Investors in stalled Ajman property projects could be digging themselves in deeper by pursuing their claims in the courts, lawyers have warned.
Lawyers warn courts may prolong agony for Ajman investors
Investors in stalled Ajman property projects could be digging themselves in deeper by pursuing their claims in the courts, lawyers have warned. The advice follows the publication of 122 approved projects by the Ajman Real Estate Regulatory Agency (ARRA) last month, which has spurred many investors in projects not on the list to seek compensation in the courts. The approved projects represent less than a quarter of the estimated number planned before prices started to tumble last year. Approval, however, provides no guarantee that the projects will be built.
"Too much speculation in the market has led to all sorts of commitments that can't be fulfilled now," said David Nunn, a partner at Simmons and Simmons. "You can go to court, but I would be very careful about that. The provisions are not there to enable you to get back money that you have already committed. Going to court is really, to my mind, the last resort." Ajman was one of the last emirates to join the property boom, with thousands of projects launched in the past couple of years as the market was peaking.
The collapse of the off-plan market has left many Ajman property developers in financial distress and kept investors guessing about whether they will be able to recover their deposits. For example, Marmooka City, one of the largest planned developments, was downsized from 206 towers to just 20. But people considering claims may be unsuccessful because many developers are already insolvent. And pursuing a case in court can cost as much as Dh30,000 (US$8,167), according to lawyers.
"Investors can pursue the developer, but the question would be the extent to which it is worth pursuing a claim if they know that the relevant developer does not have any money behind it," said David Sanson, a partner at the Dubai law firm DLA Piper. The publication of the approved list by the regulator could help people bring claims in court by establishing whether developers are fully registered with the agency, and whether their projects have been approved, according to Imad Kassir, who represents about 40 investors in stalled projects in Humaid City from Al Rashid Real Estate.
He has initiated legal proceedings in the Ajman Court on behalf of 25 people who have paid deposits for apartments that were to be built by the property company. Ajman's real estate regulator has called on developers to co-operate with the agency in order to reach an amicable agreement with investors. "Some developers have taken the decision to turn their back on their problems and to hide away. This is wrong," said Omar al Barguthi, the director general of the ARRA. "We can support them. We can look at merging them with other projects, transferring their customers to another project which has more solid ground, relieving them from future commitments against the land," he said.
Some investors are waiting for Ajman to establish a special five-member dispute committee before they pursue grievances. Mr al Barguthi hopes the committee will be set up this year. Many Ajman investors are looking forward to that. "I have not filed a court case yet, because like many people in my group I am waiting for the new dispute committee," said Nasar Haq, an investor in a Lakeview tower, a development that is not on the regulator's approved list. "It will be much cheaper to file a case then. We don't want to throw good money after bad."