On cancelling purchase agreement
Question: Five years ago, I bought a property from a developer and paid 90 per cent of the property value. The property was supposed to be delivered in May 2019, but the property was not delivered. Currently the property has been completed, but the developer handed over the property to another buyer on the pretext that I did not pay the last installment despite my announcement according to the developer. My question, is the developer legally entitled to cancel the purchase agreement and sell the property to a new buyer without my knowledge? What are the legal measures to be taken against the developer? Please advise
Answer: 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 specifies the procedures the developer should follow in order to terminate a purchase agreement. This Article states that: 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:
1. The Developer must notify the DLD of the purchaser’s non-performance of his contractual obligations. This notification must be submitted on the form prescribed by the DLD for this purpose and must include the details of the Developer and purchaser; a description of the Real Property Unit subject of the Off-plan Sale agreement; a detailed account of the contractual obligations breached by the purchaser; and any other details determined by the DLD.
2. Promptly upon receipt of the notification and verification that the purchaser is in breach of his contractual obligations, the DLD must:
A. Serve a thirty (30) days’ notice on the purchaser requiring him to fulfill his contractual obligations towards the Developer. The notice must be in writing and dated; and must be delivered to the purchaser either in person or by registered mail with acknowledgement of receipt, email, or any other means prescribed by the DLD; and
B. Where possible, mediate an amicable settlement between the Developer and purchaser, in which case such a settlement must be attached as an addendum to the Off-plan Sale agreement and must be executed by the Developer and the purchaser.
3. If the notice period mentioned in sub-paragraph (a)(2)(A) of this Article expires and the purchaser fails to fulfill 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.
4. Upon receiving the official document referred to in sub-paragraph (a)(3) of this Article, and based on the percentage of completion of the Real Property project, the Developer may take any of the following measures against the purchaser without recourse to courts or arbitration:
A. Where the percentage of completion of the Real Property project exceeds eighty percent (80%), the Developer may: 1. maintain the Off-plan Sale agreement concluded with the purchaser, retain all amounts paid by the purchaser, and claim the balance of the value of the agreement from the purchaser; 2. request the DLD to sell the Real Property Unit, subject of the Off-plan Sale agreement, by public auction to collect the remaining amounts payable to the Developer; and hold the purchaser liable for the costs arising from the sale; or 3. unilaterally terminate the Off-plan Sale agreement concluded with the purchaser, 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. In this case, the Developer must refund the amounts owed to the purchaser within one (1) year from the termination of the Off-plan Sale agreement or within sixty (60) days from the date of resale of the Real Property Unit to another purchaser, whichever occurs earlier.
- Ask the Law: Is there a ceiling on the maximum amount of end-of-service benefits?
- Ask the Law: Is employer obligated to bear all medical expenses if employee suffers an inury at work?
- Ask the Law: How do I confer all my wealth on my wife through a will in Dubai?
- Ask the Law: Can workers demand extra pay for working overtime?
- Ask the Law: Does insurance company have the right to refuse to pay compensation in case of a motor accident?
The developer does not have the right to cancel the purchase agreement without informing you through the DLD as per the procedures mentioned above. The rules and procedures stipulated in this Article will not prevent you from having recourse to courts or arbitration and the court will decide whether the termination of the purchase agreement was correct or not.