Category: Law Update

Amidst the ongoing global expansion of the real estate sector, the emirate of Dubai has emerged as a prominent player among the seven most developed emirates in this domain. However, as the real estate market experiences recent developments, certain buyers in Dubai have encountered challenges, including project delays by developers. These circumstances have given rise to concerns among buyers, compelling them to seek legal recourse in order to terminate contracts, obtain compensation for the delays, and recover the funds already paid.

At Al Safar & Partners Law Firm, we prioritize the interests of our clients and ensure that their rights are safeguarded, utilizing our exceptional legal expertise to achieve favorable outcomes. Consequently, we present a concise overview of the diligent efforts invested and the remarkable results attained throughout this pursuit.

Background of the Legal Dispute: 

A contract was entered into between the buyer (our client – M. H. A) and the first defendant (real estate company N.) for the purchase of a hotel unit for a total price of AED 899,500, with payment to be made in installments according to the agreed payment plan in the sales agreement. The delivery date of the contracted unit was also agreed upon. As per the payment plan agreed upon between the parties, our client committed to pay approximately 80% of the unit’s value, amounting to AED 638,123.00. However, the first, second, and third defendants delayed the completion of the project. Furthermore, our client discovered a significant reduction of approximately 69.1% in the agreed-upon unit’s area and a substantial change in the specifications of the unit, as it was converted from a hotel unit to a residential one for all the building’s units. The first defendant refused to amend the agreement prepared by them (the defendants) to change the contract from a hotel unit to a residential one, despite our client’s objection. Additionally, the first defendant demanded the payment of value-added tax without any legal basis, despite the conversion of the unit from a hotel unit to a residential one without our client’s consent. Consequently, our client filed the lawsuit with its claims.

Considering that the seller (the defendants) had breached their obligations under the purchase agreements, failing to complete and deliver the units within the agreed-upon timeframe without any justified or lawful reason, and disregarding the buyer’s demands to fulfill the agreed-upon terms, our client sought legal representation to assert their rights and claim their dues from the seller.

Therefore, we demanded the following:

    1. Termination of the sales contract and compelling the first, second, and third defendants (the defendants) jointly and severally to refund AED 638,123.00 to our client, along with legal interest at a rate of 12% from the date of filing the judicial claim until full payment.

    2. Compelling the first, second, and third defendants (the defendants) jointly and severally to compensate our client with an amount of AED 200,000 for the damages incurred as a result of the defendant’s breach of their contractual obligations.

    3. Restraining the fourth defendant from issuing any decisions or taking any actions regarding the unit subject to the lawsuit until a final and enforceable judgment is issued in the case.

    4. The defendant shall be obliged to submit all the documents and permits related to the project concerning the unit in question, which prove the conversion of the unit from a hotel unit to a residential unit and shall refrain from issuing any licenses related to the project in which the contracted unit is located until a final and binding judgment is issued in the case. Additionally, the first, second, and third defendants shall be held liable for expenses and fees.

As a precautionary measure, an expert shall be appointed in the lawsuit.

First Instance Court Judgment: 

The court, in its first session, decided to appoint a committee of experts in hotel apartment claims from the Court of First Instance. The committee was formed according to the decision issued by the Chairman of the Expert Affairs Committee on [date]. The Court referred the mission stated in the judgment to the committee and instructed them accordingly. Following the court’s decision, the committee commenced its mission and submitted a report of its findings in the next session.

In another session, the Court ordered the continuation of the lawsuit until the expert submits their supplementary report.

In the following session, the court of first instance ruled as follows: 

firstly, it rejected the claim filed by the second defendant due to their lack of standing; secondly, it rejected the claim filed by the third defendant due to the absence of their standing and the lack of acceptance of the claim due to the existence of an arbitration clause; thirdly, it accepted the claim filed by the fourth and fifth defendants and ruled to terminate the real estate unit sales contract, returning the situation to what it was before the contract was made. The Court obliged the first defendant to pay the plaintiff an amount of AED 638,123.00 (Six hundred and thirty-eight thousand, one hundred and twenty-three dirhams) and imposed a legal interest rate of 5% from the date of the judicial claim until full payment. Furthermore, the court ordered the first defendant to pay AED 200,000 (Two hundred thousand dirhams) as compensation and to bear the expenses and fees. The court rejected any other requests.

Reasons for Appeal: 

The first and third defendants (parties in the dispute) were dissatisfied with the court’s decision and filed an Appeal. They submitted a duly paid and insured memorandum to the case management office, requesting that the appeal be accepted both formally and substantively. They requested the annulment of the appealed judgment and a retrial on the grounds that the Dubai courts lacked jurisdiction to hear the case due to the existence of an agreed arbitration clause in Clause 19 of the sales and purchase agreement, which is the subject of the lawsuit. They also argued that the second appellant lacked standing, and they provided reasons justifying their appeal, alleging violations of the law, errors in its application and interpretation, corruption in the reasoning, and deficiencies in the deductions. They also claimed that the defense rights were violated and provided a memorandum explaining the reasons for the appeal.

Furthermore, the plaintiff (our client) was also dissatisfied with the court’s decision and filed a real estate appeal. They submitted a duly paid and insured memorandum to the case management office, requesting that the appeal be accepted both formally and substantively. In the appeal, they sought to prove the standing of the second and third appellants and requested that they jointly and severally pay the amount determined by the appealed judgment, which is AED 638,123.00, along with a legal interest rate of 12% from the date of the judicial claim until full payment. They also requested that the first, second, and third appellants be jointly and severally liable for paying the compensation determined by the appealed judgment, which is AED 200,000, as a result of the damages suffered by our client due to the breach of their contractual obligations. The appeal affirmed the appealed judgment, except for these points, and also requested that the first, second, and third appellants bear the expenses and fees of the two levels of litigation. They provided reasons justifying their appeal, alleging violations of the law, deficiencies in the deductions, and violations of the established facts in the documents.

Court of Appeals Opinion:

In a session held today, the court ruled on the appeal. Regarding the form of the two appeals, they were both filed within the designated time and met the required legal conditions. Therefore, they are accepted in form. As for the appeal by the second appellant, rejecting the claim for being filed by an unauthorized party, the court found that the original judgment was correct in rejecting this filing based on the reasons presented. The Court considers these reasons as complementary to its own Judgment and adds that the commercial licenses of both appellants confirm their participation in the project subject to the lawsuit. Accordingly, the Court affirms the original Judgment in rejecting this filing.

Regarding the claim of non-acceptance of the lawsuit due to the presence of an arbitration clause, it is evident that the sales contract, which forms the basis of the lawsuit, included an arbitration clause between the first appellant and the appellant against whom the claim was filed, but the second appellant was not a party to this clause. Therefore, the arbitration clause does not apply to the second appellant, and the dispute cannot be divided. It should be heard before a single entity, which is the court as the competent authority in any original lawsuit. Since the original judgment concluded by rejecting this claim, and the court affirms this judgment for the aforementioned reasons, the court rules as follows:

• Firstly, the appeals are accepted in form. 
• Secondly, in the first appeal, the appealed judgment is annulled regarding its rejection of the claim for being filed by an unauthorized party against the second appellant, and the claim is rejected against the third appellant. The Court orders the first, second, and third appellants to jointly repay the appellant an amount of 638,123.00 AED (six hundred thirty-eight thousand, one hundred twenty-three dirhams), along with an interest rate of 5%. They are also obligated to compensate the appellant with an amount of 200,000 AED (two hundred thousand dirhams). The appealed Judgment is affirmed in all other aspects.
• Thirdly, in the other appeal, it is rejected, and the appellants are ordered to bear the costs of the two appeals, including any rest.

The article demonstrates the dedication of Al Safar & Partners Lawyers in safeguarding their client’s rights and achieving a favorable outcome. The Court of Appeal’s decision supports the transparency and integrity of the UAE judiciary while showcasing the law firm’s competence and legal expertise in securing the interests of its clients.

For further assistance please contact Al Safar & Partners on +971.4.4221944 email reception@alsafarpartners.com  –     www.alsafarpartners.com