Khaleej Times, Sun, Mar 31, 2024 | Ramadan 21, 1445
Dubai: What happens if a buyer defaults on payments after buying off-plan property?
Emirates:
Question: I am considering buying an off-plan property in Dubai on a
payment plan proposed by the developer. Since I am not taking out a bank loan,
what happens if I default on the payments to the developer?
Answer: Pursuant to your queries, the provisions of Law No. 13 of 2008
Regulating the Interim Real Property Register in the Emirate of Dubai and Law
No.19 of 2017 Amending Law No. 13 of 2008 Regulating the Interim Real Property
Register in the Emirate of Dubai are applicable.
In Dubai, an off-plan property sold by a developer (seller) needs to be
registered in the Interim Real Property Register with the Dubai Land Department
(DLD). This is in accordance with Article 3(1) of the Dubai Law No. 13 of 2008
on the Interim Property Register.
Furthermore, units of property sold off plan which is registered in the interim
real property register maintained by DLD may be disposed of by way of sale,
mortgage, or any other legal disposition. This is in accordance with Article 6
of the Dubai Law No. 13 of 2008 on the Interim Property Register.
In the event of non-payment of the purchase price by a purchaser to a developer
(seller) may be considered a breach of terms of conditions of the Sale Purchase
Agreement (SPA) signed between a purchaser and a developer (seller).
In such a scenario, a developer (seller) may notify the DLD related to
non-payment of purchase price by a purchaser. The DLD on the complaint of the
developer (seller) will serve a 30-day notice to a purchaser to fulfil his/her
obligations and prior to serving the 30-day notice, the DLD may attempt to
amicably resolve the dispute between a purchaser and a developer (seller). If a
purchaser does not fulfil the obligations related to payment of the purchase
price, then DLD shall issue a document in favour of a developer (seller)
confirming the percentage of completion of the off-plan property sold to a
purchaser. Thereafter, based on the percentage of completion of the off-plan
property the developer (seller) may initiate relevant legal actions against the
purchaser without approaching the courts or arbitration authority which has
jurisdiction in the emirate of Dubai.
The actions which may be initiated by a developer (seller) in case of default by
a purchaser on grounds of non-payment of the purchase price may include (1)
retaining the amount paid by a purchaser by not terminating the SPA and claiming
from a purchaser to pay the balance amount of purchase price, (2) sale of
property by auction through DLD, refund of excess money to the purchaser (if
any) upon sale of the auction within the stipulated time, (3) unilaterally
terminate the SPA and retain a certain percentage of the purchase price based on
a percentage of completion of the off-plan property and refund the balance
amount to a purchaser within stipulated time as mentioned in Article 11 of Dubai
Law No. 19 of 2017 on Interim Property Register.
Therefore, based on the aforementioned provisions of law and procedures laid
down by DLD, your developer (seller) may initiate legal actions (execution
proceedings) against you for non-payment of purchase price.