Business | Property

Sponsored By

Ask the law: Fines and unfinished property

Jerry Parks, partner and head of real estate at Taylor Wessing, answers your questions

  • Compiled by Binesh Panicker, Property magazine
  • Published: 00:00 September 15, 2011
  • Property

A view of Discovery Gardens
  • Image Credit: Atiq-Ur-Rehman/Gulf News
  • Most SPAs will state that upon full payment, the developer will transfer title to the purchaser.

Fines on leaving a rented flat

Before leaving my rented flat at the end of its contract, I informed a representative of the realty firm that I would not be renewing the lease. However, a month before the end of the lease, the company asked me to pay a fine equivalent to two months’ rent since I didn’t inform them officially. They also deducted Dh750 from the deposit for painting. What could happen if I refuse to pay the fine?

If the lease contains a clear provision stating that a notice of non-renewal is to be given in writing, then the landlord would be within his or her rights to claim that proper notice was not given in this case. If, however, the lease does not contain such a notice provision, then you could argue that sufficient notice was given by virtue of your discussion with a representative of the landlord company.

It would seem that the lease provides for either a two-month notice period or a penalty payment equivalent to two months’ rent. There are no laws in Dubai that expressly forbid or limit such a penalty provision in a tenancy contract. If the penalty payment is due and you do not pay it, the landlord will have a claim against you, which could be pursued through the Dubai Rent Committee.

With regard to the painting of the apartment, if you agreed in your lease to repaint or pay Dh750 to cover the costs of repainting on vacating the apartment then you are obliged to do this. It may seem a tad oppressive, but it reminds us all of the need to read and understand the fine print, even if the lease is said to be in ‘standard form’.

Refund for a smaller than anticipated unit

I have paid 100 per cent of the agreement value for a completed unit and it is now tenanted as well. My question pertains to the area that I have been charged for as per the SPA, which amounts to 1,272 square feet, whereas the total area mentioned in the title deed issued by the Land Department is 1,098 square feet. Am I not rightfully due a refund?

Where a unit is smaller than anticipated, Decree No 6 of 2010 states that if the area of the unit (as specified in the Real Estate Register) differs by more than 5 per cent from the area stated in the contract, then the developer must compensate the purchaser by an amount equivalent to the percentage of the reduction, (eg a 50 per cent reduction in area would result in a 50 per cent reduction in the price stated in the contract).
 
You should make sure that the method of calculation of the area referenced in the contract and that stated on the title deed are the same (for example ‘net area’). Of course, there is a difference between having a right to compensation and enforcing that right against a developer where you have already paid the purchase price in full. Arbitration or litigation would likely be necessary to secure your rights.

Options when construction is not complete

I purchased an apartment in 2006. The developer told me to halt instalment payments in 2010 because construction had stopped. The total cost of the apartment is Dh380,000. So far, I’ve paid Dh230,000, but the construction is not even 50 per cent complete. What are my options?

If your preference is to withdraw, it is likely that your Sales and Purchase Agreement (SPA) with the developer will allow for this, given the lengthy delays. Every SPA is different, but usually there will be a deadline for the developer to complete the project and hand over the property.

If that deadline is not met, generally there will be a grace period (usually between six to 12 months), followed by a right for the purchaser to terminate the SPA and claim a refund. However, you should be cautious of any provisions that allow the developer to extend the completion deadline due to any events of ‘force majeure’. It is useful that you have made all due payments to the developer, as it is usually a requirement within the SPA that, in order to terminate, the purchaser must not be in breach.

That said, you should be confident of the developer’s ability to return your funds before terminating the agreement by the service of legal notice. Where a developer is effectively insolvent (and an alarming number of them are), it can be more prudent to approach them less formally to discuss a practical solution, rather than proceeding with legal action.

Selling without a title deed

I took possession of my property in Discovery Gardens in April 2009. Now I want to sell it. I asked Nakheel for my title deed but it said that my developer has not paid all sums owed to Nakheel, but the developer said the delay is from Nakheel and that it has paid everything. In this situation, what should I do?

This is not an uncommon predicament. The first point to note is that your primary contractual relationship is with the developer, not Nakheel. Most SPAs will state that upon full payment, the developer will transfer title to the purchaser.

The developer would have entered into a separate contract with Nakheel for the purchase and construction of the plot and have specific obligations under this contract. If Nakheel is not releasing the title deed it is likely that, despite what the developer is advising, there are still payment issues that the developer must resolve with Nakheel.

Legally a developer cannot refuse to register the property in the name of a purchaser who has fulfilled all his obligations. However, it would be worth finding out from the Land Department whether your interest in the property has been pre-registered in the Interim Real Estate Register. If it has then you should be able to proceed to sell your property and transfer your interest without a title deed.
 
Jerry Parks is a partner and head of real estate at Taylor Wessing. Do you have a legal question related to property that needs answering? Email property@alnisrmedia.com along with your contact details. Post your queries on: www.facebook.com/propertymagazine

Related Links

Covering freehold,rentals,investments,market round-up and much more

Property
Retail Gold Rate

Latest Ads