As a result of the financial crisis many developers have been
forced to seek termination of unit sale and purchase agreements
("SPAs") executed with investors or to mutually agree to
cancel or consolidate units.
The legal affairs department at the Dubai Land Department
("DLD") has devised a procedure to allow developers and
investors to mutually cancel or consolidate units from the
registers held at DLD and to allow developers to terminate units
where investors do not respond to legal notices. These procedures
are in accordance with Law No 13 of 2008 Regulating the Interim
Real Estate Register and Law No 9 of 2009 amending some provisions
of Law No 13 of 2008. The forthcoming Executive Council Resolution
No 6 of 2010 approving the executive regulation of Law No 13 of
2008 does provide minor enhancements to the procedures to be
implemented by DLD and these points are discussed later in this
article.
The actual procedures are frequently updated; however we have
reproduced below the current procedures at the time of writing. We
advise that to commence the termination, cancellation or
consolidation procedures an appointment should first be made with
the legal affairs department by contacting them by email or
attending at DLD in person.
DLD'S conditions to accept an application to cancel or
consolidate units by way of mutual consent
- The cancellation/consolidation agreement must be written in Arabic and on the developer's letterhead.
- The unit should be registered on Oqood and a copy of the Oqood certificate should be provided.
- In the event of consolidation of a number of property units, the developer must register the new unit before cancelling the old one.
- The developer should issue a letter stating that the person who signed the agreements, letters and undertakings attached to the application on behalf of the developer is authorised to sign on behalf of the company
Initial Documents required
- Passport copy of the authorised signatory of the developer;
- Developer's RERA registration certificate;
- Developer's commercial license or registration certificate; and
- Power of Attorney (if applicable).
In the event of the non existence of an escrow account, a letter
should be submitted clarifying that the consolidation or
cancellation procedure does not require transfer or refunding of
any amount of money from the project escrow account. Such letter
should include an acknowledgement that the funds paid by the
investor have not been deposited in the escrow account for the
project. The agreed amount to be refunded to the investor must be
paid prior to submission of the application to cancel the unit and
evidence of the payment made to the investor must be
provided.
Where funds are to be paid from the escrow account, a statement of
the escrow account must be submitted confirming that the payment
refunded to the investor has been made by the developer. A written
undertaking on the company's letterhead also needs to be
submitted confirming that the refund of the monies to the investor
shall not in any manner affect the progress of construction of the
project.
The prescribed form of the letters mentioned above are available
from the writer on request or from DLD legal affairs department and
must follow the exact format stipulated by DLD to avoid the
application being rejected.
Once DLD reviews the documents and accepts the
cancellation/consolidation application, a letter shall be forwarded
to the registration section of DLD to cancel the unit from the
register. Developers are advised to check Oqood approximately three
weeks after the submission of documents to confirm that the name of
the investor has been removed from the register.
Documents required to submit an application to
cancel/consolidate units
In addition to the documents mentioned above the following should
be provided:
- A request in writing in Arabic in the format prescribed by DLD; signed by the authorised signatory to request the cancellation/consolidation in DLD format;
- The original cancellation/consolidation agreement duly signed and stamped by the parties. If the agreement is not in Arabic a translated copy must be obtained from a licensed translator in the UAE;
- A copy of the unit SPA in the name of the investor registered in Oqood;
- Passport copy for the owner of the property;
- The financial report for the unit issued by the escrow account agent (Bank) including the developer's name, project name, investor's name, unit number and the amount paid by the investor and the amount refunded;
- To fill the following fields in the excel sheet provided by DLD
and provide the same to DLD on a flash memory:
- Confirmation of cancellation or consolidation of the unit
- Refund amount to the investor where a unit is cancelled
- Transfer and merge amounts (in the event of transferring the property and the paid amounts or part of it to another unit) - Copy of Oqood certificate;
- Copy of the progress indicator report published on RERA's Website; and
- Undertaking as per DLD format on the developer's letterhead confirming the accuracy of the signatures and that the agreement will not affect the project and commitment to implement the project.
Documents required where refund payment to the investor is
to be made from the escrow account
- The original escrow account agreement;
- Copy of Oqood certificate;
- Passport copy for the owner of the unit; and
- The original financial report issued by the escrow account agent (Bank) (not less than three months old).
Procedure to terminate units at DLD by
Developers
In the event there is no mutual agreement between the parties to
cancel or consolidate a unit and the investor fails to respond to
the 30 day legal notice issued by DLD in accordance with Article 11
of Law No 13 of 2008 Regulating the Interim Real Estate Register
and Law No 9 of 2009 amending some provisions of Law No 13 of 2008,
the developer shall provide the same documents as mentioned above
for the mutual cancellation/consolidation of units to apply to
terminate the unit SPA. The cancellation/consolidation agreement
however shall not be applicable and the letters mentioned above
shall need to be amended to request the termination of the unit as
a result of the investor's default. A meeting between the
developer and a legal advisor at DLD shall then be required to
approve the termination of the unit once all the documents have
been reviewed.
Article 15 of the Executive Council Resolution No 6 of 2010
approving the executive regulation of Law No 13 of 2008 however
states that there is no requirement for DLD to issue a 30 day legal
notice and that a copy of the notice issued by the developer shall
suffice as the 30 day notice to be provided to investors. This
provision makes the termination procedure more efficient for
developers and places a greater burden upon the investor to respond
to the developer's notice. At the time of writing however DLD
has not implemented this procedure.
Once the termination of the unit SPA has been approved, DLD shall
then issue a legal notice to the investor advising the investor
that the unit SPA has been terminated and a letter shall be issued
to the registration section at DLD to cancel the unit from the DLD
register.
Where the termination of a unit SPA is contested by an investor and
the parties fail to reach an agreement to cancel the SPA the matter
may be referred to Dubai Property Court for settlement.
DLD has also advised that a fee of AED 500 shall be introduced for
every unit that a developer or investor wishes to terminate,
consolidate or cancel by way of mutual consent in order to cover
the administrative expenses incurred by DLD. At the time of writing
this article, however, this fee has not been implemented.
All correspondences must be addressed to Mr. Ahmed Edris, Head of
Centre of Legal Affairs DLD.
We advise that the procedure and policies at DLD change quite
frequently and the above information is the most accurate
information we have available at the time of writing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
