x Abu Dhabi, UAEWednesday 26 July 2017

Should tardy Dubai home seller pay increased registration fee, buyer asks

Homefront: I agreed to buy a property in Dubai in June. The seller twice delayed, and now the transfer free has doubled to 4 per cent. I don't see why I should have to pay the higher fee in its entirety when the seller caused the delay.

Dear Mario

I signed a memorandum of understanding (MOU) to buy a property in Dubai on June 30. The seller has been delaying the sale process but has twice signed an amended MOU. The validity of the present MOU is October 30. With the change in the registration fee to 4 per cent, I have, however, refused to pay a further 2 per cent in addition to the original 2 per cent mentioned in the MOU. The seller has also refused to pay the extra 2 per cent.

Is my case strong enough to take the seller to court? The seller has defaulted twice because he could not furnish the letter of liability to my bank. Can a clause in a MOU be null and void if the law mentions that the 4 per cent registration charge is to be shared equally? Can the MOU clause contradict the law and still be valid? What is the best solution for me?

Regards,

Oindrila, Dubai

Dear Oindrila,

Thank you for your email. The Land Department’s extra fee is designed to take the heat out of the property market. It is clear that the wording on who is responsible for paying the extra 2 per cent is directed at the sellers. But the decree adds a clause that leaves an element of further negotiation between buyers and sellers by stating “unless otherwise agreed”.

In the past, the 2 per cent transfer fee – directed at both sellers and buyers – was in practice fully paid by buyers, because sellers had paid the initial registration fee to the the developer.

Now that the fee has been increased, it will no doubt be passed on to the buyers, unless otherwise agreed. This gives room for negotiation, but in a sellers’ market this cost will be passed on to the buyers.

Going to court is always lengthy and costly, so I would not recommend this course of action. In your case though, I think the seller should be compensating you due to his tardiness in concluding the transaction by, at the very least, paying this extra cost. If he has defaulted twice, then it is clear to me who is to blame for the delay.

The MOU is a legal document and cannot be dismissed even with the introduction of new legislation. The wording, therefore, is very important.

If it states that the transfer fee is payable by the buyer, then this extra charge unfortunately still falls on you. The MOU cannot contradict the law but there should be a clause that states the MOU is governed by the laws of Dubai, so if these laws change mid-sale then any changes will still be adhered to because of this clause.

The solution lies in your negotiating skills. It is nobody’s fault that this law has now come into force but, from what you say, the seller has not helped by carrying out this transaction in a timely manner. Had he done so, then the sale would have concluded well before the October 6 deadline. For this reason, I think you have a great case for him to contribute or pay the increase in the transfer fee.

Providing both the buyer and the seller do not want to cancel the deal but an agreement on who should pay the extra amount is still not reached, then the logical next step would be to equally share this extra liability, so you would end up paying 3 per cent and the seller pays 1 per cent.

Mario Volpi is the managing director of Prestige Real Estate in Dubai and has worked in the property industry in London and Dubai for the past 29 years. Send any questions to mario@prestigedubai.com