Administrative Circular

[Datum1m]

I have had the Administrative Circular issued by the Land Department dated 10th November kindly emailed to me by another member.

I will type it out word for word below with my comments and perhaps other members can let me have their views on how they see it effecting them.

Regarding the interpretation of Article No.(11) of Law No. 13 2008 regulating the interim real estate register in the Emirate of Dubai[/b]

1) The cancellation application must be submitted by the developer and not the Units Purchaser.

Article (11) never allowed the purchaser to cancel the contract, so this seems to have been added at the request of the Developers just to make sure us investors can’t cancel our contracts should we want to.
2) In case of cancelling the contract, the developer may retain 30% of the contract’s value, and the rule of (30%-70% of the money paid) shall be applied on the amounts exceeding 30%. This can not in anyway be classed as an interpretation of the original wording of Article (11) it can only be classed as an amendment because it adds further conditions to the Rule, by adding the words “contract value” and then making out the 30%-70% only applies to any of the investors money paid over and above the contractual 30%.

I feel by making it an interpretation rather the an amendment, they are looking to protect the Developers from investors claiming against how the Law13 Article (11) was originally written until they changed within this Administrative Circular.
3) The developer has the right to claim for the specific performance of the contract, and in this case the purchaser has the right to refer this to the Property Court if he wants the cancellation.

Not quite sure what they are trying to achieve with this interpretation, are they saying the Developer can still enforce the wording of his contract should he so wish and therefore making Law13 not worth the paper it is written on.
4) In case of cancelling the contract, the developer may keep the money paid by the Purchaser up to the date of selling the Real Estate Unit.

Again how can this be classed as an interpretation, it his completely giving the Developer new rights within the original wording of Article (11). However the implications of this could affect the values of the units where purchases have not defaulted from their payment plans, because with the developer now being able to retain 30% of the contract value there is no pressure on him to resell the Unit for its original price and could sell it to a new buyer at 30% less. This would give the new buyer a great financial advantage over any original Purchases. I feel if the Developer can resell the Unit at the original price, then he should only be entitled to take an administration fee away from any monies paid by a Purchaser who is in default, why should he get to keep the full 30% when it would have cost him nothing and why does he get to keep a sum as large as 30%, why do the Land Department feel the Developer need such an high percentage of what is our money.
5) Article (11) shall be implemented with immediate effect, therefore the contracts executed prior to the Law shall be subject to the terms of the contract entered by the developer and the purchaser, but the contracts executed after the enactment of the Law shall be subject to the rules of the Law.

Does this mean that any Investor who entered into a contract from when Law 13 was first introduced, (which 1 believe was sometime in July) up until 10th November would benefit from how Article (11) was written within the said Law. Therefore been able to claim 70% back of any money paid to the developer should the Investor fall into default of the contract.
6) The developer shall notify the purchaser and grant him a reasonable period to perform his contractual obligations, and provide the Land Department with a copy of the notice and the Department shall notify the purchaser in person or by registered mail or email, and give him 30 days to fulfil his contractual obligations, and the contract will be cancelled as mentioned above, in the event of not complying with its terms.

What time frame would be classed as reasonable from the Developer, would this be 7 days or 90 days, before the Land Department step in and issue their 30 day notice.

If Law13 is about protecting the Developer and the Dubai Property Market from speculators who only have small amounts of money to invest, then why don’t the Government simply instruct the Developers to only sell to Purchasers who can demonstrate they have the funds or finance in place to pay for the whole Unit at the time of purchase. I feel the Developers should not be able to gain from an investor’s loss and should only be able to take from the Investor his own reasonable expenses in having to resell a Unit. There are a lot of investors who have their life savings tied up in Dubai Property and now find themselves unable to get finance due to the Banks changing their lending criteria and the Developers should be looking at ways to help these people out rather than taking their money, because at the end of the day who are the Developers going to get to replace these Investors within the present state of the market.

Regards

Nigel