Introduction:
Whether you’re a seasoned property investor or a first-time buyer, understanding the nuances of real estate agreements & the possibilities of termination is your key to mastering this ever-evolving market
This blog aims to shed light on the various scenarios in which a real estate agreement can be terminated in Dubai, UAE, and the legal intricacies involved.
Termination in the UAE:
In the United Arab Emirates (UAE), real estate agreements, known as Sale and Purchase Agreements (SPAs), are legally binding contracts. Terminating these agreements typically requires a valid reason, as outlined in UAE law. Let’s explore some scenarios in which termination is possible.
1. Non-performance of Contractual Obligations:
One of the primary grounds for termination is non-performance of contractual obligations. If either party fails to fulfill their duties under the SPA, the other party may have the right to terminate the agreement. This could include delays in possession or transfer of title, failure to make payments, misrepresentation, fraud, or other contractual breaches.
2. Force Majeure:
Dubai’s legal framework acknowledges force majeure as a valid reason for termination. Force majeure refers to unforeseen and uncontrollable circumstances that make it impossible to fulfill the contract. However, specific conditions must be met for this ground to apply.
3. Mutual Agreement:
Parties involved in a real estate agreement can also choose to terminate it through mutual agreement. This process, known as Iqala, allows both parties to consent to ending the contract, returning them to their pre-contractual state.
Termination by the Developer:
Developers in Dubai possess certain rights to terminate off-plan sale agreements under Law No. (19) of 2017. The percentage of completion of the real property project plays a pivotal role in determining the developer’s rights.
1. Completion Over 80%:
If the project is more than 80% complete, developers have options. They can choose to maintain the contract and demand the buyer to pay the balance, request the Dubai Land Department to sell the property by public auction, or end the contract and refund the buyer with specific deductions.
2. Completion Between 60% and 80%:
In this scenario, developers can terminate the contract but with reduced deductions. They can retain up to 40% of the property’s value as stated in the contract.
3. Completion Under 60%:
For projects less than 60% complete, developers can retain up to 25% of the property’s value as stated in the contract.
Termination by the Buyer:
Buyers in Dubai can also terminate real estate agreements under specific circumstances.
1. Delays in Possession:
Buyers may terminate SPAs if the developer fails to deliver the property within the contractually agreed period, typically after the Anticipated Completion Date (ACD), which can be extended up to twelve months.
2. Force Majeure:
In cases of force majeure, where external and unforeseen events make contract fulfillment impossible, buyers have the right to request a refund of the amounts paid.
Transferring a Real Estate Agreement:
If you wish to transfer your real estate agreement to a new buyer, it’s essential to understand that you cannot compel the developer to do so. However, you can explore the following steps:
1. Amicable Resolution:
Initiate a conversation with the developer to discuss the possibility of them accepting a new buyer. In some cases, developers may provide a non-objection letter.
2. Non-Objection Letter:
Obtaining a non-objection letter from the developer is crucial for the Dubai Land Department to approve the transfer of ownership to a new buyer.
3. Legal Assistance:
Navigating the complexities of property transfers may require legal expertise from lawyers in Dubai. Seek legal advice to ensure a smooth transaction in Dubai
Conclusion
The possibility of terminating a Real Estate Agreement in Dubai depends on several factors, including the grounds for termination, the percentage of project completion, and adherence to legal procedures. It’s imperative to understand your rights and obligations and, when necessary, seek legal counsel in Dubai for compliance.