Dubai: Developers in Dubai who hand over defective units to property owners will be held accountable – local courts are making sure of that.
A new judgement, delivered in a case involving one of the city’s top developers, serves as a strong warning that developers cannot compromise on bare minimum standards at the time of handover and even thereafter.
A top court ordered a developer to pay an owner Dh600,000 for lost rental income for the period 2012-16. This was after the owner found water leakage in his then newly acquired unit, in 2011, and who then asked the developer and the property management company to set it right, according to the law firm representing the owner of the property in the Old Town.
The original value of the property was Dh1.125 million.
The defect was found to originate from a Jacuzzi above the owner’s apartment, which even after its replacement, still resulted in water leakage. It was then that the property owner decided to approach the court.
“According to the law, the plaintiff filed a lawsuit against the developer and the building’s management company, demanding a repair to the leakage and to deliver the property free of defects while also providing a certificate of guarantee,” said Dr. Raisa Abdulrahman of The Legal Group.
“Moreover, the owner also requested from “indemnification” for non-use of his property since the discovery of the defect, which was serious enough to render the unit improper for its intended use.
“The court obliged the defendant (the developer) to pay Dh600,000 in compensation for the damage suffered, by calculating the compensation for the annual rent of the unit in the area for four years (from 2012 to 2016) , including the compensation for “moral damages”.”
What is indemnification?
This is a contractual obligation where one party has to compensate for any loss incurred to the other due to any actions carried out by the former, or any entity associated with it. This is standard practice in real estate sales and purchase agreements, as well as in construction-related ones.
What the law says on property rights
It was last year that Dubai updated its JOP (jointly owned property) law and set clear markers for property owners’ rights, as well as those of the developer and property management company.
Article (40) of Law No. (6) of 2019 on ownership of freehold properties in Dubai provides that the “responsibility of the developer to repair or correct any defects in structural parts of the property shall continue for a period of 10 years.”
This obligation on the part of the developer starts from the date of obtaining the certificate of completion for the project. The developer is also held responsible to repair or replace defective fixtures in the property for a period of one year from the date of handing over the unit to the owner.
Why does this judgement matter?
The number of new homes to be delivered in Dubai has shot up in the last two years, and chances are this pace will continue for the next two to three years, at least. While handing over completed units to owners represents the toughest part of their contractual obligation, it does not end with delivering the keys.
In this particular case, the court found that the developer was still bound by “contractual liability” to the property owner. Apart from the Dh600,000 for lost rental income, the developer will also have to shell out the cost of interest accrued between 2012-16, plus the lawyer’s fees.
The court obliged the defendant (the developer) to pay Dh600,000 in compensation for the damage suffered, by calculating the compensation for the annual rent of the unit in the area for four years
It didn’t end there
The property owner has now seen fit to escalate the issue even further. A fresh legal claim was filed before the court against the developer and building management company, for compensation related to damages from 2017 until now. This is because the water leakage continues even now.
“The client filed another case to claim compensation because he still can’t use his apartment to live in it, or rent it, or sell it,” said Dr. Raisa.
A long process
Winning a judgement against a developer is not easy… nor a quick one.
In this particular case, lower court found in favour of the property owner and awarded Dh600,000 in damages. But when the developer filed for a review in the appeal court, that court eventually ruled in favour of the developer.
It was then that the Court of Cassation – the top court - transferred the case to another appeals court with a different committee of judges. This court “finally confirmed the decision of the first court and awarded the compensation,” the lawyer added. “So, there were four phases - first court, the appeal court, the cassation court and then the appeal court.”
* The Legal Affairs Department at Land Department has the authority to mediate between the parties for an amicable settlement. It also allows the developer to terminate the sale purchase agreement of the defaulting purchaser under Dubai Law Number (19) of 2017 on satisfying certain procedures.
* The cancelled project committee for liquidation, which is authorized to liquidate cancelled projects in Dubai. The Real Estate Regulatory Agency holds the right to cease ongoing real estate projects.
* There is also the Rental Dispute Settlement Committee for rental disputes, the Dubai International Arbitration Center (DIAC), and the Civil Courts- Property Division.
Credit: The Legal Group