A new judicial committee set up by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, will settle any disputes arising from cancelled property development after the 2007 crash.
New hope for credit crunch investors in Dubai
DUBAI // Investors left out of pocket after their property projects were cancelled have given a cautious welcome to the creation of a committee to settle any disputes and pay out compensation.
In a decree issued by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, a judicial committee will oversee the liquidation of cancelled developments.
The decision of the committee will be final and will not be subject to appeal.
Legal experts say a streamlining of the current system will help restore confidence in the property market among investors who will now have a better defined legal recourse.
The global credit crunch in 2007 resulted in numerous projects being delayed for years or even cancelled. Many investors lost millions of dirhams and were faced with a complicated and time-consuming legal process for compensation.
Although the exact details about how the new committee will operate are unclear, it has been confirmed it will preside over projects cancelled by the Real Estate Regulatory Agency (Rera) and will rule on claims between property developers and buyers.
It will also look at liquidation of projects and arrange for financial settlements.
"This is good news if it means this committee does this in one place and investors can get their money back in a couple of months," said Hari Achariya, an Indian investor.
In 2008 Mr Achariya paid just more than Dh600,000 for a property in The Seasons - an Ishraqah development at Jumeirah Village Circle.
However, only half of it was completed and Ishraqah eventually cancelled the rest of the project.
"A couple of months ago all the investors who paid got about 70 per cent back, for which we are grateful. But if we had had this committee when we first asked for compensation it could have been resolved sooner."
Ludmila Yamalova, founder and managing partner of HPL Yamalova & Plewka, a legal consultancy based in Jumeirah Lakes Towers, said the new committee would help to consolidate cases in one place.
Investors now can file a case in a local court, the Dubai International Financial Centre court or go through arbitration.
"We don't know who will be on the new committee but I would assume it would have to be lawyers, accountants, engineers, real estate experts as well as judges," she said.
"I would also caution investors to manage their expectations. It will be a long process from a case being filed to compensation being awarded."
It is unlikely investors would get all their money back as, in many cases, developers do not have the cash, she said.
"It's similar to a bankruptcy case and it's not just individual investors but also institutions like banks that may also need to be compensated.
"It also needs to be agreed who should be paid back first and how much," said Ms Yamalova.
The committee would also have to look at the developer's assets, who the investors are and what can be sold to pay them back.
"It could be further complicated by the fact some of the developer's assets might not be completely owned by them, like for example the land," said Ms Yamalova.
There is also confusion over what can be defined as a "cancelled" project.
Under the existing system the Land Department places a list of cancelled projects on the bulletin board at its offices and also takes out an advert listing cancelled projects in Arabic newspapers.
"What you tend to find is on many occasions the lists of cancelled projects are different, and on top of this Rera adds its own list on its website," said Ms Yamalova.
Decree No 2 for 2013 states the ruling of the judicial committee will be carried out by the Execution Department at the Dubai Courts, reported state news agency Wam.
It will work with Rera on projects cancelled under law No 13 for 2008.
The committee can also seek the paid assistance of experts, consultants and auditors to investigate the financial position of stalled projects and to verify the amounts paid and spent by buyers and developers.
Under article 3 of the decree, all Dubai courts, including DIFC Courts, shall refer cases to the committee.
Rulings made by Dubai courts in relation to liquidation of a property development will also be stayed and instead referred to the judicial committee.