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Can developer terminate off-plan property without court order?

Real Estate is certainly one of the most attractive feature of Dubai for international investors as it allures foreign expatriates to invest in UAE market be it for commercial or residential properties, considering the zero taxation policies. In today’s times, Dubai is considered as one of the world’s leading real estate sector and the rationale behind such fame is the rules and regulations governing such sector issued by the government of Dubai which offers promising development opportunities to the buyers. Real-Estate Lawyers of Dubai consider Dubai Law number 13 of the year 2008 (concerning Interim Property Register in Dubai) as the most significant law issued with respect to governing off-plan properties in the Emirate of Dubai. The primary objective of the government for issuing this regulation is to establish rules and regulations for managing off-plan properties and to ensure the safety of buyers and sellers. 

In general, the obligations of a seller is to complete the property on time and handover the same to the seller, on the other hand, the major obligation of the buyer is to make the payment on time under any off-plan agreement. However, many developers face difficulties in cases where buyers fail to adhere with their contractual obligations of submitting the consideration amount to the developer. The government of Dubai, bearing in mind such difficulties faced by developer’s amended one of the pertinent provision (Article 11) of 2008 Law by virtue of Law Number 19 of 2017 describing the ways under which the developer is authorized to terminate the sale and purchase agreement in the event of buyer’s default without obtaining an order from the court or an arbitral award. 

The Procedure to Terminate 

The amendment of 2008 Law lays down following procedures and timelines which shall be followed by the developer in case they desire to terminate the sale and purchase agreement if the buyer fails to deposit the investment amount: 

  • The primary step of every developer is to inform Dubai LAND Department for any failure of the buyer payment obligations. 
  • Upon receiving the request from the developer, the DLD shall issue a notification to the purchaser along with a 30 time period to revert to the notice. 
  • In case, the buyer fails to revert to DLD’s notice and fail to reach an amicable settlement with the developer, the DLD will issue a report which shall allow developer to de-register the sale and purchase agreement upon developer’s request without an order from court or an arbitral award. 

In addition, if the property is completed above 80% the developer may exercise following three rights: 

  • Retain all the payments made by the purchaser and continue with the SPA and seek pending payments.
  • Request DLD to sell the property through public auction; 
  • Terminate the agreement, retain 40% of the payment amount and refund the rest to the investor within one year of the termination of the contract or within 60 days if the property is re-sold to another buyer. 

Lastly, if the property completion is between 60-80%, the developer may retain 40% of the payment, terminate the contract and refund the pending payment to the buyer. In case the completion of property is less than 60% the developer can deduct 25% of the investment amount and refund the pending to the buyer and simultaneously terminate the SPA. In the event the property construction is not yet started, the developer can terminate the project and upon deducting 30% of the initial amount, he may return the rest to the buyer and terminate the sale and purchase agreement. 

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