By Mohamed Ghanem
Lawyer I LLM I Lecturer I Speaker I DIAC Arbitrator
December 9, 2020
Acquisition of distressed real estate projects in the Emirate of Dubai between the practice and the legal legislation. An overview of New Decree 33 of 2020 regarding the Special Judicial Committee for Incomplete and Canceled Real Estate Projects in the Emirate of Dubai.
The practical experience of implementing Decree No. 21 of 2013 in regard of forming a special judicial committee to liquidate the canceled projects in the Emirate of Dubai has revealed the urgent need for legislation to regulate the acquisition of the canceled real estate project, which is of course a stalled and incomplete project, the distress project’s acquisition is usually takes place by a new developer or the existing project contractor who has Financial capabilities to complete the project in cases where liquidation of the project has no economic viability for the investors and the banks financing the project.
The practical practices of the judicial committees have faced challenges in cases where the completion of the project has better results for the investors and the banks financing the project rather than the project liquidation. The main challenge was absence of private legislation regulation the project acquisition.
On the other hand, the Real Estate Regulatory Agency has spared no effort in receiving offers to acquire stalled real estate projects, and in mediating to find friendly solutions with the former developer who was unable to complete the project. The main obstacle was the lack of legislation that would give the Agency or any other judicial body the authority to transfer the project to a new developer in the absence of an agreement with the old developer or in cases of inability to contact with the old developer. In the midst of these challenges, the urgent need for legislation to regulate all aspects of the acquisition of the real estate project emerged.
Decree 33 of 2020 regarding the Special Judicial Committee for Incomplete and Canceled Real Estate Projects in the Emirate of Dubai is a new start and laid the groundwork for legislation regulating the acquisition of a real estate project in the Emirate of Dubai.
The decree defined the incomplete real estate project as the real estate project that was directly built, but stopped for reasons related to the real estate developer or buyer, or for any other reason.
The jurisdiction of the Judicial Committee entrusted with incomplete and canceled real estate projects in the Emirate of Dubai according to Article 6 of the new decree did not differ radically from its jurisdiction under Decree No. 21 of 2013, except with regard to Paragraph A / 6, which decided that the jurisdiction of the Judicial Committee is to define the rights and duties of each real estate developer from which the incomplete real estate project was transferred and the real estate developer who will undertake the re-completion of the unfinished real estate project.
This particular part will allow the committees to set mechanisms and controls for the rights and obligations of the former developer and the new developer with regard to the rights of investors and buyers associated with the project, and we hope that these controls include answering questions that have long been circulating in the minds of investors and buyers in stalled projects, including whether the new developer adheres to the delivery date in the old developer contracts? Does he abide by the terms of compensation for the delay? Does he adhere to the schedule of payments? In addition to the problems of fictitious registration of some units in the initial real estate registry with the names of buyers who did not pay any amounts, and the problems of receiving amounts outside the escrow accounts for projects.
On the other hand, the decree organized a mechanism for cooperation between the Judicial Committee and the Real Estate Regulatory Agency as a technical body with long-standing experience in real estate regulation, through which it could provide data, information and proposed solutions to deal with the incomplete real estate projects. Rather, the decree delegated the agency and gave it the authority to withdraw the real estate projects from the Judicial Committee to re-study them and indicate the possibility of their re-completion or settlement of associated disputes.
With this balance between the role of the Judicial Committee and the Real Estate Regulatory Agency, the legislator hopes to find practical and legal solutions to the problem of the acquisition of stalled real estate projects in a way that ensures achieving the best results for the benefit of investors and buyers in the interest of real estate investment in the Emirate of Dubai.
The decree did well, as it canceled any text in any other legislation to the extent that it contradicts the provisions of this decree, in order to free the judicial committees to find practical solutions that are not broken by legislative obstacles in other laws.