In Property Appeal No. 167 of 2016 (issued on 12 October 2016) the Dubai Court of Cassation held that a purchaser of units in a residential project was entitled to a refund because infrastructure (recreational facilities and landscaping works) had not been completed such that the purchaser was unable to use the units for their intended purpose. This was so even though the creation of the infrastructure was not part of the contract.
Al Tamimi represented the successful claimant before the Dubai Courts.
The Purchaser bought two units for a combined price of AED 16,433,400, of which he paid AED 4,900,350. As is often the case, the units were part of a project that was marketed as an all-inclusive residential development, with landscaping and facilities.
Handover was to be in January 2010 but the Developer was unable to deliver the units at that date and the Purchaser then proceeded to court.
At the time the claim was filed the Land Department was able to confirm that the units were registered in the Purchaser’s name on the Interim Property Register and that the project was 91.11% complete.
The Developer argued that the claim should be dismissed because the Units were complete, and filed two certificates of completion for the units from the Ports, Customs and Free Zone Corporation establishing proof of completion and two no objection certificates for the connection of water and electricity utilities.
Court of First Instance
The Court of First Instance dismissed the claim on the basis that an expert appointed by the court had determined that the units were complete and the purchaser failed to pay the remaining installments on time.
Court of Appeal
The Purchaser appealed. The Court of Appeal commissioned a further expert report which found that the units were part of a project launched as an all-inclusive residential development. The infrastructure was not complete and this meant the units could not be used for the intended purpose. The Purchaser had bought the units based on how the project was marketed and had been led to believe the infrastructure and amenities would be included in their purchase.
On this basis the Court of Appeal quashed the decision of the Court of First Instance, and declared the contract between the Purchaser and the Developer terminated. The Developer was ordered to pay back the Purchaser’s investment with interest. The Developer appealed.
Court of Cassation
The Developer argued that it had completed the project according to the plans which were approved by the relevant authorities. The Developer submitted the certificate of completion of infrastructure for the project and the construction progress report. The Developer argued that these works (representing 20% of the project) were not part of the contract and were currently in progress. They were minor works that did not justify termination. The Developer also argued that it was the Purchaser who was in breach, having paid only 25% of the price of the two units.
The Court of Cassation dismissed the Developer’s arguments and held that:
This is an important judgment because:
Whilst each case turns on its merits, the judgment helpfully indicates that one of the factors the court will consider is how the project was marketed. It must be established that the project was marketed in a way that leads a purchaser to believe that the amenities are part of their purchase. In this case, the Court of Appeal assessed the status of the project at the time the case was filed and compared it to how the project was marketed when it was launched. The Court of Appeal concluded that the purchaser bought the units based on how the project was marketed and were led to believe the infrastructure and amenities would be included in their purchase. The Court of Cassation endorsed this approach.