A: Investing in Off-Plan Properties – Legal Pointers for Sound Investment.
If you are considering investing in an off-plan properties, make sure to do the following:
A: Upon selling the property, the purchase price has to be paid by way of a manager’s cheque, issued in the name of the seller himself. The practical issue of the manager’s cheque is that the Seller must have a U.A.E. bank account in order to cash it. If the seller does not have a bank account, he can give an undertaking to the Transfer Center that he has received the money.
The alternative ways for the Seller to receive the money are: 1) in cash, 2) bank transfer, 3) regular cheque or 4) in the manager’s cheque in the name of someone else. The complications that arise from each one alternative are: there is a form of impracticality that comes with dealing with cash and fund transfers, alongside the risk of fake currency. Bank transfer also cause a time delay between the transfer of property and receipt of the funds through bank transfer. While a personal cheque may bounce after the transaction has taken place. If the aforementioned is not the case, a successfully cashed cheque brings back the first-mentioned complication. Lastly, the fourth option is an immense risk unless the 3rd party’s name is highly trustworthy. If that was the case, there could be good-faith complications with the person who receives the cash on behalf of someone else (e.g. sickness, death).
A: Increasingly, landlords try to evict tenants for alleged reason of “personal use,” a valid reason under the law. They then re-rent the property for a higher amount, which they would not have been able to do with the previous tenant because of the Dubai rental laws restrictions. If the previous tenant has proof that this was the case (e.g. copy of Ejari showing the property has been re-rented to a new tenant), he can pursue action against the landlord in the Dubai Rental Committee (RDC). Under the law, the landlord is not allowed to re-rent the property for either two years (if it is residential) or three years (if it is commercial). The law provides tenants with a recourse in the event they find out that they have been unfairly evicted, by seeking compensation for the “damages suffered.” While the law does not specify the bases for calculating damages, RDC considers elements such as an increase in rent between the new property and old property (but they must be of similar specifications), moving expenses and any other relevant expenses. There have been several RDC judgments in favour of tenants, awarding damages against the landlord, on such bases.
A. The issue of utility expenses, between landlord and tenant, is up to the parties’ agreement. Under most rental agreements, utilities (including DEWA) are the responsibility of the tenant. Most agreements do not address extraordinary expenses, such as an increase in water usage when the pipe bursts. Therefore, it is arguably the responsibility of the tenant to pay for the utility bill. But the landlord would be responsible for the payment of the repair of the pipe (unless parties agreed otherwise). Under Law No. 33 of 2008 Article 16, “unless otherwise agreed by the parties, the Landlord will, during the term of the Tenancy Contract, be responsible for the Real Property maintenance works and for repairing any defect or damage that may affect the Tenant’s intended use of the Real Property.” Therefore, in the absence of a prior agreement to the contrary, the tenant should try to negotiate with the landlord to split the difference in the increased DEWA bill, but be prepared to have to settle the invoice in full, should the landlord refuse. The focus moving forward, however, has to be to repair the pipe, to avoid further expenses. The repair of the pipe will then be the responsibility of the landlord.
A. If a large number of non-Emirati investors (20) wish to collectively buy a real estate property and designate one person to manage it, the best way of doing so is to set up a free-zone corporation. This corporation would be owned by the 20 investors, in which their ownership interest would be represented in terms of a number of shares. The company would then designate a manager, prescribing the manager’s roles and roles of the other officers of the company through corporate documents, e.g. articles of incorporation, memorandum of association, board resolutions, etc.
A: An employee will be automatically confirmed upon expiration of the probation period, unless terminated. This is irrespective of what may be stated in the employment contract and/or offer letter. Furthermore, probation period cannot be extended, for any reason.
A: There is no default provision in the UAE Labour prohibiting employees from joining a competitor. The non-competition limitation must be contractually agreed. If there is no non-competition clause in the employment contract, then there is no restriction on joining a competitor. If, however, there is a non-competition clause in the employment agreement, it will be valid if it is reasonable in its scope. Furthermore, a non-competition claim requires proof of actual damages.
A: For the purpose of calculating the end of service benefits under Article 132 of the UAE Labour Law 8 of 1980 (as amended), the salary used for the calculation includes everything, except allowances and occasional bonuses. This means that any regular payments, such as commissions and regular bonuses (regardless of their description), other than allowances, are considered as part of the salary used for the end of service calculation. This principle was established by the Dubai Courts of Cassation more than twenty years ago and has been regularly applied by the courts ever since.
A: Yes, if the following conditions are met:
1. The employee has a valid labour card.
2. The employee’s visa’s sponsor gives a No Objection Certificate (“NOC”) permitting the additional employment.
3. You obtain a part-time work permit from the Ministry of Labor/ Free zone authority for the employee.
A: As a general rule, the UAE does not monitor whether or not a UAE resident was working while outside the UAE. However, should the resident spend more than six consecutive months (180 days) outside the UAE, their UAE residence visa will be canceled.
A: No. Your end of service benefits becomes due upon the termination of your UAE employment contract.
A: When an employee breaches a limited contract, she or he can be held liable for damages incurred by the employer as a result of the early resignation. These damages may not include visa-related expenses and may not exceed the value of one-and-a-half months’ of the employee’s salary. If the employee has less than three months left in the employment contract, the maximum penalty is the value of half a month of the employee’s salary for every month remaining on the employee’s limited contract. If the early termination penalty exceeds one-and-a-half months’ of the employee’s salary, it will not be enforced. The aforementioned compensation requires a Court order. It should not be applied automatically.
A: No. It is illegal to require an employee to pay for visa expenses, regardless of how long the employee has been employed or the circumstances of the employee’s termination.
A: Assuming that you are paid on a monthly or yearly basis, your annual basic salary is calculated using the 365-day year. To calculate your end of service benefit entitlement, multiply your current monthly Basic Salary by 12. Then, divide this number by 365. The result is your daily Basic Salary, as it will be calculated for your benefits. You are entitled to the equivalent of 21 days’ worth of basic salary for the first 5 years of your employment and 30 days’ worth of basic salary for each additional year, provided that the total amount may not exceed the equivalent of two years’ pay.
A: This is incorrect. A woman on a spousal visa may work full-time or part time, provided she has the proper No Objection Certificate and her employer obtains the proper permits.
A: Not by law, but this could be arranged by the employment contract. Each person who sponsors another in Dubai is responsible for the repatriation of whomever they sponsor. As such, the employer who sponsors your visa is responsible for you. If you sponsor family members, you are responsible for repatriating them. However, if your employment contract states that your employer will repatriate your family, your employer must honor the terms of the contract.
A: Yes, but the employer would be penalised and the employee would be entitled to an amount capped at three months of the employee’s total salary and other employee’s dues.
As it is illegal for the employer to demand to hold an employee’s passport, an employer would not have a justifiable reason to fire the employee for refusing such a demand. As such, the employer would be liable to pay the employee arbitrary termination damages in compensation for this unjustified firing, an amount capped at three months of the employee’s total salary.
As a general rule, a court would not order an employer to re-hire an employee, even if the employee was fired for an improper reason.
Further, if reported to the police or the Ministry of Labor, the employer would be at risk for fines or other penalties, but these penalties would be directly between the employer and the government, not the employer and the employee.
A: No. While an employer obviously has to receive an employee’s passport for certain short periods of time (the employer generally delivers and retrieves the passport from the relevant authorities when applying for the employee’s visa or cancelling the employee’s visa) the employer cannot demand to simply hold the employee’s passport.
The only entities permitted to hold another individual’s passport are the Police, the Criminal Investigations Department (CID), Immigration Authorities, the public prosecution, and Courts.
If your employer insists on holding your passport, you are entitled to report this, not only to the Ministry of Labor but to Court which will instruct the police to collect the passport.
A: No, a developer may not require additional payments from investors for an increase in the property’s size after the sale. This is governed by at least two provisions of the U.A.E. contract laws.
One, a substantial increase in the size of the property changes the object of the contract between the parties. When the object of the contract has been changed, the contract is considered null and void and the parties must be reinstated into their original positions. This means, the developer must return the funds to the investor and pay interest. This principle is well established and enforced by UAE Courts.
Two, a substantial increase in the size of the property makes the contract indefinite in nature and, therefore, renders the contract invalid. Under the principles of contract law, for a contract to be valid – it must be definite on all material points. The size of an off-plan property is a material term. If developers are allowed to arbitrarily and unilaterally increase the size of the property – it renders the contract meaningless. By way of example, this would allow a developer to force the purchaser to take on a villa, when the purchaser bought a studio.
Furthermore, in Dubai, under Executive Council Resolution No (6) of 2010 Approving the Executive Regulation of Law No (13) of 2008 Concerning the Regulation of the Interim Real Estate Register in the Emirate of Dubai, a developer is not allowed to request additional payments, unless the parties agree. The agreement, however, has to be specific to the specific changes to the property when the property is finished. It cannot generally be agreed beforehand. In other words, sales and purchase agreement, which include a clause allowing the developer to increase size and request additional payments, are not enforceable.
A: Cheques are valid for six months from the date, from which the cheque can be cashed – the date mentioned on the cheque. Therefore, you can cash the cheque any time within those six months. If you cash the cheque and then it bounces, however, you have two years to file a complaint with the police. In general, it is advisable to file the case with the police as soon as possible to maximize the possibility of the issuer still being within the country for quicker resolution.
A: If such a provision was mentioned in the tenancy contract and you signed and agreed to it, then the charge is legal. If, however, the penalty clause is not in the contract, then there is no legal authority or justification for requesting such fee.
A: Yes, you may challenge the developer on the charges. Ultimately, there has to be a legal authority to either allow or disallow the developer to impose such charges. If there is specific law or regulation allowing developers to make such charges, then they have the freedom to so do, though there has to be some limitations on what those charges can be, to be enforceable. In most cases, however, there are no such regulations. So, developers just introduce circulars into their management policies, without relying on any authority. By the same token, however, most of the time there are no regulations that specifically disallow such practices. Therefore, in practical, terms it may just not be worthwhile to challenge the developer, because of this ambiguity in the law. However, if the charges are significant, then they could be challenged in court. The challenge would be based on the implicit terms of contract. In other words, it could be argued that when the property was purchased, there was no mention of such charges and introducing them now effectively means unilateral amendment to the contract. But this would have to be done through court. An interim step could also be to file a complaint with RERA, to seek their assistance in mediating the dispute.
A: Tenants who were subject to an unlawful eviction can bring a case to the Rent Dispute Committee and seek compensation for the damages suffered as a result of the unlawful eviction. The Dubai rental laws have a specific provision allowing tenants to do so. The bases for the calculation of compensation are not spelled out. Therefore, it becomes a matter of proof for the tenant to show to RDC how the amount of compensation is linked to the unlawful eviction. For example, they can show the increase in rent for a comparable property, moving expenses and potentially alternative accommodation in between.
A: The housing fee in Dubai applies to everyone, renters and homeowners alike. The housing fee is usually collected by DEWA. It is calculated as 5% of the annual rent. For homeowners, who are not renters, the authority uses the market value of an annual rent for a comparable property and sets the 5% from that value.
A: The only authority who has binding power to issue decisions regarding validity or breach of contract is the court. Therefore, if there is a real dispute between the developer and the parties have reached an impasse, the only way forward is to bring a court case against the developer. The Dubai Land Department and/or RERA are regulatory authorities, not judicial – which means their job is to regulate the real estate market and not to adjudicate decisions between investors and developers. It is possible at times to have RERA/DLD intervene and apply pressure on the developer to do certain limited things. But they do not have the authority to decide contractual issues. If the investor brings a case the developer it would be on the basis of, for example, breach of contract, on the grounds of, late handover, wrong property specification and/or inferior quality. The investor can also ask for compensation for the damages suffered as a result of the breach, which must be substantiated by documents.