Row breaks out over Dubai Land Department letters to seize property of investors behind with payment

The DLD has sent out letters to investors in building projects, including Mazaya Business Avenue and Jumeirah Business Centre Five, both in Jumeirah Lake Towers, saying that if they fail to make outstanding payments within a fortnight their properties will be taken and auctioned off. The letters also state that 40% of any investment so far will be confiscated.
 
But lawyers are questioning whether the DLD has the right to do so. ‘My argument and I believe the entire legal community feels the same, is that because the DLD is not a judicial body, these judgements are not enforceable. Only a court can enforce them,’ said Ludmila Yamalova, a partner at Al Sayyah Advocates and Legal Consultants.
 
Jerry Parks, partner and head of real estate at Taylor Wessing Middle East also doubts their legality. ‘The DLD has no rights to cancel a sale and purchase agreement as opposed to a project. It is not a right of the DLD to repossess a property. It is a right on the part of the developer if there is a default on the part of the purchaser and the proper legal steps have been taken to terminate the sale and purchase agreement,’ he explained.
 
But Mohammed Sultan Thani, assistant general director of the DLD insisted that it does have the right to cancel contracts after ample time has been given to investors to correct their position on defaults before cancellation notices are served.
 
‘Notices have been served to investors who have failed to comply with the legal provisions. Developers had given them ample time to pay up their dues. If the investor remains adamant and does not pay, then there is no option for the developer,’ he said.
 
According to the department, a 30 day notice is sent to an investor to pay up what is owned and if no response is received within that period another 15 day notice is served. Following this period, the department cancels the contract. ‘We need to cancel the contract so that developers can sell the properties again. There is a need to remove the past owner’s name to allow resale of property,’ Thani explained.
 
Under a decree, a developer does not need to sell at public auction if he completes more than 80% of the project and may elect to terminate the contract and retain up to 40% of the purchase price but the investor can challenge the cancellation notice, he added.
 
But Yamalova said that the notices refer to a decree, number 6 of 2010, that has yet to be made official. ‘The Dubai Land Department is over stepping its boundaries here,’ Yamalova claimed.