they not the owners, there were two other investors in the deal as well. So, the actual owner had sold to investor A for X amount, who in turn sold to investor B for Y amount, who in turn organized for us to buy the property at Z amount. The estate agent was simply facilitating the paperwork.”
When the original owner found out that two other people were making money on his house, he refused to sign the NOC that would allow the transfer papers to be processed. In the meantime, the house price had increased to Dh2.4m and the deadline to sign the NOC was fast approaching. The Nettleton’s bank had transferred the agreed value to the owner, and had the original deed of the house, but the owner was apparently trying to delay the deal past the NOC-signing…