If the developer has done nothing should we continue paying him?

[memo123]

Dear all
my developer has so many buildings and so far most of the investors have paid 45-50 %. some have paid only 10% , don't know how and what kind of deals they drew with the developer directly!
anyhow, I have been asking for the last 4 months about progress report,given that our payments are not linked with building progress, they are quarterly payments . I finally got hold of the progress report and I showed it to a structure engineer and to a civil engineer , they both laughed so much and told me, the developer literally have done nothing , while all along he has been saying construction is in progress . the engineers told me that the contractor has not done not even 10 % of the value of the building since he has only put sheetings to surround the land , he has done the pilling , literally they just cleaned the ground and fenced it .
the question here , should we as investors and owners and keeping in mind that we already paid 45-50 % of the value of the apartments , can we just stop paying him ? given the market situation and the cost of funds at the moment , I know the money is in an escrow account and he , the developer cant make use of it unless he builds , but this developer has made a fortune from the first two payments when they didn't have escrow account in place .
what right do i have to stop paying with the rest of the investors? Our money have been earning 0% for the last 9 months and we will continue paying till 2010 and earn nothing , knowing market situation .
regards

[foreigndreams]

I know just how you feel. I have bought with Select Property on Al Marjan. I don't think they have even done the piling yet, but my second big instalment is due. I have asked them if they would consider deferring it due to the exceptional currency fluctuations and also due to the fact that no building work has started yet but have had no sympathy from them whatsoever. All they can say is that I could have forward booked the money. Who could have predicted back in June that sterling would drop 25%? Of course I would have forward booked if I had thought that would happen.
We have had numerous problems with Select from the start. we were told outright lies by the salesperson just to get the sale. We finally received the contract two months after paying the first instalment. The contract actually states that if you should ever default they have the right to keep any monies paid up until that date. I would never have gone ahead with the purchase just on that clause alone. It has also taught me a big lesson never to buy something abroad in the foreign currency, always get a price in the currency for the country you live in, then you know exactly what you will have to pay.
Anyone else had any experiences with Select?

[Ajmanprop]

I am posting this simply to share my experience in general.... not quite answering the Original Poster's question.

I have seen posters recommending holding payments, but it really depends on what if any protection you have in the contract. Most contracts are one sided, written in favor of the developer. Every once in a while, you'll see a contract that is milestone based.

I think if you want to stop payments, but don't have explicit reasons stated in the contract - and be 100% in the clear, you need to file a dispute, or court case. That becomes a fairly expensive affair with no guarantee of success.

See the recent Dubai circular... which penalizes anyone holding back payment - labelling them a defaulter, even if we're talking about the last installment on a project that hasn't started.

-------------------------------------------------
Here's my experience, and the options I am faced with:

I put a downpayment on a (Freehold Villa) in Ajman. No one can say whether it will be a good ending, or a disaster, but time will tell. So far, it has been a black hole.

BACKGROUND:
- The developer widely advertised a milestone related payment plan. Full page ads, press conferences etc. Looked good - pay 50% after handover.
- Made a property booking. Put the customary 5% down. Picked the unit that we wanted.
- Got the actual contract, about 7 months after the initial downpayment. The contract does not mention anything about progress payments - just calendar based quarterly payments.
- So HERE WE HAVE THE 1st PROBLEM - having paid 15-20% - by the time we first see the contract - it is too late to request amendments. The developer has no incentive to change anything - at this point - it becomes a take it or leave it situation.
- The Official Launch took place 6-7 months after our initial booking, in Ajman. The Royals were there, adding to the credibility of the developer.

The property is now being offered at 40% above my Original price. So far so, good – but read on;

REALITY:
I have paid close to 40% - and absolutely no work has started. A slowdown I can understand, but near ZERO work. The cleared the land, put up some fence, and a project office. 3M+ sq feet. No excuse from the developer, other than that they are getting ready.

My Options:

WALK AWAY:
The developer is holding Post Dated Cheques. In the UAE, bouncing a cheque is a criminal offense. No one will throw you in Jail, but that also means a possible travel ban etc. While they may not have practical grounds to press me for payment - having dishonored cheques is something to think about.

The contract says that in the event of a default (non payment), the developer is entitled to forfeit 30% of the payments already made. However, there is no guarantee of any sort that they need to refund the balance… no time line etc.

CONTINUE PAYMENTS:
At the current rates of payment – in another 18 months or so, the total paid will be close to 80%. Even in a best case scenario, the developer will struggle to achieve 50% progress in 18 months.

The only clause in my contract – that will help – is that if the project is delayed a full 2 years, I am entitled to a refund, with interest...provided I notify them on time etc. The refund depends on the developer being solvent. In the event of a delay, even 30% of owners demanding a full refund, could possibly lead the developer to become insolvent.

GO TO COURT:
In order to stop payment via post dated cheques – we need a police report. In order to get a police report, we need to file a case. The court fees, lawyers fees are over 30,000 AED - this just to get started.

Based on the contract as it exists, I have almost no viable basis to dispute anything. As it stands, there is no situation that can be considered a default by the developer – except a handover delay of over 2 years.

My own opinion on what may be happening:

Is the master developer for Ajman holding things up? It is possible. Hopefully their troubles are temporary. I cannot come up with any other reason why dozens of developers who are eager to make a name for themselves cannot provide a reason for not starting work.

In fairness to Ajman, they’ve expressed frustration at the Federal authorities for lack of power….

So far, only the developer of a project called Al Ameera has walked away. The majority of the remaining developers whose principals are foreigners, and know they’d better keep their mouth shut.

Ajman may be sensitive to having more completed projects for which they cannot provide electricity. An alternate reason could be that developers don’t even have access to the power, water needed to start construction in any meaningful way.

The right thing for authorities to do would be to allow buyers to stop payments – say at a certain level - 50%, 75% whatver, until construction catches up etc…or at least keep a close eye on developer finances, but for now it is in their interest to let the current practices continue. Very few new buyers, so why not squeeze the ones that already signed up.

In general, it has been made clear by both Dubai and Ajman that investors for the most part are on their own. The law may help, it may not – but don’t count on it always.

In my case, I am not in it for a quick buck. Just want the project delivered. If the project is delayed, it is only fair to ask that payments be delayed...

I've searched a number of boards etc - but cannot find a single project in Ajman – announced end 2006, 2007 that is on track.

[dietcola]

An interesting case to say the least... if i was in you position i would be thinking about persuing the court option... no way would i be paying more money out now to a "developer" who is doing nothing but spending you money... the power would be in the numbers here... do you have anyway of contacting the other investors involved? if so group together and light the fire of court appearences under the ass of the developer... perhaps itll get the ball rolling on the project or give you some idea of if your going to get your money back...

[Ajmanprop]

Thanks, actually, going through forum after forum - there doesn't seem to be a single project launched in the end 2006, 2007 time frame that is proceeding on track in Ajman. People who have paid close to 50%+, but still waiting for work to start, are not uncommon.

I have contacted an attorney in Dubai, that will give me a quote next week. Right now, am just trying to get legal help to put a stop on any remaining post dated cheques - and will worry about a refund etc. later on.

Yes, to your point, I have located a few other investors on forums. If the price of taking action is rather high, will see if I can get anyone else to join / share expenses.

[a remorsed buyer]

Read in the national yesterday that it's unethical (sort a speak) for a developer to request more money if they haven't broken ground yet in this financial climate.

You must find out more information on approvals, etc I think.

I will not pay more until I see something worth it's salt.

Originally Posted by memo123

Dear all
my developer has so many buildings and so far most of the investors have paid 45-50 %. some have paid only 10% , don't know how and what kind of deals they drew with the developer directly!
anyhow, I have been asking for the last 4 months about progress report,given that our payments are not linked with building progress, they are quarterly payments . I finally got hold of the progress report and I showed it to a structure engineer and to a civil engineer , they both laughed so much and told me, the developer literally have done nothing , while all along he has been saying construction is in progress . the engineers told me that the contractor has not done not even 10 % of the value of the building since he has only put sheetings to surround the land , he has done the pilling , literally they just cleaned the ground and fenced it .
the question here , should we as investors and owners and keeping in mind that we already paid 45-50 % of the value of the apartments , can we just stop paying him ? given the market situation and the cost of funds at the moment , I know the money is in an escrow account and he , the developer cant make use of it unless he builds , but this developer has made a fortune from the first two payments when they didn't have escrow account in place .
what right do i have to stop paying with the rest of the investors? Our money have been earning 0% for the last 9 months and we will continue paying till 2010 and earn nothing , knowing market situation .
regards

[Green_age]

I have stopped paying the installment and so far my last delayed for about 35 days!
Its a shame that there is no buyers rights or so. They can cancel your contract after 45 days if they want to, so all you've paid so far is gone!
On the other hand, cause there is no buyer these days on the market, the developer may not cancel your contract, because at least they hope to squeez somebody who is already trapped.
I still think that if all people affected with these unfair deals, get to gether and sign a petition to authorities, MAY BE that works ...