Consequences of the buyer’s failure to make payments for off-plan properties
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A property sold by a developer before construction must be registered with the Dubai Land Department’s Interim Real Estate Registry.
Ask: I am thinking of buying a property in Dubai that is still under construction and will pay the developer over time according to their plan. But what happens if I don’t make payments to the developer because I don’t get a bank loan?
Answer: According to Dubai laws, specifically Law No. 13 of 2008 and Law No. 19 of 2017, which regulate property registration, the rules apply in such cases.
In Dubai, when a developer sells an off-plan property, it must be registered with the Interim Real Estate Registry of the Dubai Land Department (DLD). This is described in Article 3(1) of Dubai Law No. 13 of 2008 on Provisional Property Registration.
Furthermore, properties sold off-plan and registered in the provisional real estate register by the DLD can be sold, mortgaged or managed in any other legal way. This is stated in Article 6 of Dubai Law No. 13 of 2008 on Provisional Property Registration.
If a buyer fails to pay the purchase price to a developer (seller), it may be considered to be in breach of the terms of the Sale and Purchase Agreement (SPA) signed between them.
In such a case, the developer (seller) can inform the Dubai Land Department (DLD) about the non-payment. The DLD will then send a 30-day notice to the buyer, giving them time to fulfill their obligations. Before sending this notice, DLD may attempt to resolve the issue between the buyer and the developer (seller) informally.
If a buyer defaults on payment of the purchase price, the developer (seller) has several options depending on Dubai Law No. 19 of 2017 on Provisional Property Registration:
- The developer can keep the amount already paid by the buyer without terminating the Sales and Purchase Agreement (SPA). They can then ask the buyer to pay the remaining balance.
- The property can be sold at auction through the Dubai Land Department (DLD). If the property sells for more than the outstanding amount, the excess money is refunded to the buyer.
- The developer can unilaterally terminate the SPA and keep a certain percentage of the purchase price depending on the completion status of the property. The remaining balance is refunded to the buyer within a specified time frame.
These actions may give rise to legal proceedings (enforcement proceedings) initiated by the developer against the buyer for non-payment of the purchase price.
News Source: Khaleej Times
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