Further consumer protection in the Dubai real estate market has been announced in the form of Law No. 13 of 2008 regulating the “Interim Real Estate Register” in the Emirate of Dubai (the “Law”). The Law appears to take effect from its date of publication in the Official Gazette.
Interim Real Estate Register
The Law introduces the concept of the Interim Real Estate Register which is to be used to record all off- plan sales of real estate units. It would appear that the Law therefore excludes plots sales; however, this will need to be clarified with the relevant authorities in due course. Principally, any sale or other disposition that transfers or restricts title or any ancillary rights will be void if not recorded in the Interim Real Estate Register.
Sales undertaken prior to the law coming into force will also need to be registered in the Interim Real Estate Register. This should be done within 60 days of the Law coming into force.
No sale prior to handover
Article 4 provides that no developer shall commence a project or sell its units off-plan before taking possession of the land on which the project is to be built and obtaining the necessary approvals from the relevant competent authorities. We assume therefore that handover would need to have taken place prior to commencement of sales. However, this will need to be confirmed with the Land Department.
Article 5 of the Law provides that an application to register a unit in the Interim Real Estate Register should be filed using the standard form. Rules and procedures will be issued by the Land Department in due course in relation to other information required to be submitted with the form.
Article 6 of the Law provides that units that are sold off-plan and registered in the Interim Real Estate Register may be sold, mortgaged or otherwise legally disposed of. No reference is made in the Law to any contractual provisions preventing such disposal. No doubt clarification will be issued by the Land Department in relation to this point in regulations / directives which may follow the publication of the Law.
Article 7 of the Law provides that developers (both master developers and sub developers) are not allowed to charge any fees for the sale, re-sale or other dispositions of units. This restriction does not apply to administrative expenses which the developer may charge to third parties with the approval of the Land Department. Typically transfer fees of between 1% and 5% are charged by developers. It would appear that such fees will no longer be lawful unless approved in advance by the Land Department.
If such fees are required to be a genuine “administrative” expense it is difficult to see how the Land Department could approve fees which relate to the value of the unit disposed of as it should be no more expensive for a developer to approve a high value transfer than a low value transfer. There is no doubt that this point will be the subject of much debate.
Completion of development
Article 8 of the Law provides that developers must register completed projects in the Real Estate Register as soon as a completion certificate has been obtained from the relevant authorities. Registration should identify those units that were sold to purchasers who have fulfilled their contractual obligations. The Article also allows an individual purchaser (on fulfilment of its contractual obligations) to request that the registration of the unit is transferred from the Interim Real Estate Register to the Real Estate Register.
Article 9 of the Law provides that a developer who wishes to market his project through a real estate broker must first conclude a contract with a broker who is accredited under the terms and provisions of Regulation No. 85 of 2006 concerning the Register of Real Estate Brokers in the Emirate of Dubai. Following which, the developer must register the contract at the Land Department.
Article 10 of the Law provides that developers and brokers may not conclude informal contracts for the sale of units in projects that have not been approved by the relevant authorities. Such contracts made without such approval will be void and presumably the relevant purchasers will be entitled to a full refund in those circumstances.
Article 11 of the Law provides that, if the purchaser defaults on any term of the contract made with the developer for the sale of a unit, the developer should notify the Land Department accordingly and the Land Department will then give the purchaser 30 days notice to fulfil his contractual obligations. Presumably such grace period will apply following any grace periods allowed in the unit sale and purchase agreement between the developer and the purchaser.
If at the end of the 30 day period, the purchaser has not fulfilled his contractual obligations, the developer may cancel the contract and will be obliged to repay the purchaser its money less a deduction that does not exceed 30 per cent of the monies paid by the purchaser.
Variations to units
Article 12 of the Law provides that developers may no longer claim additional monies where the unit turns out to be bigger on completion than was agreed in the contract. However, where the unit turns out to be smaller, the developer is liable to compensate the purchaser for the difference unless it is marginal.
As mentioned above, it is likely that a number of clarifications / further regulations will be issued in due course to add greater certainty to the legal position. In the meantime, developers and end users should ensure that they review their position in light of the Law and seek the necessary legal and technical advice where their position is unclear.