Protection Law planned for property buyer in Dubai
Posted by 7starsdubai on July 21, 2008
original published TheNational.ae
Last Updated: June 19. 2008 9:13PM UAE / June 19. 2008 5:13PM GMT
The proposed property law would also give home buyers the right to seek compensation against developers who make changes to a project’s design halfway through construction. Ryan Carter / The National
People who buy property off developers’ plans will be better protected from misleading marketing by developers if a new consumer protection law is passed by the Dubai Land Department (DLD).The proposed property law would also give home buyers the right to seek compensation against developers who make changes to a project’s design halfway through construction.Under the regulation, developers would have to give buyers a “disclosure statement” before signing a contract.
The statement must include full disclosure about a development, such as how many buildings it will include, the facilities it will provide and where it will be located. It would also include the estimated service and maintenance charges for the development and a date of completion.The regulation is also expected to contain a “statutory warranty” from the developer, meaning that home buyers will be entitled to seek compensation if changes are made to a development or the final product differs from its description in the disclosure document.
The aim of the regulation is to crack down on developers who sell properties off-plan and then fail to deliver on their promises.”This is going to be huge if they bring it in,” said Stephen Kelly, an associate with Clyde & Company legal consultants.”It will mean developers warranting that the information in their disclosure is correct and not incomplete. If a developer makes changes to the development later, for example they decide the development is only going to have five gyms as opposed to the original 20, then a buyer can seek compensation if they suffer loss from the changes.”
The National recently highlighted complaints raised by residents at Jumeirah Beach Residence after the developer, Dubai Properties, decided to cancel five of the gyms originally planned for the project and build a 500-vehicle car park where a beach park had been planned.In 2005, Emaar Properties came under similar pressure from residents at its gated community projects, the Meadows and the Springs. Owners complained that the developer had failed to deliver some of the facilities it had promised, and was also charging for amenities initially sold to them as free of charge.
“These changes, if introduced, will impact how developers market their projects and will hopefully assist in preventing some of the problems that have occurred recently, with developers not completing their developments as they have been represented to purchasers,” said Mr Kelly.
The Real Estate Regulatory Authority (RERA) was set up by the Dubai Government last year to regulate the emirate’s property market and stamp out malpractice among developers.
All developers now have to register with the RERA, and any money made from off-plan sales has to be placed in a specially managed account, known as an escrow.The escrow account must be opened with an approved bank, but before this can happen, developers must provide all details about a project to the DLD, such as the title deed of the plot, the designs and layout. Money made from off-plan sales is then placed in the account and used only to fund the construction of the project.
The system is also expected to ensure that construction firms are paid on time.
“You’re no longer going to see property developers collecting money at the launch and then just using it to buy another plot,” said Alexis Waller, a partner at Clyde & Company.”
The developer now has to work with the approved bank, RERA and the DLD to develop a cash flow system, so it’s clear how the development is running and what the money is being spent on. The bank will also have to approve the money being paid to contractors, and when.
It’s really about cracking down on those developers who take the money but then don’t do the work.”
Strata law – legal principles that lay out rules in freehold condominium and apartment developments – took effect in April in Dubai. However, the law is currently under revision and changes may be made.
The law also places the management of a development’s common areas – such as lifts, pools, gyms and parks – in the hands of the home owners, who will be entitled to set up a home owners association.
A spokesman for the RERA, who wished not to be named, said the authority was close to finalising the revisions of the law.
Walid Abdel Latif, the director of sales and marketing at Define Properties, which recently launched in Dubai with a planned portfolio of properties worth Dh8 billion (US$2.1bn), said the fresh regulations would weed out the poor quality developers in the market. “It’s a very healthy move,” he said.
“Through this, we will be able to provide the right services to buyers, will know how much those services will be and how good the actual quality of the building will be. Although we’re a new company, it’s good for us to start from scratch – so we’re building the right way from the start.”
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