Dubai: Real estate investors will be given the right to annul their contracts and get all their money back if developers violate the terms and condition, according to the latest draft of Real Estate Investor Protection Law.
Besides getting their funds back, investors will be able to ask for additional compensation, while the developer can be fined, said the director of the Dubai Land Department, Sultan Butti Bin Mujren told Gulf News.
The law, which has been in the works for some time is expected to be issued soon by the department. It is aimed at protecting investors from delays in the handing over of projects or unilateral changes in the size or other specifications of the properties.
Investors can cancel the contract if the property handover is delayed for more than a year. This applies even if there is provision for completion delays in the contract. They will be eligible for compensation if the handover is delayed for more than a month, but less than a year, according to the draft.
The law will also offer investors recourse in case of defects in the property when it is delivered and undocumented claims and charges from developers, among other provisions.
“It is a clear legislative tool to break the contract and guarantee compensation for investors where the developer attempts to breach the contract,” Bin Mujren said. According to the new law, the Land Department will have an observatory, regulatory, technical and executive role to protect investor’s rights. The law will spell out the rights and responsibilities of the developer and the investor during the project development, the sale of units, the completion of the properties and the handover to the investor. More attention is also paid to the details of service agreements, maintenance contracts and the registration of the property.
Majida Ali Rashid, Director of the Center for Investment Management at the department said: “This law is the first of its kind on the regional and international level. It is not only to protect the investor but to put in place a transparent business relationship between investors and developers. This will be enough to increase the investment growth with the real estate sector in the emirate.”
Muhannad Al Wadiya, managing director of Harbor Real Estate said that the new law should be considered a wake-up call for developers to finish their projects – and would encourage investors to get back into the market by creating “a positive vibe”.
There is concern however that the new law may not apply to the many existing disputes between developers and investors, as it will only be applied to new contracts.
However, in an effort to ensure openness and transparency in the market going forward, the new law provides for the Land Department to track the progress of all real estate projects in Dubai.
This will also serve as a useful resource, especially for non-resident investors who have no access to monitor their investments directly, according to Dr Ahmed Belhasa, who is chairman of a large developer in the UAE.
The department will maintain a data base of projects and contracts, among others, that would be available to investors. Developers will not be allowed to promote or sell any properties unless they have the approval of the department and the units are registered in its records.
Rera has already ordered the cancellation of projects they no longer deemed viable. However, the new law also provides for the agency to pair up approved developers and banks to fund the completion of projects.
The new law will also require that all real estate agents and brokerage companies to be licensed by and registered with RERA. The brokerage is not allowed to get a commission unless the property is transferred to the investor
The new laws are a necessary part of the ongoing efforts to safeguard investors and better regulate the Dubai property market, which experienced unprecedented boom – and bust – since 2007. Dr Belhasa said transparency was required to understand the market and better regulate it. “It is important not only to protect the rights of investors, but also for the development of the country,” he said.
The Land Department has flagged the possibility of introducing a standard template for a sales and purchase agreement, which all developers will be required to use.
This new template will include the details of developers, investors and the property, as well as penalties on both sides for breaches of their obligations.
Al Wadiya said that this would end the practice of each developer using selling contracts to suit themselves. However, he pointed out that: “Investors must now take the time to read, understand and negotiate the terms of their agreements, instead of blindly signing them, which has been the case.”