His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai and Prime Minister of the UAE, issued decree N⁰ (21) of 2013 on 23rd July 2013 concerning the formation of a special judicial committee for the liquidation of canceled real estate projects in the Emirate of Dubai and the settlement of relevant rights (Committee of canceled Real Estate projects). The Decree came into force upon its publication in the Official Gazette on 10th September 2013.
As such, there is specialized regulation in the Emirate dealing with such cases. Moreover, the regulation applies to the real estate developments existing in onshore, as well as in free zone areas of the Emirate.
Nevertheless, a buyer would firstly need to establish whether the project at issue is indeed cancelled or the situation he faces represents a delay or has a different nature. At the outset, the Decree sets the competent authority to cancel real estate projects, which is the Real Estate Regulatory Authority (RERA).
How does RERA declare a real estate project as cancelled?
Article 23 of Executive Council Resolution No (6) of 2010 sets out the nine grounds under which RERA can cancel a project, these include but are not limited to, events where the developer has obtained all the necessary approvals to start construction works and yet has failed to do so; instances where in contravention of Article 16 of Law No. 8 of 2007, the developer has mismanaged the project’s escrow account; and when the developer fails to complete the work due to his own gross negligence.
Once RERA has passed a resolution to cancel the project under article 24 of the Executive Council Resolution No (6) of 2010, the developer has seven working days to appeal the cancellation resolution. In the event that the appeal is successful, RERA will write new terms and conditions which the developer must agree to in writing. If however the appeal is rejected, RERA will proceed with the cancellation of the project.
After the cancellation of the project, RERA will draft a report setting out the reasons for cancellation and address the said report to the developer. In turn a RERA appointed auditor will review the escrow account and request the developer or the escrow agent, to distribute the available funds to the purchasers within 14 days of the cancellation. The auditor’s fees will be met by the developer as stipulated in article 25 of the decree.
Article 26 of the Resolution provides that in the event of a shortfall between the monies refunded to the purchasers and that which they had initially paid, the developer will be given 60 days from the day of the cancellation, extendable at RERA’s discretion, to pay the shortfall. The Dubai Courts Execution section will have authority to implement the decisions of the committee as provided by Article 5 of the Decree.
The Powers of the Committee
This decree provides that all projects canceled by RERA, the government’s Real Estate Regulatory Authority, will be subject to the scrutiny of the Committee, composed of at least one panel of minimum three Dubai Courts judges. The decision of the committee will be final and unappealable.
The Committee functions at Dubai Courts. According to Dubai Courts, if a certain development has not been listed with the Committee, the buyer should liaise with the Dubai Land Department (DLD) to understand when that certain development will be transferred to the Committee.
What are the buyer’s rights in this respect?
Investors or buyers are rarely put on notice when a project has been canceled. They are therefore requested to consult the Dubai Land Department’s website or attend their offices to ascertain the progress of their project. Once it is established that the project has been canceled, investors should approach the Land Department and provide proof of an interest in the project by way of Sale and Purchase agreements, proof of amounts paid, and any other relevant documents required by the regulators.
The next step will require the investor to file a petition to the DLD department who will, in turn, forward the request to the committee. The latter will then contact the investor to acknowledge the claim and inform him of the date of a hearing before Dubai Courts in order to have the amounts paid reimbursed from the escrow account of the projects or from other executable proceeds of the canceled project.