13 December 2009
An investor can claim his rights on his long-term leasehold property with the Property Court in Dubai, say legal experts.
Investors were unaware of which legal authority they can go to in the event of a dispute with their developer in the case of long term leasehold property.
In the case of the freehold property, they are heard by the Real Estate Regulatory Agency (Rera) and the Property Court.
This opinion was sought in the context of the recent dispute between some investors and Omniyat Properties.
About 50 dissatisfied investors representing around 180 units of The Square project in Hor Al Anz area in Al Mamzar, a leasehold property are claiming that Dubai-based developer Omniyat Properties has breached their lease purchase agreements by asking for full payment of their leasehold units prior to handover.
"It is safe to assume that the legal regime for leasehold properties with regards to dispute resolution rules and procedures are no different than the ones for freehold properties. Consequently, it should be the same authorities, i.e. the Property Court [Dubai Court of First Instance] and where agreed by the parties any arbitration tribunal appointed which has have authority to entertain disputes between a developer and an investor in a leasehold property," said Axel Jacob, Legal Consultant, Fichte & Co Legal Consultants.
"In most of the Dubai real estate laws, there seems to be no distinction between leasehold and freehold and there are no further distinct provisions on leasehold properties," said Jacob.
The investors have given Omniyat post-dated-cheques (PDCs) for the rest of the 50 per cent of the payment. They said Omniyat had already encashed the first instalment. "Also we are threatened that the second instalment will also be deposited even while the handover is still pending," said Faisal Altaf, an investor in the project.
"Full payment of our units prior to the handover was not as per our initial contract which states only 50 per cent of the property shall be paid before handover and the rest will be paid in 20 instalments, three months after the handover of the project," said the investor.
The investors said they were concerned that their leasehold investment is at the risk of not being registered by any legal authorities.
Speaking to Emirates Business, the investor shared a document given by Dubai Land Department to Omniyat Properties dated October 25, 2009, that said: "Pursuant to Decree No3 of 2006, concerning determination of designated areas, according to this decree Hor Al Anz area where the project is located is not considered to fall in designated areas. The long-term lease agreements reached between Omniyat and Non GCC nationals will not be recognised by the Land Department and the Land Department will not register such agreements. The project also falls outside the jurisdiction of Law No27 of 2007 Concerning Ownership of Jointly Owned Properties in the Emirate of Dubai and Owners Associations will not be permitted to be formed or registered for this Project."
According to Mohammad Ahmad Al Shaikh, General Secretary of the Dubai Rent Committee: "The Rent Committee looks for only cases with respect to disputes between landlords and tenants and those who have a tenancy contract. He confirmed they looked at contracts for any tenure period. If this is between a developer and the buyer of leasehold property, that has nothing to do with the Rent Committee. For such a case, they should go to the Property Court."
"I would really appreciate, if land department can help us out in this matter as I have now really got tired of spending money on such small matters to know where we stand," the investor said.
Jacob said the leasehold property disputes are distinct from that of a tenancy contract. "Though the name may suggest otherwise, leasehold property agreements are of an entirely different legal nature as tenancy/lease agreements. Therefore, there would be no course to the Rent Committee in such cases."
Mehdi Amjad, Executive Chairman and CEO, Omniyat said: "This transaction specifically falls under the Land Department as a Musataha Agreement which DLD uses for our relationship with our customers who are landlords, who are effectively owners of Musataha in a long-term lease agreement."
Investors claimed the developer has added four additional contracts to the existing lease contracts which include a mortgage agreement, leasing tenancy contract, property management agreement and a deed of adherence. The investors have refused to sign these contracts saying the developer is in breach of the initial contract.
Jacob said that as per the general rule stated in Article 267 of the UAE Civil Code, the contracting parties are bound by their valid contractual stipulations. "Any amendment has to be subject of mutual agreement. The defaulting party is held liable for the consequences of its unilateral changes, where the UAE laws are exclusively applicable."
Amjad said: "There have been no multiple contracts that have been issued. The laws have effectively evolved a lot in the last three years and we had to update our contracts in line with the changes of the law and the keeping in line with the Musabaha Agreement. We also updated the contracts in line with the financing deal we have been providing to these customers."
An investor can claim his rights on his long-term leasehold property with the Property Court in Dubai, say legal experts.
Investors were unaware of which legal authority they can go to in the event of a dispute with their developer in the case of long term leasehold property.
In the case of the freehold property, they are heard by the Real Estate Regulatory Agency (Rera) and the Property Court.
This opinion was sought in the context of the recent dispute between some investors and Omniyat Properties.
About 50 dissatisfied investors representing around 180 units of The Square project in Hor Al Anz area in Al Mamzar, a leasehold property are claiming that Dubai-based developer Omniyat Properties has breached their lease purchase agreements by asking for full payment of their leasehold units prior to handover.
"It is safe to assume that the legal regime for leasehold properties with regards to dispute resolution rules and procedures are no different than the ones for freehold properties. Consequently, it should be the same authorities, i.e. the Property Court [Dubai Court of First Instance] and where agreed by the parties any arbitration tribunal appointed which has have authority to entertain disputes between a developer and an investor in a leasehold property," said Axel Jacob, Legal Consultant, Fichte & Co Legal Consultants.
"In most of the Dubai real estate laws, there seems to be no distinction between leasehold and freehold and there are no further distinct provisions on leasehold properties," said Jacob.
The investors have given Omniyat post-dated-cheques (PDCs) for the rest of the 50 per cent of the payment. They said Omniyat had already encashed the first instalment. "Also we are threatened that the second instalment will also be deposited even while the handover is still pending," said Faisal Altaf, an investor in the project.
"Full payment of our units prior to the handover was not as per our initial contract which states only 50 per cent of the property shall be paid before handover and the rest will be paid in 20 instalments, three months after the handover of the project," said the investor.
The investors said they were concerned that their leasehold investment is at the risk of not being registered by any legal authorities.
Speaking to Emirates Business, the investor shared a document given by Dubai Land Department to Omniyat Properties dated October 25, 2009, that said: "Pursuant to Decree No3 of 2006, concerning determination of designated areas, according to this decree Hor Al Anz area where the project is located is not considered to fall in designated areas. The long-term lease agreements reached between Omniyat and Non GCC nationals will not be recognised by the Land Department and the Land Department will not register such agreements. The project also falls outside the jurisdiction of Law No27 of 2007 Concerning Ownership of Jointly Owned Properties in the Emirate of Dubai and Owners Associations will not be permitted to be formed or registered for this Project."
According to Mohammad Ahmad Al Shaikh, General Secretary of the Dubai Rent Committee: "The Rent Committee looks for only cases with respect to disputes between landlords and tenants and those who have a tenancy contract. He confirmed they looked at contracts for any tenure period. If this is between a developer and the buyer of leasehold property, that has nothing to do with the Rent Committee. For such a case, they should go to the Property Court."
"I would really appreciate, if land department can help us out in this matter as I have now really got tired of spending money on such small matters to know where we stand," the investor said.
Jacob said the leasehold property disputes are distinct from that of a tenancy contract. "Though the name may suggest otherwise, leasehold property agreements are of an entirely different legal nature as tenancy/lease agreements. Therefore, there would be no course to the Rent Committee in such cases."
Mehdi Amjad, Executive Chairman and CEO, Omniyat said: "This transaction specifically falls under the Land Department as a Musataha Agreement which DLD uses for our relationship with our customers who are landlords, who are effectively owners of Musataha in a long-term lease agreement."
Investors claimed the developer has added four additional contracts to the existing lease contracts which include a mortgage agreement, leasing tenancy contract, property management agreement and a deed of adherence. The investors have refused to sign these contracts saying the developer is in breach of the initial contract.
Jacob said that as per the general rule stated in Article 267 of the UAE Civil Code, the contracting parties are bound by their valid contractual stipulations. "Any amendment has to be subject of mutual agreement. The defaulting party is held liable for the consequences of its unilateral changes, where the UAE laws are exclusively applicable."
Amjad said: "There have been no multiple contracts that have been issued. The laws have effectively evolved a lot in the last three years and we had to update our contracts in line with the changes of the law and the keeping in line with the Musabaha Agreement. We also updated the contracts in line with the financing deal we have been providing to these customers."
By Anjana Kumar
© Emirates Business 24/7 2009
