Breach of Contract in Dubai Real Estate

A breach of contract in Dubai real estate refers to the violation of an agreement that occurs when one party fails to meet the partial or total obligations outlined in the contract. The UAE government has issued and implemented laws and regulations to address issues related to the breach of contract, providing non-breaching parties the right to take legal actions to mitigate their losses.

Legal Relationship Between Developers and Buyers

The contractual purchase agreement between a buyer and developer forms the central legal relationship in any Dubai property acquisition or off-plan investment. Crafting detailed contracts outlining rights and obligations helps mitigate contract disputes down the line. UAE property law, specifically key regulations like Law No. 8 of 2007 and Law No. 13 of 2008, govern the sale of real estate units between both parties. Call us now for an appointment at +971506531334 +971558018669

Developer Obligations in Dubai

Under Dubai property legislation, licensed developers hold several key responsibilities:

  • Constructing real estate units according to designated plans and permits
  • Transferring legal ownership to the buyer as per the mutually agreed contract
  • Compensating buyers in case of delays or failure to complete the project

Meanwhile, off-plan buyers agree to make payments in installments tied to project construction milestones and formally assume ownership only after completion. This sequence of events relies heavily on both parties upholding their respective contractual commitments.

Buyer Rights in Dubai

In alignment with consumer protection initiatives across Dubai, real estate regulations also enshrine certain rights for property buyers:

  • Clear legal ownership of purchased asset after completing payments
  • The buyer is required to make on-time payments until the property is handed over according to the agreed timeline
  • Refunds and compensation in case of breach of contract by the developer

Understanding these codified rights is key for buyers assessing legal action around contractual violations.

Reasons of Contract Breaches by Dubai Developers

Common reasons for contract breaches by Dubai developers include:

  1. Delayed handover of property beyond the agreed completion date.
  2. Providing a smaller unit size than what was contractually agreed upon.
  3. Failing to deliver promised facilities and amenities.
  4. Fundamentally changing the specifications of the real estate unit agreed upon in the contract.
  5. Suspending construction work on the project for more than six months without justification.
  6. Not registering the real estate unit with the Dubai Land Department as required.
  7. Failing to link payments to the construction stages of completion.
  8. Not delivering the final sale contract for the real estate unit to the buyer.
  9. Misrepresentation or fraud, such as intentionally misrepresenting property details or conditions.
  10. Construction defects that were known but not disclosed to the buyer.
  11. Negligence in performing duties, such as real estate agents failing to act in the best interests of their clients or not disclosing important information.
  12. Unilateral termination of contracts without meeting the specified conditions for doing so.

What are the penalties for developers who Breach Contracts in Dubai

The consequences for developers who breach contracts in Dubai include:

  1. Legal liability: Developers can be held liable for breaching contracts with buyers, such as providing smaller unit sizes than agreed upon or failing to deliver promised facilities and amenities.
  2. Compensation claims: Buyers may sue developers for compensation, especially in cases of delayed handover. The Sale and Purchase Agreement (SPA) typically includes clauses about completion dates and compensation for breaches.
  3. Dispute resolution: In Dubai, dispute resolution encompasses various methods, including litigation, arbitration, and alternative dispute resolution (ADR) mechanisms. The aim is to provide efficient and effective means for resolving disputes in commercial and property matters.
  4. Payment withholding: Property investors or buyers may be able to withhold due installment payments while a developer is in breach of contractual obligations.
  5. Project cancellation: The Real Estate Regulatory Agency (RERA) monitors construction progress and can initiate procedures to cancel stalled projects if developers fail to meet their obligations.
  6. Contract Termination: In some cases, buyers may have the right to terminate the contract and be relieved of further obligations.
  7. Damages: The injured party (buyer) may seek monetary compensation for losses suffered due to the breach.
  8. Specific performance: Courts can order the breaching developer to fulfill their contractual obligations as originally agreed upon.
  9. Liquidated damages: If the contract includes a clause specifying predetermined damages in case of a breach, the injured party can claim those damages.
  10. Legal proceedings: Buyers may initiate legal proceedings by filing a lawsuit in the relevant UAE court against developers who breach contracts.

The Real Estate Regulatory Agency (RERA) monitors construction progress and can initiate procedures to cancel stalled projects.

It’s important to note that the specific consequences can vary based on the nature of the breach, the terms of the contract, and the applicable laws and regulations in Dubai. Call us now for an appointment at +971506531334 +971558018669

How Dubai’s Real Estate Market Handle Buyer’s Breach?

Dubai’s real estate market has implemented specific regulations to handle cases where buyers breach their contracts, particularly for off-plan properties. Here are the key points on how Dubai handles buyer breaches:

  1. Notification Process: When a buyer breaches the sales contract, the developer must notify the Dubai Land Department. The Land Department then provides a 30-day notice to the buyer in writing.
  2. Completion Percentage-Based Penalties: The penalties for breach depend on the completion percentage of the off-plan project:For projects over 80% complete: The developer can retain up to 40% of the purchase contract’s value.
  3. Refund Timeline: The developer must return the remaining amount to the buyer within a year of contract cancellation or within 60 days of reselling the property, whichever is earlier.
  4. Project Cancellation: If the off-plan project is cancelled by the Real Estate Regulatory Agency, the developer must refund all payments made by the buyer.
  5. Land Sale Contracts: These procedures do not apply to land sale contracts, which remain subject to the provisions in the purchase contract.
  6. Auction Option: For projects over 80% complete, the developer can request the Land Department to auction the property to collect the remaining amount, with the buyer responsible for auction expenses.

These regulations aim to protect both developers and buyers in Dubai’s real estate market, providing clear guidelines for handling contract breaches and ensuring fair treatment for all parties involved.

As specialized property lawyers with over a decade of experience in real estate litigation in the UAE, we will guide you through the process of gathering and presenting evidence to support your claim. We handle all communications with the other party and represent you in any necessary legal proceedings and litigation. Contact a trusted property dispute lawyer to protect your rights at +971506531334 +971558018669

We will negotiate with the developer on your behalf to seek a resolution, whether that means pushing for the completion of the project or securing a refund. We ensure the developer’s compliance with UAE real estate regulations. Our deep understanding of UAE real estate law allows us to advocate effectively on your behalf, protecting your investment and bringing you peace of mind.

We assist you in conducting due diligence on the property and the seller, ensuring all transactions are transparent and legally sound. We also help draft and review all necessary documents, from the purchase agreement to any financing arrangements.

Seeking guidance from an experienced property dispute lawyer as soon as issues arise can prevent them from escalating into serious conflicts.

Call us now for an appointment at +971506531334 +971558018669

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