How to resolve real estate disputes in Dubai?
Posted: Mar 18, 2020
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:
- Dubai Land Department- Amicable Settlement Centre (DLD-ASC): the DLD-ASC mediators or settlement committee is a proficient authority in amicably settling the disputes between the parties without any costs. The authority has access to all the database pertaining to the property registered with DLD, thus, hold large experience in resolving such disputes. Any decision passed by ASC will be binding and enforceable on the parties, as it is mutually agreed by way of settlement.
- Legal Affairs Department of DLD: recent development in the real estate laws allows the developer to terminate the sale purchase agreement of the defaulting purchaser under Dubai Law Number 19 of 2017, upon satisfying a certain procedure. The process of termination will be undertaken through DLD legal online system post submitting the fees of AED 3,000 (UAE Dirhams three thousand). DLD legal system also has the authority to mediate between the parties for an amicable settlement. Buyers aggrieved from DLD's decision for termination of Sale Purchase Agreement can file claims before the civil courts.
- Cancelled project committees for liquidation: Pursuant to Royal Decree Number 21 of 2013, the Cancelled Project Committee (CPC) is authorized to liquidate the cancelled projects in Dubai, wherein Real Estate Regulatory Agency (RERA) of Dubai holds the executive rights to cease the ongoing real estate projects. CPC has the exclusive jurisdiction on any dispute pertaining to a dispute arising out of cancelled projects.
- Judicial Committee for returned cheques: Due to a large number of bounced cheques submitted by the buyers, the Dubai government under Decree Number 56 of 2009 established a committee to pass decision over bounced cheques submitted by the investor, reschedule the payment scheme, forward the bounced cheques case to the competent court.
- Rental Dispute Settlement Committee: Dubai has established an exclusive authority for resolving rental disputes relating to the lease of property under Decree Number 26 of 2013, Rental Dispute Settlement Committee (RDSC). RSDC can only entertain lease below ten years, property located within mainland or free zone who does not have their regulating authority. The decisions issued by RDSC can be appealed before the RDSC appeal committee.
- Arbitration before Dubai International Arbitration Centre (DIAC): A property dispute can be referred to DIAC only post mutual consent through the agreement. However, there are several properties which cannot be arbitrated due to public policy.
- Civil Court- Property Division: The property courts of Dubai has jurisdiction over all the property disputes, which should be initially referred to Court of First Instance followed by Court of Appeal and Cassation.
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):
- Commercial or civil claim to which DIFC company is a party;
- Any claim arising out of any contract to be performed wholly or partially in DIFC;
- Any claim and actions arising out of any transaction which was performed in DIFC or any part thereof;
- Appeals against the laws frame by DIFC bodies;
- The claim which provides exclusive jurisdiction to DIFC Court under DIFC rules.
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:
- Appeal against the judgment of Real Estate Court: either party aggrieved from the decision of Court of First Instance can file an appeal before the Court of Appeal within thirty (30) days from the date of receiving the judgment, upon the payment of relevant court fees.
- Appeal/objection against Arbitral Award: According to Federal Law Number 6 of 2018 concerning the Arbitration Law, the arbitral award shall be binding on the parties and will hold the competent court shall pass res judicata and a decision confirming the award. Yet, the law further allows party to challenge the arbitral award under Article 53 of the Arbitration Law under several circumstances including but not limited to, absence of specific arbitration agreement, incompetency of either party at the time of concluding arbitration agreement, failure to appoint arbitrators in accordance with the procedures, award containing subject matter beyond the scope of tribunal.
- Appeal against the decision of Rental Dispute Committee: the judgments issued by the first instance of the rental committee can be appealed before Appellate Division except for claims less than the value of AED 100,000. There is a further exception on the foregoing clause, where the appeal can be filed in cases less than value AED 100,000 in any of the following cases:
- If an eviction order is passed;
- Judgment is against the rules of jurisdiction;
- If the judgment fails to address the relief sought by parties;
- Judgment issued against a third party;
- is based on forged or false documents;
- The objection against the order of DLD Legal Affairs Department: the buyers aggrieved from the decision of DLD for termination of the sale and purchase agreement can raise an objection before the Civil Court in accordance with Law Number 9 of 2009.
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:
- Insolvency with restructuring, where the court or relevant authority appoints a financial expert who restructures the finances of the company;
- A protective composition which available for companies facing financial issues, but not yet insolvent;
- Liquidation which is considered post exhausting the aforementioned options; In any of the above cases, the investors must submit all the relevant documents pertaining to the property such as sale and purchase agreement, payment receipts to either the liquidator or the auditor as the case may be in order to seek the relevant claim.
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:
- Original award or a certified copy;
- Copy of the arbitration agreement;
- Legally translated and duly attested and notarized arbitral award, in case of a foreign award;
- Copy of minutes of deposit of the award.
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.
Dr. Hassan Elhais is a legal consultant in Dubai, specializing in the drafting of all statements of claim, memos and consultation on litigation of all manner.