Off-plan projects are amongst the hottest investment opportunities in Dubai. They are a highly lucrative option for local and foreign investors as they are cost-effective and have higher resale value. Of course, there are other reasons why people love off-plan projects in Dubai.
However, today, we are going to discuss a rare yet possible aspect of off-plan properties—cancelled off-plan projects. Yes, there can be delays in the completion or even cancellations. What should you do if a project is cancelled? What are your legal options? How to handle a cancelled off-plan project in Dubai? Let’s find the answers in our detailed guide.
What are Cancelled Off-Plan Projects?
Cancelled off-plan projects refer to real estate developments that start construction but are stopped before their completion. These projects are officially cancelled by the relevant authorities or developers.
Such cancellations can affect the real estate market, which can cause problems for both investors and developers. The reasons for these cancellations can be external, like financial or legal issues, or internal, such as construction delays.
Who Decides When an Off-Plan Project is Cancelled?
This is an important question to answer: who cancels or can cancel an off-plan project in Dubai? When an off-plan project is cancelled, the Real Estate Regulatory Authority (RERA) is the official body that declares it.
RERA has the power to cancel projects for various reasons, such as delays, technical problems, budget changes, or economic difficulties. This is explained in Article 23 of Resolution (6) from the Executive Council of 2010.
Why Off-Plan Projects in Dubai Get Cancelled
Why would a developer or RERA cancel a project? Well, there are several reasons why off-plan projects in Dubai may be cancelled. These include:
a. Legal Issues
Problems like difficulties in getting necessary permits or legal disputes over land ownership or construction rights can cause cancellations.
b. Financial Problems
Developers may struggle with funding issues. This could be due to delayed payments from buyers or partners or a lack of overall funding.
c. Regulatory Issues
If developers don’t follow the rules and regulations set by Dubai authorities, or if there are major changes to the project plans, it could lead to cancellation.
d. Unexpected Crises
Lastly, events like economic downturns or natural disasters can also affect a developer’s ability to complete a project as originally planned.
What Does Dubai’s Law Say About Cancellation of Off-Plan Projects?
In 2020, a new law was introduced by the UAE’s Vice President, Prime Minister, and Ruler of Dubai, His Highness Sheikh Mohammed Bin Rashid Al Maktoum. This law, known as Decree No. 33 of 2020, made updates to rules surrounding cancelled real estate projects in Dubai.
A special tribunal was initially set up in 2013 to manage unfinished or cancelled projects. In 2020, this law was amended. The new decree formed a new committee appointed by the Chairman of the Dubai Judicial Council to handle these matters. The goal of this law is to protect investors and ensure transparency in the real estate market.
New Tribunal for Cancelled and Unfinished Projects
With the introduction of Decree No. 33 of 2020, the special committee’s name was changed to the Special Tribunal for Liquidation of Cancelled Real Estate Projects. This committee replaced the previous one created in 2013.
Under the updated law, this new tribunal is responsible for:
- Defining Investors’ Rights: The tribunal ensures that investors and buyers are aware of their rights after the liquidation of assets from cancelled projects.
- Resolving Disputes: Handling unresolved complaints from cancelled or unfinished projects that the previous committee didn’t address.
Importantly, all legal cases related to cancelled or suspended projects must be dealt with by this tribunal, not regular Dubai courts. The tribunal’s decisions are enforced by the Execution Court in Dubai.
Changes to Dubai’s Interim Real Estate Register
Along with the new laws for cancelled projects, there was an amendment to the Interim Real Estate Register in Dubai. The update states that if developers fail to begin a project for reasons beyond their control, they must refund all payments made by buyers. This rule also applies to projects cancelled by the Real Estate Regulatory Agency (RERA).
The Process of Cancelling an Off-Plan Project
Canceling an off-plan project involves several steps. Here is a breakdown:
1. Passing a Resolution
RERA begins the cancellation process by passing a resolution when they find issues with the project. These issues could include delays, poor-quality construction, or other serious concerns. RERA has the authority to cancel a project for various reasons.
2. Submitting a Report
Once the resolution is passed, RERA must prepare a detailed report explaining why the project is being cancelled. This report will include proof of the issues that led to the cancellation.
3. Audit Process
After the report is submitted, an auditor is hired to verify the project’s financials, especially the escrow account. The developer is responsible for paying the auditor’s fee.
4. Reimbursement to Buyers
After the audit, the developer must reimburse the buyers. This must happen within 14 days of the cancellation, provided the escrow account has enough funds. If the funds are insufficient, the reimbursement period can be extended to 60 days.
5. Formation of a Review Committee
A special committee is set up to review cancelled projects. This “Cancelled Real Estate Projects Committee” includes at least three judges from the Dubai Court. Their decision is difficult to challenge, adding an extra layer of authority to the process.
How to Handle a Cancelled Off-Plan Project in Dubai?
If you are a buyer and your off-plan project gets cancelled, here is what you can do:
Confirm the Cancellation
First, check whether the project is officially cancelled by RERA. You can do this by visiting the Dubai Land Department (DLD) website or by going to their office.
Submit Your Petition
If the project is cancelled, you will need to provide proof of purchase. This can include your Sales and Purchase Agreement and proof of payments. Once you submit these documents, DLD will schedule a hearing to begin the reimbursement process.
File a Court Case (If Needed)
If the project has not been cancelled, but you are still facing issues, you have the right to take legal action. You can file a case against the developer for delays or other issues.
Frequently Asked Questions
What Happens When a Project is Cancelled in Dubai?
When a real estate project is cancelled in Dubai, the legal authorities get involved. They manage the liquidation process, which includes reviewing the project’s financial situation. This process often involves moving funds and evaluating the investments that have been made.
Will Investors Get Their Money Back After a Project is Cancelled?
Yes, investors are entitled to a refund. The liquidation department requires developers to return the money to investors within 60 days from the cancellation date.
How Do I Request a Refund After a Project is Cancelled?
To request a refund, you need to file a petition with the Dubai Land Department (DLD). You will need to provide proof of your payments and the Sales and Purchase Agreement (SPA). Once you submit the documents, DLD will set a hearing date to start the refund process.
How Can I Handle Delayed Property Handovers in Dubai?
First, make sure all your payments are up to date. Then, visit the project site to check on the progress. If you are dealing with delays, check out our guide for tips on how to handle delayed property handovers in Dubai.
So, this was our guide on how to handle off-plan projects in Dubai. Looking for economical off-plan property investment opportunities in Dubai? feel free to contact us.
