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Protection at last, but too late for many

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?

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February 15, 2011 4:02 by



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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3 Comments

  1. Stephen Park on February 16, 2011 6:45 am

    The problem is that those who purchase with a mortgage are then told that they are not the “owner”, the bank is, and that therefore they are not eligible for any compensation and cannot cancel or seek refund of any deposits
    e.g SKYCOURTS in dubailand – completion and handover promised 2007/8
    now feb 2011 and still nothing, and developer refuses to return or refund deposits or cancel the contract, blaming force majeure for delays, and then saying it is nothing to do with “me” as i am a lessee and my mortgage bank is the legal owner anyway
    but they still ask “me” to pay for fees for handover notices (an admin charge) and snagging reports – but hang on – you just said im not the owner?!?
    it seems im the owner when they want money, but not the owner when my legal contract allows me to cancel the contract because of developer delays of more than 24mths for handover from the givern delivery date
    typical dubai, one rule for them, one for us

     
  2. abdul on February 17, 2011 7:21 am

    Imagine what some of the people who invested their life time savings and then they are chased by the developers and the banks for payments for properties which are delayed and not at all ready. What kind of life they and their family members are having since the property market crashed. Real unfortunate ones for no fault of theirs, they invested and lost everything they had, and to add to all this pains and losses , they are chased like animals by hunters. I hope the law is very strong and protects the buyers and investors We would like to thank the government for releasing this news and also the law soon.

     
  3. ramesh on February 17, 2011 10:50 am

    Thousand’s of low income families invested their children’s savings and life time savings in Dubai, Ajman and Ras-khaimah properties , and lost everything. They have lost their peace, reputation, credibility (by taking loans from relatives and friends) and most important their health also in many cases. Prices went 60% down and developers are saying either you pay the agreed price (2008 price) or be prepared to lose whatever you have paid or we will put legal cases on you and put you in jails by going to the courts. People paid Dhs 380000 for a studio which is still not ready in Ajman and today Dhs 180000 is read studio flat in International city. No one can continue investing in a project, which when finished will return you less than 50% of your investment. It is a hard choice, and people everywhere around the globe, don’t know how to come out of all this and what to do next and Therefore, I think it is time UAE government has planned to intervene and come up with a viable alternative. Its a very touching gesture by the government and we are highly thankful to them for their kind support during this very tough times. All our prayers are for them to Almighty God. Thank you a million times for the news.

     

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