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April 24, 2019
The concerned article is a pathway to understanding the various aspects of dispute resolution in real estate matters in Dubai.
1. What are the main dispute resolution authorities established in Dubai to resolve real estate disputes?
UAE offers a wide range of dispute resolution methods and relevant authorities governing real estate sector wherein the litigation courts seem like a last resort for the parties, considering the timeline and costs involved. Following are prominent authorities licensed to act upon real estate dispute:
2. What is the status quo of arbitration in real estate disputes in Dubai?
If the sale and purchase agreement signed the parties refer to a dispute resolution clause through arbitration, the parties must resolve the matter through arbitration by offering their consent in writing. Either party in such case has the right to challenge the jurisdiction of the arbitration centre before the competent court, or the other party can equally contest on the basis of mutual agreement for dispute resolution. The process of arbitration is fairly less time to consume than potential litigation in real estate matters. However, there are certain cases under which the real estate matter cannot be referred to the arbitration centre, such as in matters where the property in dispute is public property. In such circumstances, courts continue to have the jurisdiction in the matter, even if there is an arbitration agreement between the parties. This empowers to court to safeguard the interest of investors in cases where arbitration fails to resolve their problems or in cases where other party does not comply with the arbitration clause.
3. What is the legal status of the dispute resolution clause in a Sale and Purchase Agreement and other documents before the relevant court or independent authority?
The dispute resolution clause in the sale and purchase agreement (SPA) will be treated similarly as that of other commercial contracts. If the dispute resolution clause allows for arbitration, the matter shall be referred to arbitration, unless the property in question cannot be arbitrated or otherwise specified by the court under any decree or if the matter has been referred to the Canceled Project Committee. Whereas, if the SPA authorizes the parties to present the matter before the court, the parties can opt for any of the aforementioned dispute resolution authorities, prior to submitting their claim before the court, subject to the clause that they fulfil the prerequisites of such committees.
4. What is the limitation period for submitting a claim before the relevant authority?
Federal Law Number 5 of 1985 on the Civil Transactions Law (the Civil Code) provides in several clauses the time-limit in which the aggrieved party can file a civil claim. However, it does not specifically highlight the limitation period for real estate sector, yet it can be witnessed through Article 473 of the Civil Code which states the limitation period for any contractual claim is 15 years from the date on which the dispute arose, or the claim arises. Whereas, the Civil Code obliges to file an appeal before the Appeal court within thirty (30) days from the date of judgment from Court of First Instance and sixty (60) days to file appeal before Court of Cassation from the date of judgment of Appeal Court. Similarly, Article 880 of the Civil Code sets out the time limit for architectural default in building contracts which are ten years from the date of knowledge of default.
Further, the Legal Affairs of Dubai Land Department does not specify the time limit for filing the complaint about the termination of the SPA. However, it can begin anytime post signing the contract, should the buyer fail to adhere to his contractual obligations such as fulfilling the payment schedule. In this regards, post submitting the complaint the authority provides a thirty (30) day time period for the buyer to remedy the breach. It further allows the developer who has completed 80% of the construction to submit the complaint about the termination of the agreement, should the buyer fail consistently to meet with the payment schedule.
5. What is the structure of the court where large real estate disputes are referred? Are there certain divisions of the court to resolve a particular dispute?
In accordance with Article 32 of the Civil Procedure Law, with regards to the actions in rem relation to property/real estate, if the parties are located within the jurisdiction of several courts, the jurisdiction will be with the court in whose jurisdiction the property or any part of the property lies. Unlike Dubai International Financial Centre (DIFC) free zone, other free zones in the Emirates does not have specific jurisdiction. Thus, the matters have to be referred before Dubai Courts.
Further, Dubai court has specifically established a Real Estate Court who holds the exclusive jurisdiction over real estate matters which is an extended arm of Court of First Instance. The matters referred before the said court can be of any amount, and the party is filing the case must submit court fees with a maximum of AED 40,000 (UAE Dirhams forty thousand).
Unlike the above, DIFC has their courts and DIFC Law Number 9 of 2004 highlights the roles and responsibilities of DIFC Courts. As opposed to earlier, the Dubai Law number 16 of 2011 permitted the contracting parties to agree to DIFC Court jurisdiction even when there is no connection to DIFC courts.
In such cases, DIFC holds exclusive jurisdiction in relation to civil and commercial cases falling within the following gateway, under Article 5A (1):
6. What are the interim remedies available to the parties? The Civil Procedure Law does not offer a concept of interim reliefs or injunction to parties in a civil claim, except for attachment of the property, if the claimant proves that the defendant will default in submitting the claim amount.
On the contrary, the Federal Law Number 6 of 2018 concerning the Federal Arbitration Law empowers the arbitral tribunal under Article 21 and 18 to issue interim relief or conservatory measures either at the request of the party or suo moto. These interim reliefs will be granted in cases to preserve the evidence; maintain the assets from which the award will be satisfied; prevent the parties from taking any action which can cause imminent harm to the arbitration process. Further, according to Dubai Decree number 26 of 2013 authorises the Rental Dispute Committee to entertain all the interim and urgent reliefs filed by either party. However, the law does not provide a description for the type of interim reliefs.
7. What are the possible procedures for filing an appeal?
The procedure for filing an appeal or raising an objection against the judgment passed by any authority is different for each organization detailed as follows:
8. What remedies are available for the developer and investor, if a real estate project is cancelled by the government?
Dubai Real Estate Regulatory Agency (RERA) an extended arm of Dubai Land Department holds the authorization to cancel real estate projects in Dubai under Decree number 6 of 2010. Upon the cancellation of such project, the developer has seven (7) days from the date of notification to file an objection in writing against the decision of RERA. Upon receiving the objection from the developer, RERA has to issue its decision within seven (7) days from the date of submission. Subsequently, RERA is obliged to issue a technical report highlighting the reasons for cancellation. RERA must on the expense of the developer appoint an auditor for analyzing the financial position of the project, investment received by the developer or credited in an escrow account, assessing the payments made by the developer.
Whereas, according to the concerned decree, the investors will be refunded the amount deposited in the escrow account within fourteen (14) days. In any event, if the amount deposited in the escrow account is insufficient to pay off the investors, the RERA will oblige the developer to pay off from personal funds. Should the developer fail to refund the amount to investors, RERA may take any decision against the developer. In the current circumstances, the investor upon receiving information for the cancelation of the project shall submit the relevant documents to the auditor appointed by RERA to seek the claim.
9. What remedies are available to investors if the developer or the owner of the real estate project files for bankruptcy before the competent court?
Federal Law Decree Number 9 of 2016 concerning Bankruptcy in UAE, governs the process for insolvency filed by the companies partly or wholly owned by the government, private institutions or companies within the free zone, except financial free zones.
Alike any other company filing for bankruptcy, the Developer of a real estate project can also submit an application claiming bankrupt. The concerned law offers several paths to the company facing financial difficulties such as:
10. What is the procedure for enforcing local arbitral or other awards in real estate disputes in Dubai?>
Pursuant to Article 55 of the Federal Law Number 6 of 2018, a party looking for enforcing the arbitral award shall submit the request for its ratification before the Chief Justice of Civil Court along with following documents:
Upon receiving the aforementioned documents, the competent court shall provide its confirmation on the award and shall order for its enforcement within sixty (60) days from the date of the request, unless the court has specific reasons to set aside the award under the Law.
The awards or orders passed by other relevant authorities highlighted in Question 1 will be binding and does not require ratification as they are an outcome of agreement between the parties, except for the judgment passed by the Real Estate/ Property Court which must be submitted before the Execution Court post thirty (30) days from the date of judgment.