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Marwa El Mahdy
Importantly, the Court also confirmed that a decision by the Land Department to cancel the registration of off plan units in the Interim Register is subject to the Court’s review if the parties dispute such a decision.
The Claimant (the Purchaser company) entered into a Sale and Purchase Agreement (“SPA”) of four off plan residential units with a real estate developer (the Second Defendant/ the Developer). Pursuant to the SPA, the expected date of completion was 30 November 2011. Additionally, an escrow account number was included in the SPA as the Second Defendant’s account. The Claimant paid AED 4,884,720 (the Claim amount) to the First Defendant, who is the main developer for the project where the units subject of the SPA are located.
The Claimant, after inspecting the site of the project, discovered that:
Before the Court of First Instance, the First Defendant argued the lack of its legal capacity in the case. Additionally, the Land Department addressed the Court, stating that the units subject of the dispute are registered under the Claimant’s name.
The Court of First Instance dismissed the case and the Claimant appealed before the Dubai Court of Appeal which, after appointing an expert and after submission of his report, quashed the lower Court’s decision and ordered the Second Defendant to pay to the Claimant the Claim Amount plus interest from the date of filing the claim until full completion at a rate of 9%.
Developer’s grounds for appeal:
The Second Defendant challenged the Appeal Court’s decision before the Dubai Court of Cassation on the following grounds:
The Court of Cassation
The Cassation court found the Second Defendant’s arguments inadmissible and held:
This decision of the Court of Cassation reinforces its recent series of decisions in respect of contractual reciprocal obligations. It also confirms that a developer must ensure that it fulfils all its contractual obligations prior to resolving to the Land Department to cancel the registration of an off plan unit, since such a decision is subject to the Court’s review and does not have res judicata status against the buyer and does not protect the seller (developer) in the event of the latter’s breach of its obligations.
Additionally, if the Court finds differently to the Land Department, the parties will be restored to the same legal positions as before the Land Department’s decision. In practice, there have been examples where developers, in breach of their obligations, resolve to obtain a cancellation from the Land Department and resell the units. The original buyer has taken the matter to Court and the developer has then found itself in a peculiar situation where a Court has issued judgment in favour of the old buyer, even though they have re-sold the units.