Courting closure on disputes

Feature About 60 people visited the Dubai Land Department on a recent morning to ask about the progress of their property disputes.

Property disputes are being dealt with by the Dubai Land Department.

Michel Nassour should be preparing to take possession of his two luxury apartments in The Dubai Lagoon, a residential project by Schon Properties just off Sheikh Zayed Road. Instead, he is at the busy office of the Dubai Land Department on this particular morning, trying to find out why his contract has been cancelled. Mr Nassour's home should have been completed at the end of this year but construction has not even started, nor is it likely to any time soon. He paid more than Dh350,000 in 2006 towards two properties at the long-delayed project, and now he is worried he may never see any return on his investment. "They just cancelled my contract and I won't get my money back," he says. Mr Nassour has turned to the Land Department for clarification and to find out what his rights are, but the experience has left a bitter aftertaste. "That's enough," he says. "They need to make the issues they have clear to the investors. I can't invest without having a clear view of what's happening." Mr Nassour is not alone at the Land Department. About 60 other investors in the delayed Palm Jebel Ali, the second of three vast artificial islands by Nakheel, took the morning off work to request that the department push the developer into resuming construction of their homes, in addition to others aready queueing at the department. They are quickly ushered from the foyer into a meeting room by an official. "He took our points down, but I don't know what is going to come out of it," says Aarti Chana, who bought a villa at Palm Jebel Ali. "I hope they recognise the plight of the investors. We have faith in them and hope they take action. It will be sad if they don't." Some of them have invested more than Dh15 million in the project, and prices have fallen by about 45 per cent from their peak in the third quarter of last year. They are unhappy with Nakheel's recent offer to transfer their investments to inland projects closer to completion and want to know how the emirate's property regulator can help them. Nakheel was unavailable for comment. Everyone there has a story to tell about a regretted property investment, most of them exacerbated by long delays in the construction of homes that remain little more than plans on undeveloped sites. Similar scenes are occurring on most mornings at the Deira offices of the property regulator, although fewer people come these days than they did a year ago at the peak of the property downturn, says Mohammed Sultan Thani, the assistant director general of the Dubai Land Department. Most of the complaints involve transactions dating back to 2006 or earlier, when speculators dominated the market, the legal framework was weak and little attention was paid to the finer details of a purchase agreement. In the case of the Palm Jebel Ali investors, Mr Thani says the group is now trying to reach an agreement with Nakheel, although he doubts the dispute will be resolved quickly. "It's not an easy matter because they've been negotiating now for a few months and I don't think they'll have a very fast solution," he says. As Dubai World seeks to restructure US$26 billion (Dh95.49bn) of debt, including a bond repayment of $4bn by Nakheel due next week, the people visiting the department have less legal clout than the big banks and hedge funds seeking repayment from the developer and its parent company. Dealing with complaints from property investors is nothing new for the department or the associated Dubai Real Estate Regulatory Authority (RERA), but it intensified when Dubai's property market went into its downturn more than a year ago, causing concern among thousands who had bought off-plan homes. "At that time, people were just trying to run away from their contracts and were complaining that they don't want to pay, and asking the developer to return their money," says Mr Thani. "For many, when they bought, they weren't thinking about living in the apartment. They were just thinking about selling it as soon as possible. They didn't care what was in the contract." Mr Thani says many disputes arise from delays in construction and changes developers have made to the size and design of apartments and villas. But the most prevalent complaint is about contracts that have been cancelled by developers due to non-payment. Property firms must now get approval from the Dubai Land Department to cancel sales contracts, after which the authority sends letters to the defaulting investors telling them they have 30 days to fulfil their contractual obligations or submit their pleadings. In some cases, developers have the right to keep all of the money paid to the point of the buyer defaulting. But if RERA orders the cancellation of a project, investors can claim a full refund. "Our legal team usually sits with the investors, addresses the problems and tries to find a way for the buyer to continue the payments, otherwise the contract will be cancelled according to law," says Mr Thani. "We try to make sure the investor has a better understanding but we cannot force the developer to do anything unless it's against the law." The Land Department will usually encourage the buyer and developer to reach an amicable agreement, and offer assistance, but the power to settle disputes legally rests with the Dubai Property Court, which was set up in September last year, just before the global financial crisis hit the emirate's property sector. Cases were originally handled by RERA, which became swamped with disputes that emerged from the six-year property boom in the short time between its establishment in 2007 and when the Property Court came into being. Until then, investors had to wait up to three years for their cases to be heard by Dubai's Civil Court. The court is now thought to be handling more than 500 cases, says Duane Keighran, the deputy head of real estate for the MENA region at the law firm Simmons and Simmons. He says his firm tries to encourage the settlement of cases out of court as the hearings can still be cumbersome and costly. "I think the court is overwhelmed," Mr Keighran says. "There should be further streamlining of the process." Mr Thani says there are other ways disputes can be settled, such as through arbitration or by using a free service provided by the Property Court that enables buyers and sellers to discuss the problems and hopefully reach an amicable agreement. RERA also announced a service last month offering free legal advice to those in property disputes. "This could save going to the court, otherwise they'd have to pay a huge cost," says Mr Thani. [e-mail]