A developer may terminate an off-plan sale only through the Land Department procedure, which buyers can contest in court

The principle

Under Article 11 of Dubai Law No. 13 of 2008, as replaced by Dubai Law No. 19 of 2020, a developer alleging an off-plan buyer's breach must follow a public-order procedure: notify the Land Department, which verifies the breach, gives the buyer 30 days' written notice, attempts settlement, and issues a document confirming the procedure or a certificate that it was followed. With the document the developer may terminate and retain the permitted percentage without going to court, or may sue. The buyer may always contest the procedure, deny breach, prove the developer's breach or dispute the percentage, which can never exceed the legal maximum. A sued developer may counterclaim directly. Notice that omits a deceased buyer's heirs, or the guardian of a buyer lacking capacity, voids the document.

The case and the decision

The President of the Court of Cassation asked the General Assembly about the application of Article 11 of Dubai Law No. 13 of 2008 on the Interim Real Property Register, as replaced by Dubai Law No. 19 of 2020.

The Assembly first recalled its judgments in General Assembly appeals Nos. 2 and 3 of 2020 and 7 of 2021: the 2008 Law in principle governs all off-plan dispositions, registered or not, but not where the unit was completed before the dispute reached court, or was registered in the (final) Property Register at any stage, unless it had already been entered in the interim register or the seller had applied for interim registration with the required documents and the Department had not issued the certificate for reasons not attributable to him; substance prevails over labels. A developer may terminate off-plan sales made since 2008 and retain up to the percentages fixed for each completion level, following the procedures in force when terminating, where the buyer breaches, chiefly by not paying.

Under Article 11 the developer must notify the Land Department of the breach; the Department verifies the buyer's obligations, gives 30 days' written notice, attempts an amicable settlement and, failing settlement, issues a document confirming the procedure stating the completion percentage; if it finds no breach or the buyer raises serious objections, it issues a certificate that the procedure was followed so the developer may pursue his rights. The Assembly drew six points: the developer may act under Article 11 without court or arbitration once he has the document; he may still sue, and the court then decides the buyer's defences and, if breach is proved, applies Article 11 with discretion over the retained percentage; the document is void if breach was not verified or written notice not given; the developer may sue if the Department issues nothing within 30 days without fault on his part; and he may sue directly for validation of the contract if not relying on breach.

It then resolved that the buyer may always, by claim or defence, contest the procedure, deny breach, prove the developer's breach or dispute the percentage, never above the legal limit; that a developer sued by a buyer may counterclaim without a Department document; and that notice not reaching all heirs of a deceased buyer, or the representative of a buyer lacking capacity, voids the procedure, in which case the buyer's representative may seek re-registration or, if impossible, refund and compensation.

Laws applied

In the court’s words

“يحق للمشتري في جميع الأحوال سواء بدعوى يرفعها أو دفاع يبديه في دعوى مقامة ضده من المطور أن يثبت عدم إتباع الإجراءات الصحيحة لإصدار الوثيقة”

Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.

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