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So-called market practices cannot circumvent laws of the land

Discrepancies between contractual obligations and practice should be nipped right in the bud

Gulf News

In recent months, there has been a lot of feedback regarding the ability of developers to shortchange their customers, either through incomplete disclosure and/or changing the terms of the contract. This issue needs to be highlighted at length such that the customer knows his/her rights from the very outset.

Knowing these rights allows the investor to not be allowed to deviate from the law under the excuse of “market practice”, especially when the law is clear. It is this clarity of the law that in turn should be part of the business practice as well as the market vernacular, such that investors need not be worried about aspects of the law that are clearly defined for their benefit.

In Dubai and Abu Dhabi, developers are mandated to make certain disclosures as part of their sales contract with the investor. These disclosures include the levy of service charges in accordance with the Article 4 of the Direction for General Regulation Concerning Jointly Owned Properties (2010) and Article 15 of Abu Dhabi Law 3/2015.

Developers are deemed to have given these as warranties to the buyer and if there has been inaccurate/incorrect information that has been found for a period not exceeding two years, the developer is liable for damages. In certain cases criminal, in accordance with Article 5 of the Direction for General Regulation Concerning Jointly Owned Properties (2010).

These warranties, as part of a number of others, are considered as such by the law in Dubai for developers under Article 26 of Law 27/2007 to the buyer. In subsequent cases, the penalties that have been imposed on the developer have been strict and prompt, on issues ranging from service fee violations to significant changes in the floor plan from that represented in the sales and purchase contract.

The developer is also mandated to disclose the jurisdiction and the means of dispute resolution. This is critical. It is surprising that in recent times violations have taken place with the developer and investor approaching competing dispute resolution centres and not the ones stipulated In the agreement.

Such warranties are there for the protection of the investor, and allows for the latter to approach any claims in a clear and transparent framework devoid of any surprises.

Prime example

It is important to remember that when there is a change and/or update of the law, market practices may sometimes follow with a lag. However, that should not be considered as an excuse for its non-application. A prime example is one of transfer fees at the time of changing of hands of the property.

According to Rera guidelines, it is amply clear that both the buyer and the seller should pay 2 per cent each (i.e., share the fees equally). Yet there have been many instances where brokers have insisted as “market practice” having different norms. Investors are advised to check each aspect of the transaction (real estate or otherwise) with the concerned authorities, especially as information has been so widely disseminated across multiple platforms.

It is heartening to note that as a result of these and other mechanisms put in place by lawmakers, there has been a significant reduction in the incidence of developer and investor disputes. What is of further comfort is that the issues are getting resolved in an increasingly transparent and expeditious manner.

Business contracts will always continue to mutate, and complexity of the business transaction will always mean that there will be aspects of the law that will need to be continually updated to deal with changing business practices and innovations. That being the case, what is clear is that the framework in place has left room for sufficient innovation to take place, while safeguarding the rights of the investor.

This has always been paramount for the law and its theory as well as practice in Dubai has made it a model for others to follow.

— The writer is a Senior Partner at NM Advocates, which has a partnership with GCP.

For information on the real estate sector within the UAE, please visit our sister site, getthat.com.

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