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According to very recent discussions the Dubai Government considers new laws to protect property investors.
Whilst current Dubai real estate laws deal with the termination of purchase contracts by developers in case of defaulting buyers to a great detail, they lack any provisions on dealing with defaults on the developer’s side.
This in combination with the lack of contractual termination rights for most investors, who normally had nothing to say in drafting the purchase contract, has imposed a legal vacuum for many investors who saw their own rights violated by developers who were either not delivering in time, making all to many changes and downgrades or were not commencing construction at all but kept requesting regular payments threatening to put the investor in default should he not comply.
Investors were left with the dilemma of either having to pay towards a project that they had lost faith in or having to go to Court to seek termination of their contracts as a last resort, hoping that the judge would apply general provisions of the UAE civil law which next to advancing Court fees and paying legal fees to lawyers required to do a lot of arguing in front of the Court without being able to clearly foresee the results of such action. In this situation most investors adopted a wait-and-see strategy.
According to the discussions new laws shall bring about financial penalties for developers should they deliver projects late or defective units. It is also said that termination rights are to be included outlining the legal grounds for such termination by the investor. As such the newspapers introduced two examples: a material change to the specifications of the property or a refusal of the developer to link the payment plan to construction milestones. We can only hope that the non-delivery within a certain time limit after the promised completion date will also be a reason for termination.
Uncertain as of yet is the date on which such law shall be enacted. We can only speculate, but the current situation has made it clear, that while buyers are slowly returning to the Dubai market, added legal security for their investments is a must-have in order to sustain investor interest in this market that certainly will not go back to the days of speculation driven astronomic returns but is switching to more and more long term investment strategies.
The equilibrium may very well be brought back to square in 2010.
