New Property Law in Dubai Favors Developers

The hastily-introduced law No 9 in Dubai heavily favors property developers, and prevents any investors from pulling out of deals, without good reasons while allowing developers to cancel, rearrange or renegotiate the deal. The key points are:

• Developers can keep the full amount paid and request that the purchaser settles the remaining amount of the contract price if 80% of a project has been completed. If the buyer is unable to pay,they can request the property be sold at auction. It is not clear whether this 80% would be the individuals property of 80% of the development as in 80/100 properties completed.
• Developers may revoke any contracts and deduct up to 40% of the purchase price of the unit if 60% of the project is complete.
• Developers can revoke contracts and deduct 25% of the purchase price if less than 60% has been completed.
• If construction has not yet started, the developer may revoke the contract and deduct up to 30% of monies already paid.

New laws to protect property developers in Dubai as work comes to a standstill on many projects

Currently, the only way for a buyer to terminate a contract is to present the case in court and request termination through RERA. This amendment has been made retroactive so will apply to any agreements made in the past.

Needless to say, smaller investors are not completely happy with the new law, of which there is a copy posted here at the Dubai property investor’s group website. The amount of lawsuits is growing in Dubai, the first property auction in Dubai will be held next month, and many of the developers who have canceled projects are switching investors onto a different development, whether they want to or not. A good example of this is the canceled Trump Tower project. Investors are being forced to accept an investment in other, less prestigiously-named projects instead.

Millions of dollars worth of projects have already been canceled, and there is a lot of confusion as to what is going ahead. Jones Lang Lasalle reported that at least 50% of the previously planned projects due for completion between 2009-12 have now been canceled, and the amount of unpaid money to British sub-contractors is in the region of $600 million. Developers are hastily renegotiating contracts and it seems as though many sub-contractors are unlikely to be paid more than 50% of the outstanding bills.  No doubt this new law will go some way to protecting the developer’s interests, but is hardly confidence inspiring from the small property investor’s point of view.

The Trump Tower is one of numerous canceled projects in Dubai

The one-kilometer tall Nakheel Tower is also scrapped