Some of the recent verdicts delivered by the local legal system have given cause for optimism for investors and investor groups. In delivering the verdicts, the court has called on the developer to provide suitable compensation for reneging on contractual obligations. Image Credit: Supplied

Dubai: After engaging in intense legal skirmishes through the local courts in the last two years, jilted property investors seem to be taking a breather now in their campaign against errant developers.

According to legal sources, the number of investors filing claims in the local courts against developers has dropped this year. But it is too early to say this will be the permanent state of affairs going forward.

"Many investors have been waiting to see how the property market — and developers — will perform before deciding whether or not to file claims accordingly," said Saleh Ahmad Al Obaidli, member of the dispute resolution team at Hadef & Partners, the law firm.

"But it's very difficult to know how many claims are in the pipeline in order to assess the levels of activity in the courts. The local property courts probably handled more claims in 2009 and 2010 than they will by the end of 2011."

Some of the recent verdicts delivered by the local legal system have given cause for optimism for investors and investor groups. In delivering the verdicts, the court has called on the developer to provide suitable compensation for reneging on contractual obligations.

While the courts' proactive nature on recent judgments gives them hope, the steep legal bills that precede any such effort are invariably proving a hurdle difficult to surmount. Some disillusioned investors are giving up.

"Legal fees could easily go over Dh100,000 and that in today's context makes it more reasonable for an investor to drop such plans altogether," said an UK based investor with a property in a semi-stalled project. "There's also no guarantee the judgments will fall in the investors' favour. In such instances, it's best to make a quiet exit."

Al Obaidli can relate with the sentiment. "Whilst off-plan investors are still bringing fresh cases against developers, many are conscious of the costs and delays involved in court action and in arbitration and instead prefer to seek a settlement with the developer," he said. A closure for investors beckons on other fronts. There is that related to investors in projects that have been scrapped by the Real Estate Regulatory Agency (Rera). The agency has a set procedure in place for the cancellation.

As part of it, a developer may challenge the Rera decision to cancel. Only once the procedure is complete is the investor legally entitled to a refund from the developer.

"Accordingly, in every case it is necessary for the investor to establish whether Rera has completed the cancellation procedure in respect of his project," said Shahram Safai, partner at the law firm Afridi & Angell.

According to Safai, there is no magic formula that would suggest one set of investor-developer disputes is best left for the courts and another isn't. Nor should investors take up the legal battle going by the tenor of recent verdicts.

"It is difficult to draw conclusions from the results of cases that are reported in the press," he said.

"It would be expected that the investors with the strongest cases would fight court action against developers, whereas those with weaker cases will try to settle out of court."

The short and the long of it is that patience has to be a virtue for investors seeking justified recompense from their developers through legal means. Coupled with that it would help if they had deep pockets as well.

Global crisis: assigning blame

Developers trying to get out of their obligations towards investors better not blame the global financial crisis.

"Towards the end of the last quarter, many developers who were adversely effected by the financial crisis attempted to excuse their failure to deliver on time by blaming it," said Salah Ahmad Al Obaidli of Hadef & Partners.

Arbitration: resolving disputes

Not all property disputes can be settled by the courts. There are some purchase contracts which specifically require dispute resolution through arbitration.

Also, the sale and purchase agreements on property transactions these days reflect the new realities. Shahram Safai of Afridi & Angell said as investors focus on completed projects, the purchase price would likely be paid in full.