Legal Remedies for Buyers in Dubai to Recover Funds from Delayed Property Handover

Introduction:

In Dubai’s rapidly growing real estate market, off-plan property purchases have become a popular investment option. However, delays in property handovers are a common issue, leaving buyers uncertain about their rights and remedies. The legal framework under UAE law offers various mechanisms for buyers to recover funds or seek compensation when property handovers are delayed. This article explores these remedies, focusing on key provisions of the UAE Civil Code (Federal Law No. 5/1985) and Dubai Executive Council Decision No. 6/2010, which regulate the rights of buyers and the obligations of developers in such situations.

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Key Legal Provisions for Buyer Protection

Contractual Obligations and Good Faith:

According to the UAE Civil Code, parties are required to execute contracts in good faith. Article 246 mandates that all contracts, including Sale and Purchase Agreements (SPAs), must be performed according to the agreed terms and in a manner consistent with good faith. This implies that developers are legally obligated to adhere to the timelines and conditions set out in the SPA, including delivering the property on the specified date and according to the agreed specifications.

If the developer delays the handover, this may be viewed as a breach of the good faith requirement, giving the buyer the right to claim compensation or seek other remedies as per the SPA and relevant UAE laws.

Remedies for Breach of Contract:

Under Article 295, the Civil Code provides that damages for breach of contract can take the form of a monetary payment. Buyers who face delays in property handovers may claim compensation for the financial losses incurred due to the delay. In some cases, the court may order that the damage be rectified by restoring the parties to their original positions or by specific performance, such as requiring the developer to complete the property handover.

For instance, if the delay has caused significant financial strain on the buyer, such as the inability to rent or occupy the property, they may seek compensation for these losses through legal action.

According to Article 569, the validity of an SPA depends on the availability of the property at the time of delivery. This places an obligation on the developer to deliver the property as agreed in the SPA, ensuring it meets the specified characteristics, size, and condition. Failure to do so constitutes a breach of contract, and the buyer may pursue legal action for non-compliance with the terms of the agreement.

For instance, if the property is not ready for handover by the stipulated date or if the developer delivers a unit smaller than agreed upon, the buyer can either demand the correct unit or seek a cancellation of the contract.

Furthermore, article 572 authorizes the buyer to choose between waiting for the correct unit size to become available or cancelling the SPA if the developer fails to deliver as agreed. This remedy is particularly relevant in cases where the developer is unable to hand over the property due to unforeseen circumstances. If the developer cannot rectify the situation within a reasonable timeframe, the buyer has the right to cancel the contract and claim a refund of any amounts paid.

Article 574 offers additional protection to buyers by allowing them to challenge unjust or unfair terms in the SPA. If a developer exploits the buyer’s situation by offering a unit with unfair conditions, such as a significantly smaller size or lower quality, the buyer may approach the court to modify the agreement. The court can revise the terms to rectify the imbalance, and the buyer may either continue with the modified agreement or request a refund.

Dubai Executive Council Decision No. 6/2010

Dubai’s real estate regulations offer further protections to buyers of off-plan properties, particularly in cases where there are disputes over delayed handovers. The Dubai Executive Council Decision No. 6/2010 outlines several remedies for buyers:

When a dispute arises between a developer and a buyer, Article 14 provides that the Dubai Land Department (DLD) will attempt to mediate and preserve the contractual relationship. The DLD may suggest solutions that are fair to both parties and if a settlement is reached, it is documented in a binding agreement. This approach encourages amicable resolution without the need for protracted litigation.

If the developer fails to meet its obligations, Article 15 authorizes the buyer to enforce penalties, depending on the stage of the project’s completion. If the project is more than 80% complete, the developer may retain up to 40% of the unit’s value, and the contract may be rescinded. If the project is less than 60% complete, the developer can deduct 25% and cancel the contract. In all cases, the developer must return any excess amounts to the buyer.

Article 18 stipulates that if the buyer cancels the contract, the developer must return all sums paid within a maximum of one year from the date of rescission or within 60 days of the sale of the unit, whichever is sooner.

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Conclusion:

Buyers facing delays in property handover in Dubai have several legal remedies available to them under UAE law. From seeking compensation for financial losses to cancelling the contract and recovering payments, the UAE Civil Code and Dubai’s real estate regulations offer protections to safeguard buyer rights. By understanding these provisions, buyers can take appropriate legal action to recover funds and ensure compliance with their contractual agreements.

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