The JOP Law also explains that the developer remains liable for 1 year from the date of the development’s completion certificate to repair or replace defective installations in the development, including mechanical and electrical works and sanitary and plumbing installations.
If there is conflict between a unit owner’s purchase contract with the developer and the JOP Law, (for example if the contract tried to shorten either of the time-periods mentioned in the two above paragraphs), the JOP Law would supersede the contract on this issue.
Article 544 of the Federal Civil Code, in dealing with the concept of latent defects, states it is “permissible for a person to contract in his own name imposing a condition that rights are to enure to the benefit of a third party if he has a personal interest, whether material or moral, in the performance thereof.”
As such, depending on the wording of the construction contract between the developer and the contractor, the Owners Association and the unit owners may be able to argue they are entitled to take direct action against the contractor who built the development for breaches of the contractor's obligations under the construction contract.
Under the Federal Civil Code, the developer has a claim against the contractor and the supervising architect for ten years from the date of delivery of the work if either (a) the building suffers total or partial collapse or (b) there is a defect that threatens the stability or safety of the building. The contractor/supervising architect cannot contract out of this liability.
The developer 's remedy is compensation – and crucially the obligation to compensate applies even if (a) the building collapse/defect arises from a defect in the land or (b) the developer consented to the construction of the defective building. This strict liability may be important in years to come.
INVESTOR PROTECTION
One legacy of the global crisis is that most investors are limiting their sights on completed projects (with many also seeking to take advantage of so called distressed sales of units bought at the top of the market in 2008, and whose buyers are now unable to make the final few installment payments).
At present, many commentators view the regulation of off-plan property sales in Dubai as being too developer-friendly. The Dubai Government has published a draft Investor Protection Law (the “Investor Law”), which could see a strengthening of the investor's position, which may lead to a boost in the off-plan property market.
Amongst other protections, the Investor Law would see sellers of off-plan property obliged to provide various warranties to purchasers including that the seller (a) has good title to the property and full power to transfer it to the purchaser and (b) will at its own expense enter into such documents and take such actions has may be necessary to give good title in the property to the purchaser.
Perhaps more importantly, the Investor Law would introduce the right for the purchaser of off-plan property to terminate the contract and to recover all amounts paid if the developer fails to complete the unit or handover possession within a specific period of the date set in the contract of sale as the estimated handover date, regardless of whether the contract for sale includes a provision allowing the developer to delay handover in any circumstances.
The introduction of the Investor Law would be a shift in power towards investors in Dubai 's real estate market. Investment in off-plan property could become more attractive, and this could lead to price increases across the board.
About the author:
Shahram Safai is a Partner and Head of the Real Estate department at the law firm of Afridi & Angell.
ssafai@afridi-angell.com
Afridi & Angell
Emirates Towers – Level 35
Sheikh Zayed Road
Dubai, United Arab Emirates
Tel: +971-4-330-3900
Fax: +971-4-330-3800
www.afridi-angell.com
