Ask the law: 10% paid for off-plan property, but unable to pay more

Question:

I bought a property from an off-plan developer 4 months ago and paid 10 per cent of the property value. Currently, I am unable to pay the installments agreed upon according to the property purchase agreement. I asked the developer to allow me to sell the property, but the developer refuses and says that according to the purchase contract, I cannot sell until I pay 40 per cent of the value of the property.

My question is, according to Dubai real estate law, does the developer have the right to prevent me from selling the property until I pay 40 per cent of the property’s value? If I cannot sell, does this mean I will lose the money I paid to the developer? Please advise.

Answer 1:

To answer such question, I would advise the questioner that:

1.-You will not be able to resell the property without the consent of the developer in case the purchase agreement contains such a condition which prevents you from selling the property until you pay 40 per cent of its value. As per Articles 246 & 267 of the Civil Transactions Law: “The contract shall be implemented, according to the provisions contained therein and in a manner consistent with the requirements of good faith” and “If a contract is valid and binding, none of the contracting parties may revoke, modify or rescind it except by mutual consent, order of the court or a law provision”.

2.-The developer has the right to retain the (10%) you have paid and request for more according to the completion percentage of his project unless the Developer has not commenced work on the Real Property project for any reason beyond his control, or where the Real Property project is cancelled pursuant to a final reasoned decision of RERA, where the developer in this case must refund all payments made by you.

Due to Article 11 of Law No. (19) Of 2020 Amending Law No. (13) of 2008 Regulating the Interim Real Property Register in the Emirate of Dubai, Where a purchaser fails to fulfill his contractual obligations under an Off-plan Sale agreement concluded with a Developer, the following rules and procedures will apply:

The Developer must notify the DLD of the purchaser’s non-performance of his contractual obligations. Promptly upon receipt of the notification and verification that the purchaser is in breach of his contractual obligations, the DLD must: serve a thirty (30) days’ notice on the purchaser requiring him to fulfill his contractual obligations towards the Developer or where possible, mediate an amicable settlement between the Developer and purchaser.

If the notice period mentioned in this Article expires and the purchaser fails to fulfil his contractual obligations or to reach a settlement with the Developer, the DLD will issue an official document in favor of the Developer confirming the following:

A. the Developer’s compliance with the procedures stipulated in paragraph (a) of this Article; and

B. the percentage of completion of the Real Property project subject of the Off-plan Sale agreement, calculated in accordance with the relevant standards and rules adopted by RERA.

Upon receiving the official document referred to, and based on the percentage of completion of the Real Property project, the Developer may take some measures against the purchaser without recourse to courts or arbitration including to terminate the Off-plan Sale agreement concluded with the purchaser,

a. Where the percentage of completion of the Real Property project is between sixty percent (60%) and eighty percent (80%) or exceeds (80%), retain up to forty percent (40%) of the value of the Real Property Unit stipulated in the Off-plan Sale agreement, and refund any amounts in excess of this to the purchaser

b. retain up to twenty-five percent (25%) of the value of the Real Property Unit stipulated in the Off-plan Sale agreement, and refund any amounts in excess of this to the purchaser in case the percentage of completion of the Real Property project is less than sixty percent (60%).

As a conclusion, the rules and procedures stipulated in this Article will not preclude the purchaser from having recourse to courts or arbitration.