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: 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.