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Investor ‘protection’: here we go again…
A proposed investor protection law does little to guarantee protection for real estate investors here in the UAE. Kipp isn’t terribly surprised…
May 2, 2012 4:07 by kippreport
Last month, Kipp wrote about a new proposed law intended to ‘protect’ property investors in Dubai. Set to be enforced in the middle of 2012, the new law would ban developers from selling property to investors unless 20 percent of the property is completed. At the time, we said we thought the act didn’t exactly protect investors-after all merely ensuring the completion of 20 percent of the project before sales doesn’t quite qualify as protection from in-completion or force de majure. Even if 20 percent is completed, where is the guarantee that the remaining 80 percent will be?
Double edged sword, Kipp said it then and we will say it again one month later: all of the measures put into place to ‘protect’ investors are something of a double edged sword. RERA really need to reconsider the message they are sending potential real estate investors when they draft such laws.
Consider article 11 of the draft Investor Protection Law which “suggests developers will retain control of common areas where such rights are contained in the original sales and purchase agreement” as Michael Lunjevich, a property lawyer at Hadef & Partners told The National. Essentially, the law says the developer will maintain the right to manage the ‘common areas’ of a particular development.
Sounds like trouble and Kipp has only two words: “Shoreline Apartments.”
Oh yes, remember that messy debacle? Towards the end of 2011, Nakheel closed off access to the club house and pool claiming unpaid service charges. Nakheel said it had plans to open up membership to the community’s pool and fitness center, to the public. And quite naturally, the residents of the Shoreline Apartments were incensed. Things got so out of hand, residents called the police to get the security guards to open the shut door-which they said was a safety hazard.
When done well, management of the ‘common areas’ by the developer, isn’t necessarily a bad thing. Yet, Kipp can easily foresee how things could sour if there isn’t a further clarification of the responsibilities of a developer who maintains the rights of the common areas. Outlining a developer’s extent of control and the type of limitations in their rights, is pivotal to avoiding another ‘Shoreline Apartments.’
Till then, RERA should consider altering the law to make allowance for those who are currently in possession of apartments that aren’t being adequately maintained by their developers. Taking such steps legally, will help restore the confidence of investors, world wide-something the Dubai real estate sector can really do with at the moment.