At the end of 2010, Dubai Real Estate Regulatory Authority (RERA) announced that it would introduce the, so-called, Real Estate Investor Protection Law (Law) and that it would do so “very soon.” As of April 2011, the Law has not yet been published. Nor have official drafts of the Law been circulated. No further updates as to the scope or timeline of the Law have been issued. Yet, the investor community is eager for the Law to take effect, though very little is known about the protection, as its title suggests, it promises to investors.

Because all that has been announced about the Law has been in the way of comments from RERA and other government officials in the media, it is difficult to ascertain the exact nature and scope of the Law. Some question whether the Law will ever be introduced. Also, it is unclear as to how much of what investors wish for this Law to address will be incorporated in its final form. As such, whatever comments are made about the Law are speculative in nature. Perhaps then the best way to speculate is to analyze statements made by public officials and industry commentators.

RERA officials have described the Law to include several provisions. One relates to penalizing developers for delaying delivery of projects, in the form of fines in increments of AED 500,000, potentially amounting to millions of Dirhams. Another provision may relate to penalizing developers for “committing fraud or falsifying statements,” such as “falsifying [construction] progress report.” New regulations for property handover and corresponding standards for quality control have also been mentioned. Introduction of a grading system to assess and grade developers has been discussed. And so has regulation of property valuation professionals. Revamping and strengthening of the escrow services laws and regulations is too being contemplated.

RERA has also alluded to possibly introducing a standard sales and purchase agreement, which all developers will be required to use. Among other things, this new template is supposed to include an equal penalty on both developers and investors for breaching their obligations. This, for example, would require developers to pay a penalty for delivering properties late. Another provision in the template will allegedly require developers to pay their 1% of the property registration fee, instead of passing it onto purchasers.

Whatever the final form of the Law may be, the utility of at least some of the alleged provisions in the Law is questionable. One, the new template of the sales and purchase agreement is supposed to apply to new contracts, and not existing ones. Yet, the majority of disputes, in which investors feel they need protection, relate to existing contracts. Two, some of the provisions are already adequately addressed in other laws. The property registration fee, codified in Dubai Law 21 of 2006, is one example. Similarly, the penalties to be imposed on developers, either for delivering properties late or for falsifying project status reports, are covered by the U.A.E. federal law, in existence since 1987. Therefore, what is required today is the enforcement of the existing laws, instead of introduction of news ones. This, of course, is subject to the Dubai Courts applying federal laws, as opposed to only applying local Dubai laws.

Article brought to you courtesy of
Ludmila Yamalova
www.lyhplaw.com