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Dubai officials get tough on developers who have not started projects

Dubai’s Real Estate Regulatory Agency (Rera) is compiling audited technical reports on all the projects that are under the master developer’s freehold areas. ‘We are asking them to give clear reasons as to why a developer has not commenced a project since they are aware of what is happening on site,’ said Rera Chief Executive Officer Marwan bin Ghalita.
It is part of the process that allows the agency to cancel projects that it decides have no chance of going ahead so that investors can get their money back or switch to a development that is going ahead.
‘Similarly, a time frame is given to sub-developers to explain the reasons for not starting construction before any action is taken,’ added bin Ghalita. A developer who has not started his project within the six month span of obtaining necessary permission from Rera is served with a 10 day notice whereby he has to furnish the Trust Account Department the reasons for the delay.
‘If a developer’s reasons are genuine we take more guarantees on its commitment to start construction, offering it grace periods to commence construction with the approved time schedule being sent to all investors,’ he explained.
‘However, if there is no response to our notice, we issue a cancellation notice for the project. The developer has the right to submit an objection to our letter within seven days of receiving the notice,’ he added.
If the developer does not respond, bin Ghalita said the agency issues cancellation order for the project and forwards the project file to the Land Department’s legal section to co-ordinate with the court and other parties to start mediation.
‘We are in favour of mediation that tries to solve the problem between the developer and the investor through mutual agreement. And if no agreement is reached, parties can move to the Property Court,’ he said.
In another sign of toughness the Dubai Court of Appeal has directed a developer to deliver a booked unit to the buyer despite a delay in the payment of the third installment. The court ruled that if a developer receives and accepts part payment for an instalment, this will be considered an approval in principle for extension of the payment period.
In this case the buyer signed a contract on June 25, 2007, to buy a housing unit for Dh1.3 million to be paid in six installments. He paid the first and second installments on time, and then paid part of the third installment.
But when he wanted to pay the rest of the third installment, the company accountant refused to accept the payment. The company told the buyer that the purchase agreement was null and void. The buyer transferred the remaining amount via bank remittance to the company’s account, which it received. The court ruled that the company’s acceptance of the payment implied acceptance of the continuation of the contract.
Before giving the verdict, the Court of First Instance wrote Rera to check whether the property was registered. Rera said the contract had not been registered and the court ruled that the contract was null and void and directed the seller to pay back the money received from the buyer.