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Abu Dhabi, UAETuesday 25 September 2018

Homefront: 'Am I liable for VAT on a property paid for last year?'

The Dubai resident is being charged the tax by the developer despite completing the purchase in December

Property expert Mario Volpi advises whether VAT applies in this case as the tax was introduced after the reader had booked and paid for the unit. Reem Mohammed/The National
Property expert Mario Volpi advises whether VAT applies in this case as the tax was introduced after the reader had booked and paid for the unit. Reem Mohammed/The National

I booked an off-plan serviced apartment unit in 2016, with the Oqood (the contract) registered with the Dubai Land Department the same year. As per the agreement, the unit was supposed to be handed over in December last year, so, I paid the full purchase price to the builder that month. Then there was a delay on the builder's side and it is now going to be handed over in two weeks time. The builder is now asking me to pay 5 per cent VAT on the purchase prices. A clause in the agreement says the builder may delay the handover for a year without penalty. There is also another clause that says the purchase price excludes VAT but in case VAT is imposed by the government, then the purchaser would be required to pay it. As a serviced apartment, I understand this unit falls under the commercial property category therefore is subject to VAT. However, the deal was done in 2016 and I fully paid the purchase price in 2017, so I believe VAT doesn't apply as the tax was introduced after I booked and paid for this unit. What is your opinion? AK, Dubai

There is still much confusion between parties on the subject of VAT as the whole process is still relatively new to all concerned.

Given that you have fully paid the unit before the VAT deadline came into force, means that there should be no VAT payable by you, irrespective of when the property is actually going to be handed over. The bill of sale or invoice was produced before VAT became applicable and you settled this again before the VAT commencement date.

I can understand why the developer is asking you to pay the tax but on checking with a local lawyer, you are not liable to pay and the developer cannot use the delay as justification to request payment given that the full payment was made before the deadline. Their argument is flawed otherwise any or all serviced apartments bought before January 1 2018 would also be liable.

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I have an issue with the condition of an apartment I am due to move into. Although the apartment was dirty with some serious maintenance defects, the real estate broker promised me everything would be rectified once the contract was signed. Since then, it has been nothing but a headache. I was supposed to move in last month but nothing was ready. The move in date was extended by five days but still nothing was ready. Although the apartment is new, as it was completed last year, the owner's representative never did a snagging check. On the last move in date, when I was supposed to receive the keys and access cards, the landlord did some of the basics, such as painting, fixing light fixtures and replacing missing kitchen cabinets doors, but no cleaning was carried out. We are unable to properly fit appliances in, for example, a kitchen cabinet door is blocking the space designated for the washing machine. The landlord is now refusing to discuss the matter further, saying that my expectations are too high and I should look for an alternative. The real estate broker is offering other apartments but I have run out of time now as I need to vacate my current apartment in three days. What are my options? MR, Dubai

I wish you had written to me sooner as my advice would have been that you would be better off looking for an alternative property. If the reality is that you have indeed run out of time, you are left with no other option but to take this property. I suspect it will be fraught with hassles from the beginning.

The property was never handed over in the correct manner from the start and it would appear that the owner and his representative do not understand their responsibilities, therefore any improvements or attention to maintenance issues will unfortunately fall on your shoulders. I’m also sure that you will have issues in getting any money spent back from the landlord. That said, if you have to move into this unit you must insist on getting (in writing) that when you return the property, you are allowed to hand it back in the same condition as it is now. Remember to take photos to prove the current condition and keep receipts of any money spent in getting the unit to a reasonable order.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for 34 years in London and Dubai.

The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com

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