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Protection at last, but too late for many
Investors in the Dubai property market aren’t legally protected half as much as they should be. You could say it is about time something was done, but is it too late?
February 15, 2011 4:02 by Eva Fernandes
Let me rewind to a few years back, to Dubai pre-recession: it is hard to forget the ever swelling bubble that was the Dubai property market. While on one hand, larger-than-life property developments were unveiled, prices were soaring even higher than the towers Nakheel and Emaar promised. Investors from inside and from outside the UAE poured in cash by the millions; many bought off plan and had no other guarantee their developments would arise other than artists’ impressive visions of what the end product would look like. It wasn’t rare at all to see kiosks set up in local malls primarily for the purpose of selling property. At such kiosks would often sit a dolled up sales girl handing passersby brochures of multiplexes against vanilla skies.
And then, to use the words of Elizabeth Wurtzel, the recession hit Dubai ‘gradually and then suddenly.’ All of a sudden, stories of massive debts, property companies going bust, companies leaving the country and construction reaching a deadly standstill began to emerge. And because such kind of a downturn was unprecedented in Dubai’s rather immature property market, the course of action for investors was unclear—after all there isn’t a manual for investors in that situation. If you were one of Dubai’s many investors, what were you to do if all of a sudden your property developer upped and left? How would you claim the millions of dirhams you invested? What kind of legal action could you take? And if the company has vanished who would you try at court?
Of course, the woes of the property crash were felt all around the world; but the transitory nature of Dubai (and by extension the companies that operate here) and the extent of the boom and bust here meant investors in Dubai with an incredibly raw end of the deal.
If you chose to go after your developer legally, you’d find the case both time consuming and expensive. According to Ludmila Yamalova, Managing Partner of HPL Yamalova & Plewkas, filing a case with Dubai Courts costs roughly 7 percent of the contract value, translations costs (every document submitted to the court must be translated to Arabic) and of course the attorney’s fees. Yamalova said “Most of the time, the minimum expense of litigating a case is Dh150,000.”
AED 150,000 as a minimum charge for legal action. That’s on top of all the money invested.
This is no minor problem. When I meet with investors who have been victims of some property developers they often talk with a bitter sharpness in their eyes and I genuinely feel for them. These are people who invested sometimes millions at the height of the boom; Dubai companies happily took their money but when everything went flat those same companies offered absolutely no protection to them. These people are left high and dry, some neck deep in loans they took to pay for their properties, and thus legally bound to stay in the country.
A new law would be very, very welcome then; but for most, even if it was up and running instantly, it would already be too late.
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