Nov 15 2008 |
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Claim to refund: 70 pc of 'monies paid' or 'contract value'?
There is much confusion over the interpretation of Article 11 under Law 13A circular issued by the Land Department , Dubai, dated November 10, 2008 and signed by Sultan Butti Bin Migrin, general manager of the department, has raised a serious question on the 'extent of claim to refund' in the event of a 'purchaser default' in a property.
Several investors called The Business Weekly on Wednesday and Thursday seeking clarification on the circular which claims to be an interpretation to Article 11 under Law 13 that regulates the Interim Real Estate Register in the emirate of Dubai. The major confusion, according to a legal expert, pertains to the part under the original Article 11 that says, "If the purchaser has not fulfilled his contractual obligations with the developer, the developer may cancel the contract and repay the purchaser his money, less a deduction that does not exceed 30 per cent of the 'monies paid' by the purchaser."
In fact, the new circular apparently has not interpreted Article 11, rather it has 'amended' the article by stating, "In the case of canceling the contract, the developer may retain 30 per cent of the 'contract's value', and the rule of (30-70 per cent of the money paid) shall be applied on amounts exceeding 30 per cent.
Arshad Hussain, an investor who has paid five per cent of the contract value to a leading developer in Dubai for a project launched in July, said even if the new circular is an amendment, it should not be made applicable for the payments made against projects before November 10, the day when the new circular was issued.
A majority of the legal experts argued that the original Article 11 should apply to all projects announced before November 10.
The reason: because these investors have been holding on to their investments in the faith that there exists an Article 11 which would ensure them a 70 per cent refund of the monies paid by them in the event of an incapability to pay up or a default on their part.
In the event that the purchaser defaults on any term of the contract he made with the developer for the sale of the Real Estate Unit, the developer should notify the Department accordingly and the Department will then give the purchaser 30 days notice to fulfill his contractual obligations, by hand, registered post or email.
If at the end of the period referred to in item 1 of this Article the purchaser has not fulfilled his contractual obligations, the developer may cancel the contract and repay the purchaser his money less a deduction that does not exceed 30% of the monies paid by the purchaser.
The new administrative Circular Interpretation of Article No. 11 of Law No. 13 2008 regulating the Interim Real Estate Register in the Emirate of Dubai
The cancellation application must be submitted by the developer and not the Unit's Purchaser.
In case of cancelling the contract, the developer may retain 30 per cent of the contract's value, and the rule of (30%-70% of the money paid) shall be applied on amounts exceeding 30%.
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 to this to the Property Court if he wants the cancellation.
In case of cancelling the contract, the developer may keep the money paid by the Purchaser up to the date of selling of the Real Estate Unit.
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.
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 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.
This circular shall be in effect from its date until the date of issuing the implementation regulation of the law.
Sultan Butti Bin Migrin General Manager Land Department Government of Dubai
By CL Jose
© The Business Weekly 2008
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Comments By Our Users (34)
This is a very good article. The law clearly says that we should get back at least 70% of th invested money. When we brought this unit, the law clearly stated that we will be getting our money back if the investor defaulted. All the SPA or reservation agreemnet only protects the developer. This shoudl change.
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RERA has once again made mockery of real estate law. They have given a clear indication - They dont care about investors. Their loyalty is towards developers.
How can a law so important as Article 11 be amended overnight and without any proper consultation.
People like me who bought property in July or Aug- what happens to us ?
Thank You RERA for letting us down again.
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Such an important article on such a cruciail subject is published by Zawya on such a low key location of the website.
This article should be headline on Zawya site....this topic is effecting thousands of people in Dubai.
Poor show Zawya.
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Well, I do agree, this is a very important Article and it should be published on the front page. I really appreciate the indepth analysis of the Article 13 and clause 11 with the new intepretation. Hope Dubai government will protect the Investors. They should think that Investors are the backbone of Dubai. Without Investors, the city can't grow,
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GROUND REALITY IS THAT NO ONE CARE ABOUT THE SMALL INVESTORS . THERE IS NO LAW IN CASE THE DEVELOPER DEFUALTS. OR DELAYS THE PROJECT BY 5 YEARS AND SO ON..... ONE OF IT IS DUBAI LOOGANS. ONE SHOULD GIVE STANDING OVATION TO THIS KIND OF DEVELOPER FOR RELEASING NEW AND APPROED PROJECT FROM RERA AND LAND DEPARTMENT..GOD BLESS EVERYONE.
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Al Attar properties Sold, Vancouver, Toronto and Global Point towers in International City in 2004 confirmed delivery of units on November 2007 is not even started construction. They collected 40-50% payments from the investors. Is RERA is sleeping?
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If non payment developers can cancelle this deals and cut big amount from advance payment.
What is ground reality, If developers obtained payment more than 30% payment and still not completred first floor or in many case still not started construction jobs, also still not obtained Escrow account and still pressing to pay continue monthly installments.
This is common complaints,
Many developers sold more that 5 towers,
Still first project is not completed,
It is thefore, it is great risks to pay further payment to same developers.
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I totally agree with you
I as in anvestor and many others like me have paid the developer up to 50% of the value of the apartments we have bought . Yet this developer have not even done pilling , and he already sold 7 towers .
in this case why can he just return the money to the investors , since he claims it is in an escrow account and cant do anything with our money if he does not build .
wouldnt it dangrous to continue paying? Imagin there is no name tag on the plot yet ?
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it is absolutely disgraceful how Developers now act against the flippers and speculators to justify the law towards their benefit, in the past, all developers craved for speculators and flippers to finance their projects, and Master Developers were no exception, all of them exploited their existence to finance their projects, and everyone was benefiting, without them; most of Dubai's ready and famous projects wouldn't have been built.
the fact is that if there's an opportunity an investor would use it! there's nothing wrong with that. now all of a sudden Developers are criticizing flippers who are becoming a taboo! let us face it, they are doing this in order to push RERA change Law 13-2008, as otherwise most buyers (I would say 80%) would cancel or default, this applies on both end users and flippers as they feel they bought at exaggerated rates, and they're better off without such projects.
moreover, these Developers won't be able to build if the Buyers cancel with 30% is forfeited from paid amount, so they have to make it impossible for anyone to default on payments.
very disappointing by RERA, how developers had this influence that easy, seems that the small guy financing the projects is no more of importance, but we can still get more money out of him! right?
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It is not the issue of developers or flippers. The developers used to support or encourage the Investors to invest in their projects. I too had the same experience. The developer assured me that I can get a minimum of 20-30% with in 3-6 months time. I told them that I am not in a position to pay the 3rd payment, and the developer told me that it is his problem to resale my unit. Now he can't and he is asking me to pay the 4th instalment.
I think RERA and the Land Department knows about it. If all the Investors are defaulting, then there is severe crash in this market. It is better to have a Real Estate Fund to support the Developer as well as the Investors. This will benefit the development in Dubai.
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Can some one pls tell me just one small thing-
DOES RERA OR LAND DEPT KNOW WHAT ...THEY ARE DOING.
They are making up the story as they are going along.
Cant they understand that who is in the position to pay the next installment, esp to ... developer like Emaar.
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I've been trying to get instructions from Emaar customer care on how to get 70% refund on cancellation of monies I paid for my off-plan. Has anyone succeeded on this?
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The major speculators are most of the developers. They are the people who have even advertised in newspapers while launching their projects indicating that prices are expected to go up by a certain percentage after a particular date, thereby encouraging more mass speculation. These are like gambling advertisements and should therefore not be allowed.
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I was shocked to read my email from Emaar just now. They rejected my request for an extension! How can this be true after reading everywhere on the Internet that they were granting extensions and relaxing payment schedules? Emaar Customer Care also wrote me and said that if I should default on my payments, that they were under NO OBLIGATION to refund 70% of the monies I paid already (as stipulated in Law 13). So don't believe what's in the newspapers, Emaar is not being ethical in these times of financial crisis. Clearly if they are providing extensions, they are not providing options for everyone, and they are not intending to refund 70% of your money if you default. This is not right. What can we do? I thought Emaar was a reputable company. Not so.
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Dear Sirs
What about the investor rights ?
Damac held investors money for over 2 years then cancelled the whole project and gave the investor their money back plus a measly 5.5% to 6% interest on the money they have been holding for two years on the excuse that they didn’t get the permission to build on the original plot intended .
Is this fair?
When the investor defaults, he looses 30% of the contract value or of the amount he already paid, yet when the developer defaults, he is not penalized and punished !
Where is the government protection for the investor?
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Real estate in dubai is madness. Government is sleeping on minor situations like these. This is just the beginning.
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I am lead to believe that there has been a further amendment to this ruling in the last 24/48 hours. It is something to the effect of:
- For purchasers prior to July 08, the developer can retain up to 10% of the developer’s original price;
- For Purchasers after July 08 it is up to 30% of the developer’s original price.
There has been no media on this, but developers are quoting this… Could someone confirm this ‘new’ apparent ruling?
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A dedicated portal where BOTH end users and investors can access information such as:
Regulatory and legal aspects of land / asset ownership
Payment schemes for different developers
Updates from RERA and other govt bodies
Developer track record and customer satisfaction surveys
Investment opportunities (REITS etc)
Financing end user, developer and investor:- Mortgages, Escrow, Sukuk, Equity
could be the way forward.....
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Dubai Govt dont give a damn to us investors. This is the real face of Dubai.
They will keep changing the rules whenever and wherever it suits them.
Dont forget Emaar and Nakheel are their money making machine.
Its people like us who will be grinded in this machine.
We all have to accept that we were all folled by this mirage that Dubai is fair and heaven for us investors.
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Seems once again a dumb law was passed and then changed. Why dont YOU think before issuing a law.???
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The Dubai government sought to provide investors with confidence and further attract foreign and institutional investors by creating RERA.Nothing wrong with that.Unfortunately,the problem is with the incompetent people at the head of these organisations who have no business sense or concept of customer care. This is manifest in the whole organisation.All one needs to do is try to get somebody at RERA to pick up the telephone,reply to emails or indeed have a protocol for visitors to their offices,let alone respond to complaints.
The end result is the shambles that has resulted due to mismanagement and incompetence.These organisations which are the laughing stock of the industry could have been its saviour.A good idea woefully executed with potentially disasterous consequences.
As for the new laws-don't hold your breath.
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If you or anybody whom you know cannot make the next payments on their property then all your money will be forfeited. So if you feel this new interpretation of law 13 affects you or your friends then join this group by sending email to:
investorslaw13@hotmail.com
with
* your name
* your mobile
* amounts invested in off plan in Dubai
* short bullet point about your opinion on the new interpretation of law 13
Most of us worked hard for the money, maybe it is our lifes savings. To recover from a collateral damage with the upcoming recession will be tough or impossible.
As the developers joint forces against us, to achieve this interpretation we too have formed a group and have joined forces to reverse it.
A lot of developers dont have enough equity for their projects, they depend only on the purchasers funds, and there will be no bridge finance for them as well.
Developers must stop finger pointing to investors, only with their help the market came up and all developers were thankful for the speculation because it helped them to increase their profits.And the developers shall not forget that they overheated the market by themselves, caused by greed, lies about construction costs to justify their high prices.
Please forward this email to all other investors you know in Dubai, circulate it through your email and network !
Lets start all together to make the first step for a change.
Remember everybody is a part of the chain and part of the success.
We shall make an organised and collective petition to the Land Department. We shall make ourselves heard!!!!
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investorslaw13@hotmail.com
An initiative has already begun and come a fair bit in an attempt to get the voices of investors heard. Be sure to send an email to that adres containing your contact details, amount invested and where, and also a comment or your opinion regarding the latest changes.
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investortslaw13 at hotmail.com or check google-group:
http://groups.google.com/group/dubai-property-investors/web?hl=en
There are a lot of people in the same situation, and we will together try to make a sustainable change. Join!
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investorslaw13 at hotmail.com
That's the right email-adress!
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Please scan the letter from EMAAR and email it to us. You can remove confidential data if you like.
investorslaw13@hotmail.com
Please support our group ! In the last 5 days approx 100 investors joined.
We are preparing a petition to submit to the Land Department and Skh. Mohammed.
Regards
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CALLING FOR A NEW LAW THAT REALLY PROTECTS THE INVESTORS!!!
If the government is taking steps to protect the developers by putting exit barriers for investors, THEY SHOULD ALSO PROTECT THE INVESTORS / BUYERS BY ENFORCING DEVELOPERS TO CHANGE PAYMENTPLANS ACCORDING TO CONSTRUCTION.
What happens at the moment is that, developers are assured of their 30%, if they develop or not and I have spoken to many investors complaining that the developer is in huge delay with construction but RERA is not able to do anything for them, in fact they are advised to just pay their installments or facing cancelation of their paper unit!!!
Implementing this law will also be in line with the earlier introduced Escrow Account by the government for off-plan projects, that should lock the investors capital from the developer and release this in stages linked to construction progress.
So why should developers still make their personally designed paymentplans according to their interests, that are often unrealizable. It is not unusuall to hear that an investor has paid 30% / 40% with the developer not even started the actual construction. I know developers introducing 2/2,5 year payment plans for 80 story buildings, and having delays for years with the construction not in sight, even after 4 years. In such cases the developers are abusing the lack of knowledge of the investors, or at least failing to give transparent and reliable paymentplans.
I BLIEVE THAT THE INVESTORS INTEREST SHOULD ALSO BE HEARD AT THE LAND DEPARTMENT AND COVERED BY A NEW LAW!!!
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Hope Dubai government will protect the Emaar , Nakheel , and all Government Companies . We don't want to think that Investors are the backbone of Dubai. After this time we don't need to Investors, now our countries grow with your money in past of 5 years and please go back home !
(All commercial units in International city was free zone before august 2008 "when they sold out 4 years back" ,but now you need local sponsor ,same as Dubai , this is new generation of cheating in Middle East Country ), Just Ha Ha ,....
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UPDATE ON OUR INITIATIVE AGAINST THE RECENT CHANGES OF LAW 13:
Until today 122 memebers have signed up, they own approx. 1 Billion AED of offplan units in various developments.
WE ARE GROWING !!
Everybody who wants to join please sen an email to:
investorslaw13@hotmail.com
The following actions are going to happen soon:
1. Setting up a comitee
Will be done this weekend, everybody who want to represent the group is most welcome and can send us an email.
2. Petition to Land Department
The draft will be discussed this weekend and presented for discussion in the first official meeting.
3. First official meeting
We are planning on this event for the next week.
4. Legal advise
We will hire a lawyer to represent us and attend our first official meeting.
Please join our group, the more we are the better it is. We can change the unfair interpretation of law 13 !
Yours
Dubai Property Investors
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i m a invester and i have invested 2.4million in sanali tower 2 in dubai land as i said i paid two installments as per the contract as the builder promise me that the work is going to b started from march 2008 as if its already 9 months passed and the builder fail to start the work yet so please help me out how should i get my money back which i paid in hsbc sanalis escrow account please reply
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I have paid a 10% deposit for an apartment in Jamera Village.
I do not want to go ahead and make the next payment if i can get 70% of my initial investment back.
How do i know if i can get 70% of my money back if i dont want to go ahead?
and do you know if Deeraj East Coast are giving any time extensions on payments?
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I do agree but no body is listening to us what we should so Developers sending legal notices and cancelling our properties.
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i will join the group as i want my money back from the developers asap
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I have invested 1 millions in different project .I want my money back what should i do
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