Dubai Court of Cassation, Real Estate Appeal No. 11 of 2025, judgment of 8 April 2025
In real estate investment several companies with separate legal personality and assets may share a single project and so be jointly liable for its obligations; whether they do is a question of fact. Money paid for a debt whose cause never arose, or later ceased, may be recovered (Articles 321 and 324 of the Civil Transactions Law). Because supplies of residential buildings are exempt from VAT under Articles 45 and 46 of Federal Decree-Law No. 8 of 2017, VAT paid on a unit sold as a hotel apartment must be refunded where the sellers failed to deliver it as a hotel unit. A general release does not cover a liability it does not show was waived.
A buyer bought a hotel apartment in 2017 from a developer company for about AED 1.65 million. After the unit was not delivered as a hotel unit, he obtained in an earlier action termination of the sale and a refund. He then sued the developer and another company of the same group for the VAT he had paid to the second company, service charges and compensation. The Court of First Instance ordered both companies, jointly, to refund AED 79,200 of VAT with 5 per cent interest and to pay AED 200,000 in compensation; the Court of Appeal affirmed.
The companies argued in cassation that the second company was not a party to the sale, that the VAT had been paid to the Federal Tax Authority, and that the buyer had signed a release in March 2020.
The Court of Cassation dismissed the appeal. A defendant has standing when it is responsible, directly, derivatively or jointly, for the right claimed, and in real estate investment several companies with separate personality may share a single project and be jointly liable for its obligations. The lower courts had found that the buyer's statement of account was issued by the second company and had held both liable because the obligation had a single source.
On VAT, the Court applied the rules on recovery of undue payments and the VAT Decree-Law, under which supplies of residential buildings are exempt, except for zero-rated first supplies. The buyer had paid VAT because the unit was sold as a hotel unit, but the companies never completed the steps needed to deliver it as one, so the supply was exempt; they had not proved that they paid the amount to the Authority, and it was they, not the buyer, who had failed to keep the unit in hotel use. The money had been received without right and had to be returned.
On compensation, non-performance is itself a fault and the amount is for the trial court. The release of March 2020, which cleared the developer of all claims connected with the property, did not show that the buyer had given up his rights arising from the change of use.
Developers often divide a project between group companies, with one selling and another collecting payments. Buyers can sue them together where the facts show a common project. The judgment also shows that VAT collected on hotel apartments must be repaid if the unit is not supplied as a hotel unit, and that broad releases signed by buyers are read narrowly.
| Articles 321 and 324 of the Civil Transactions Law (Federal Law No. 5 of 1985) (recovery of undue payments) — text of articles 321, 324 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
| Articles 45 and 46 of Federal Decree-Law No. 8 of 2017 on Value Added Tax — text of articles 45, 46 |
| Cabinet Decision No. 52 of 2017 on the Executive Regulation of the VAT Decree-Law |
“من الجائز وفي مجال الاستثمار العقاري تعدد أصحاب المشروع الواحد واشتراكهم رغم اختلاف الشخصية الاعتبارية والذمم المالية لكل منهم في مشروع مشترك”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
Dubai's 2020 off-plan termination rules apply to earlier contracts, and courts may set the developer's retention below the maximum
Dubai Law No. 19 of 2020, which replaced Article 11 of Law No. 13 of 2008 on the Interim Real Property Register, applies retroactively to off-plan contracts governed by t…
Unregistered sales of land granted to UAE nationals in Dubai give the buyer no title and no limitation defence
Under the Ruler of Dubai's instructions of 2 September 1994 (published on 18 November 1994), dispositions of land granted by the government to UAE nationals without the R…
A buyer under an unregistered contract may claim attached property if he shows evidence of ownership or possession
Although ownership of real property passes, between the parties and against others, only on registration (Article 1277 of the Civil Transactions Law), Article 166(1) of t…
A contract's clear terms bind the parties; a buyer who accepted unfinished infrastructure cannot rescind because of it
The General Assembly restated that a contract is the law of the parties: neither may revoke, amend or rescind it except by agreement or on grounds the law allows, and cle…
A debtor's only home cannot be sold in execution on the ground that it exceeds his housing needs
Under Article 106(2) of the Civil Procedure Regulation (Cabinet Resolution No. 57 of 2018), the house used as a residence by the debtor and the dependants living with him…
A request to sell the whole co-owned property must be made in the claim, not to the enforcement judge
Article 1166(2) of the Civil Transactions Law, as amended, allows a co-owner who cannot sell his share to ask for the whole property to be sold. Such requests must be mad…
Whether you are establishing a new venture, restructuring an existing enterprise, or exploring residency pathways — we are here to advise.
Arrange a Consultation →