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Ajman realty under regulatory scanner
Property watchdog agency negotiates with disputing parties and seeks a middle ground.
- Nicole Walter, Features Editor
- Published: 11:49 August 3, 2009
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- The Ajman Real Estate Regulatory Agency has warned developers against collecting instalments from investors unless an escrow account is opened and activated.
Taking on the role of an unbiased middleman, the Ajman Real Estate Regulatory Agency's (ARRA) outreach programme for investors who are having issues with developers is starting to yield the desired results. Apart from negotiating with developers still interested in carrying on with their projects in Ajman, ARRA is also using its status to get real estate companies to come together for the wider good.
"There are a few mergers in the pipeline, but the (property) investor must agree in writing to their units being transferred from tower A to B," states Omar Al Barguthi, the agency's director general. "The developer needs to give them something equal or better than what they had, floor- and size-wise for example, so they can actually accept the change."
ARRA is also sticking to its guns when it comes to developers getting escrow registered. "Developers complained about us cutting off their financial supply, but we said come and open an escrow and we are more than happy to allow you to go back to collection," the official adds. "If the developer does not have an escrow, investors need not pay and must instead come to see us for advice."
This was exactly what an Iranian investor who was worried about the status of his property in a tower project did. He had booked a unit in Lake Signature by GR8 Holdings and was not too sure where the project was heading. The developer is registered with an escrow account, but is now operating alongside Samama Holdings under the umbrella of BL Properties. This could eventually lead to a consolidation of their projects as well.
This investor used ARRA to negotiate with the developer. "The developer wanted me to sign a contract with new conditions - including a 'never ending delay' - compared with my original agreement, giving them the right to keep 100 per cent instead of 30 per cent of my money paid."
But, after a meeting with ARRA officials, the investor finds himself in a better frame of mind, with the real estate authority suggesting the contract should not be entered into. ARRA's contention is that new contracts will be superseded by a new standard sales and purchase agreement (SPA) that it will issue. The new contract will be backdated, which means ARRA can amend existing SPAs and ask developers and buyers to accept it.
"The developer has now agreed with me about not signing their contract proposal, but instead wait for ARRA's," the Iranian investor informs.
As in this instance, ARRA's emphasis is for all parties concerned to seek - and secure - a middle ground. But, when it comes to project cancellations, matters tend to get more complicated.
"A buyer needs to have a sound reason for cancellation. Let us not forget the contractual agreement," the ARRA director general comments. He cites an example of a buyer having paid 40 per cent on his acquisition with construction yet to start on the project.
"We will call the developer and find out what is holding him up and what he's done with the money he has collected," Al Barguthi adds. "If the justification is verifiable and within our acceptable standards, then we tell the buyer to hold off cancelling, but the developer has to stop collection and we will monitor the progress."
ARRA gets cracking
Contract breaches by either party will be taken seriously. A property court in Ajman is on the horizon, a judge will preside over a committee to resolve future conflicts. To register a project in Ajman, proof of municipality approved plans, feasibility studies - including land, construction and marketing costs - SPA samples, and details of units sold and the approved contractor must be provided.
A developer registration requires licences from Ajman Municipality's planning department and ARRA as well as a one-year audited financial report of the company and a six month bank statement, passport and residency visas of all partners. In addition to the same credentials, master developers also have to prove their capability, provide master community guidelines and infrastructure plans that are approved by a UAE consultant as well as provide samples of land sale agreements with sub-developers. arra gets cracking
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