Ask The Law: Refund For Delayed ProjectsTuesday, November 15, 2011
I purchased two studios in 2008 and paid 40 per cent of the price for each unit. Nothing has happened on the site so far. Please advise where I stand and how I can get back my hard earned money.
This is a sad but familiar story. I suggest that you first approach Rera (Real Estate Regulatory Agency) and ask if the project has been cancelled. If not, you should ask why — it seems clear that the project in reality is not going ahead. You should also approach the developer to find out if the company is still operational. If you can't contact them, you might want to approach the company registrar where the developer was incorporated to see if their registration has been cancelled or not. You should also look at your SPA (Sales and Purchase Agreement) and see what the contractual deadline (‘long stop date') is for the delivery of the unit — if that date has passed then in the absence of ‘force majeure' you may have a contractual right to a full refund. The reality here however is that if the project has not even started, it may well be that the developer has become insolvent. In which case you could be facing the unattractive option of suing a penniless company. And as they say in Ireland, if you sue a man of straw, you just end up with chaff… and legal bills of course.
I purchased a unit from a prominent developer and paid the first three instalments (20 per cent of the contract value). Construction has still not started. The developer has now given me two options: swap to a unit in another building for a lower price or forfeit all payments made to-date. The developer has sent reminders for the next instalment, and has threatened to file a case in the Dubai Courts against me. The SPA says the developer can terminate and keep 10 per cent of the contract value. What are my options?
If the development is in Dubai, then the Rera recommendation is that all developers should align instalment payments with construction milestones. You should therefore notify the developer that you will not be making any further instalment payments until such time as a Rera-approved payment plan has been produced. Whether you choose to swap your unit for another one (presumably nearer completion) is entirely up to you — there is no obligation on you to accept this offer. The developer cannot forfeit your payments if you decline. I doubt the developer will seek to terminate the SPA, as if it were to do so it would be obliged to repay the balance 10 per cent. It may, however, argue that it is not terminating, but keeping the contract alive and requiring you to comply with the contractual instalments as they fall due. Again, in the light of the lack of construction you should notify the developer that you will only pay as per a Rera-approved plan. This advice is subject to your right to terminate the contract over the developer's failure to deliver the unit by the contractual long stop date.