Homefront: ‘Can I cancel my property sales contract and get a refund if there is a construction delay?’

All developers have a legal cushion of 12 months’ delay for completion

Investors stand a chance of getting their money back only when the Dubai Land Department or Real Estate Regulatory Agency cancels a project. Photo: Bloomberg
Investors stand a chance of getting their money back only when the Dubai Land Department or Real Estate Regulatory Agency cancels a project. Photo: Bloomberg

I want to cancel the property purchase contract I signed with a developer for two reasons. Firstly, construction has stopped on the tower in which I purchased my unit.

Secondly, the construction progress of my unit was supposed to be at 20 per cent (as per contract) by December. However, in February 2021, it only stands at 9 per cent.

How can I cancel the contract and get my money back, even though the developer is refusing to do this? AB, Dubai

The first thing you should do is carefully read through your sale and purchase agreement. This document will outline how you can cancel your contract, if possible. Maybe it is not possible to cancel at this early stage, which is why the developer refused to do so.

All developers have a legal cushion of 12 months’ delay for completion, which allows for certain unforeseen circumstances in the timeframe for construction.

Having said this, you are referring to construction milestones and often developers’ sale and purchase agreements will state what is owed in stage payments based on these milestones. Therefore, if the build is delayed, often the owed payment will also be delayed.

Obviously, Covid-19 has placed many constraints on all of us and developers have also not been immune to these issues. These constraints have translated into delays as to where your property should be in terms of construction to date. For this reason, I believe you need to be more flexible in your approach to the developer.

Each project is dealt with on a case-by-case basis but only when the Dubai Land Department or Real Estate Regulatory Agency has cancelled a project will you stand a chance of getting your money back. The project you refer to has not been cancelled.

You need to gain more information and allow much more flexibility towards the developer in terms of timeframes before deciding what to do next.

I purchased a property four years ago. Prior to purchase, I was told by other property owners that I need to pay municipal tax only if I am renting a unit. I was told that if I owned the property, I will not be charged this fee, which reflects in the monthly utility bills.

Is this true? If I am being wrongly charged this tax, which agency should I complain to about the issue? WA, Dubai

Whether you rent or own a property and subsequently pay the utility bill for that unit, you will still be liable to pay the municipality charges.

These charges are calculated based on 5 per cent of what the property would rent for, in accordance to the Rera rental calculator. In addition to the monthly housing fee, sewage charges are also added.

I believe the confusion about the rental situation could be due to how they calculate the fee in the first place, as in using the potential annual rental figure.

In terms of who to raise this issue with, I would suggest you speak directly with the Dubai Water and Electricity Authority.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for more than 35 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com

Published: March 25, 2021 08:00 AM

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