A rising number of property disputes in Abu Dhabi are hinging on an often brief document known as a "reservation agreement", lawyers say. While Dubai has a raft of laws and regulations to govern the property market, Abu Dhabi has only a basic land registration law.
This means disputes in the capital rely on a strict reading of the contract between the two parties. At the peak of the market in 2008, however, full contracts were often not drawn up, leaving the two sides with a short reservation agreement in place before the contract was issued. "A lot of people here have purchased simply on the basis of a one-page reservation agreement," said Glenn O'Brien, a partner in the dispute resolution practice of the law firm Clyde and Company. "And there is certainly a scarcity of quality agreements."
Mr O'Brien said this mixture - terse agreements and a lack of specific laws for the market - meant it was "more uncertain how things will work out in Abu Dhabi than in Dubai". On the one hand, judges have awarded multiple refunds to homebuyers on the basis that the developer did not keep up its end of the contract; whether that required it to issue a full contract as stipulated in the reservation agreement or to proceed with construction. One salient case involved a buyer of 10 units on Reem Island who had paid the full price of Dh10,914,800 (US$2,971,710) but sued for cancellation of his purchases on the basis that the seller did not send his sale and purchase contract "on time".
The Court of Appeal reversed a decision to throw out the claims made by the Court of First Instance and allowed the appeal to go forward. The judge ruled that a full refund should be awarded to the claimant because the property had not been properly registered, as required by Law No 3 of 2005. He was awarded the Dh10,914,800, as well as 5 per cent interest and Dh150,000 in "material and moral damages". But at the Court of Cassation, the highest in the country, a judge ruled that a property investment in an investment zone, such as Reem Island and Al Raha Beach, did not require registration to be a binding legal agreement.
"That changed the landscape a bit," Mr O'Brien said. "It's more in the developer's favour than in the past." In addition, where developers have not set out construction milestones - a type of schedule of progress that they will make on a building - the courts have been deciding that any agreement itself implies that the developer will proceed with building in an orderly way. "This potentially means that the strength of a developer's claim or defence is now potentially affected by its progress with the development in general and what it is able to display to the court as its level of genuine commitment to the transaction," said Akram el Huda, a senior associate in the Abu Dhabi office of Hadef and Partners.
Whatever legal documents the two sides entered will be examined in great detail. Afterwards, the application of the lawrequires a degree of creativity, lawyers say. "There is a gap between how to apply laws, especially property laws, because there are no specific laws to refer to in terms of freehold property," said Mohammed Hassan al Marzouqi, a lawyer at Al Tamimi and Company. Mr al Marzouqi said the current legal challenges of the Abu Dhabi courts can find their origin in the rapid rise of the property market in 2008.
"The market situation at that time was very tempting," he said. "The profit margins you could make in a short period of time were unbelievable. It was madness." His recommendation for today's potential property buyers echoes that of other legal professionals: "It is always advisable to seek advice from a lawyer ? before you sign a contract". bhope@thenational.ae
