The Dubai Supreme Court established an important precedent in Appeal 219/2009, issued on January 24 2010, concerning whether a non-licensed real estate broker is entitled to agreed commission. The Supreme Court opined that the requirement to obtain a licence to practise real estate brokerage in the Emirate of Dubai is an imperative rule whose violation results in the invalidation ab initio of the brokerage agreement concluded by the real estate broker.
A real estate broker brought an action against his client claiming brokerage fees of approximately Dh2.9 million due pursuant to the terms and conditions of a brokerage agreement entered into with the client. The lower court dismissed his case and its decision was upheld by the Court of Appeal.
The broker appealed to the Supreme Court, arguing that the Court of Appeal's decision was a violation of Article 3 of Local Order 32/1987 regulating real estate brokerage in the Emirate of Dubai. This local order was in force before the promulgation of By-law 85/2006. The broker argued that the order did not provide for the penalty of invalidation of the contract, but rather provided only for certain disciplinary measures not amounting to invalidation of a brokerage agreement. Moreover, the broker argued that should the court invalidate the brokerage agreement, it should restore the parties to their original position prior to their agreement; if this were not possible, it should order adequate compensation since the broker had performed his obligations and the client had received the benefit thereof.
The Supreme Court dismissed the broker's argument and confirmed that the prohibition against conducting unlicensed real estate brokerage activity is a matter of public order whose violation entails voiding of the contract ab initio. As for the broker's alternative argument, the court considered it a demand for new relief that was not raised before the trial court, and hence it was not permissible to be raised on appeal.
For further information on this topic please contact Ali Al Aidarous at Ali Al Aidarous International Legal Practice by telephone (+9714 282 8000), fax (+9714 282 8011) or email ([email protected]).