Introduction:

In this study, we discuss a real estate case reviewed by the Dubai Primary Court on 13th February 2023. The case concerns a lawsuit for the termination of a real estate sale contract due to the defendant’s breach of its contractual obligations.

Facts:

The plaintiff filed a lawsuit against the defendant (a real estate company) seeking the termination of a preliminary sales contract signed on 12th November 2017. The contract involved the purchase of an apartment in the “108 Tower” project located in Al Barsha South 4. The plaintiff had paid an amount of AED 699,600 out of the total agreed amount of AED 1,359,600, but he had not received the apartment on time due to the defendant’s delays in completing the work and failing to meet the agreed deadlines. The defendant did not adhere to the agreed project completion schedule and changed the type of the unit from a “villa” to a “townhouse,” breaching several technical details.

In contrast, the defendant argued that it had followed correct legal procedures, including notifying the plaintiff through the Land Department about his failure to pay the overdue installments, which led to the cancellation of the unit’s registration in the plaintiff’s name and its re-registration in the defendant’s name.

Claims:

The plaintiff requested the termination of the contract and the refund of the amounts paid along with legal interest. On the other hand, the defendant requested the rejection of the termination claim, arguing that the contract had been “legally terminated” based on the procedures followed in accordance with Law No. 13 of 2008 and the amended Civil Procedure Code.

Chronology of Proceedings:

The plaintiff paid the amounts due under the contract but did not receive the apartment.
The defendant sent multiple notices to the plaintiff regarding payment obligations.
After the plaintiff failed to pay the overdue amounts, the defendant filed a complaint with the Dubai Land Department, which issued a notification to the plaintiff confirming the validity of the legal procedures.
As a result, the property’s registration was cancelled from the plaintiff’s name and re-registered under the defendant’s name on 25th August 2022.

Court Decision:

The court rejected the plaintiff’s request to terminate the contract, considering that the contract had already been terminated based on the legal procedures followed by the defendant in accordance with Law No. 19 of 2020.

The court ruled that the defendant retained the right to recover 10% of the total contract value, while the plaintiff was entitled to a refund of AED 414,222.53 from the defendant. The court also ordered the defendant to pay legal interest of 5% annually on the amount owed, starting from the date of the claim on 1st January 2023 until full payment is made. Furthermore, the court ordered the defendant to bear the legal costs and attorney’s fees.

Legal Analysis:

Termination Procedures and Rights of the Parties: The court established that the defendant followed the correct legal procedures in accordance with Law No. 19 of 2020. Under this law, developers can terminate off-plan sale contracts when the buyer breaches contractual obligations, such as failing to pay overdue amounts. The court confirmed that the defendant’s actions were lawful and valid.
Right to Refund Paid Amounts: In contract termination cases, the affected party is entitled to a refund of the amounts paid if the contract is canceled. The court determined that the defendant retained 10% of the total amount as compensation, which is the amount the developer is legally entitled to keep according to the law.
Legal Interest: The court ruled that legal interest would be applied at a rate of 5% annually on the claimed amount, reflecting the general trend in courts for such cases.

Conclusion:

This case serves as an important example of how real estate transaction laws are applied in the UAE, particularly regarding the termination of real estate sale contracts due to one party’s breach of contractual obligations. It highlights the importance of both parties adhering to the agreements and following the legal procedures in case of disputes. In this case, the court relied on precise legal texts and took all aspects of the case into consideration when making its decision.