Termination legalities in dispute

Dubai : Cancellation notices enforced by Dubai Land Department do not affect the legal rights of investors and can be disputed, officials confirmed.

"We're trying our best to avoid termination and be part of a solution. But if a contract gets terminated by the land department it will not prevent the investors from being able to go to court," Mohammad Sultan Thani, the assistant director general of excellence and organisational governance at Dubai's Land Department (LD) told Gulf News.

A discussion has been raging over the legality of developer's termination notices served to investors, endorsed and enforced by the Land Department.

"It is worrying to see the LD has assumed a role that purports to allow it to terminate agreements," said Michael Lunjevich, partner at the law firm Hadef & Partners.

Article 267 of the Civil Code states that this right is reserved to the mutual agreement of the parties and the Court.

The Court has the necessary skills, expertise and legal foundation to investigate matters, hear both sides of the story and make an enforceable ruling based on the application of the law against the merits of the case, he added. "It is not clear whether the LD has these tools at its disposal and it certainly raises some public policy issues if it can assume a role reserved to the Courts."

Ludmila Yamalova, partner at Sayyah Advocates & Legal Consultants, pointed out that Article 6 of Dubai Law 7 of 2006 Concerning Land Registration in the Emirate of Dubai, under which the LD was established, sets out its scope as regulatory functions.

New decree

However, it is the recently signed in Decree No 6 that gives the LD the power to enforce termination notices. Confusion reins over the decree being in force, but the LD confirmed that it is.

"We can auction the property when it is terminated and over 80 per cent completed. However, no developer has yet opted for auction. They wouldn't get the price they want," Thani said.

The buyer from time of termination served, has 30 days to reply. Then a final notice is sent asking for payment within two weeks. But Thani said the investor still has a choice.

"They can accept the termination by letting the six weeks pass and if we don't hear from them we will enforce. Or they can come to the LD and challenge it. We will then bring in the developer and buyer to discuss a solution."

It is the solution the land department wants to focus on. Thani said they could include pressuring the developer to discount, extend payment plans or take over property for rental until the investor can afford payments, and then transfer it back to him.

"I commend the LD for wanting to bring people closer together but the reality is that these kinds of decisions are driving the parties further apart," Yamalova said, referring to the termination notices.

Those state that the decision is final, the unit will be auctioned off, the investor loses 40 per cent of monies paid and complaints on both sides have been taken into account.

"Investors panic. They see an official government document. It creates an imbalance because developers don't have to go through court but investors are cornered into going to court," she added.

Over the last two years the LD has received 6,000 applications from developers for termination of investors' contracts. "Seen proportionally, we have 230,000 units registered, it isn't much," Thani, who has dealt with 540 dispute resolution cases over the last two months, including terminations, said.

Investors, however, complain that it is difficult to get to a sympathetic ear leading to the impression that developers are favoured. Mehedi Guliyev represents an investor into the delayed Mazaya Business Avenue who paid 60 per cent and was terminated.

"We're prepared to partially pay the next 20 per cent due. We've been asking for is more time and instead the developer threatens us with termination. We'll go to court if we have to." Mazaya wasn't immediately available for comment.

Thani said that termination notices are more likely to be sent out and enforced when buyers only paid 10 or 20 per cent. Which seems to indicate a wish to weed out speculators and keep serious buyers in the system rather than wanting the power to terminate buyers to make life easier for developers.

"The idea of terminations via the LD is that we're aware and able to clear our records of owners on our register. Developers and investors need to talk to come to an agreement, if they just send legal notices to each other they won't achieve anything," Thani said.