The Dubai Real Estate Court’s UniqueRuling

The Dubai Real Estate Court recently issued a unique judgment, establishing the developer’s right to combine the stipulated compensation stated under the contract, along with loss of profits due to a decrease in the price stemming from the volatility of the real estate market.

The Judgment

The court decided that the purchaser is obliged to compensate the developer an amount of AED 8,300,000 for the following reasons:

  1. The dismissal of the purchaser’s initial lawsuit in which annulment was sought.
  2. The purchaser was compelled to pay a delay penalty of AED 498,000 to the developer for refusing to take possession of the unit.
  3. The purchaser was compelled to pay a delay penalty of AED 224,000 to the developer.
  4. The purchaser was compelled to pay AED 848,000, representing the difference between the amount remitted by the purchaser and the legally prescribed 40% to be retained for non-possession of the sold unit.
  5. The purchaser was compelled to pay an amount of AED 6,721,000 as a consequence of selling the units at substantially lower prices than those agreed upon in the contracts. Such a difference is due to the plaintiff’s failure to fulfill their contractual obligations by not paying the sale price.
  6. The purchaser is also liable for a 5% statutory interest, in addition to fees, expenses, and attorney’s fees.

Ruling Summary

The court summarized the ruling as follows:

  1. The plaintiff (the purchaser) breached his obligations by ceasing to pay the required installments for the sale, and the defendant (the developer) did not default on his obligations. The court further ruled that the plaintiff’s claims, through which he attempted to substantiate it for claiming the termination of the agreement and the return of AED 8,400,000 were all deemed to be legally unfounded.
  2. The court affirmed that the defendant/counter-plaintiff/developer met their obligations within the stipulated dates and duly notified the Land Department about the plaintiff’s breach and payment cessation. The department notified the plaintiff of their obligation, however the plaintiff persisted in failing to fulfill their duties. This prompted the department and the developer to terminate the contract, and the developer, subsequently, sold the property to a new purchaser other than the previous purchaser/the plaintiff.

Expert Commentary

Counsel Tarek Saad (pictured), Head of the Litigation department at BLK Partners (Khalid El Tamimi in collaboration with BLK Partners) , commented on the ruling. He noted that the ruling is unique as it stands among rare such rulings issued by the Dubai Courts, wherein the developer was granted compensation covering all contractual losses and loss of profits, irrespective of the sale of the unit to a new purchaser. In this case, the Dubai Court elected to supersede the application of the law regardless of whether the purchaser may not have the same financial solvency as the developer.

Real estate law in Dubai is governed by the Dubai Land Department (DLD) and the Real Estate Regulatory Authority (RERA). They regulate the activities of real estate developers and brokers. The Strata Law applies to multi-unit developments, and foreign ownership laws limit the rights of foreign individuals and companies to own real estate. A new Real Estate Law, Dubai Decree No. 22/2022, supports the growth of real estate investment funds.