By: Bin Nakhira Partners,
In Part 1 and Part 2 of this series, we discussed the development of the Law No. 13/2008, its amendments and interpretations up until the promulgation of Law No. 19/2017, we turn in this episode to the judicial application of Article 11 prior to commenting on the interpretation.
As elaborated on in the explanatory note, the jurisprudence in the interpretation and application of Article 11 of Law No. 13/2008, with its amendments, were not harmonious. First instance courts dealt with the Dubai Land Department’s decision to terminate the contract and allow the developer to deduct the specified percentage. However, such a decision by the Department is an administrative decision that must be challenged by the specific means of appealing an administrative decision, whereby the Court of Cassation has held that:
“Decisions issued by the Department are not judgments and are not subject to particular competent courts to hear the dispute, the court shall not be restricted in the hearing and adjudication of the case, but it shall subject it to its control and settle its dispute. Consequently, the issuance of the Department’s decisions shall not prevent the litigants from pleading before a competent court to settle the related dispute.”
(Real Estate Appeal No. 94/2012)
The noted judgment does not deny the developer’s right to terminate and deduct amounts, so long as the provisions provided for in Article 11 are adhered to.
In fact, some of Court of Cassation judgments considered the rules stipulated in Article 11 of Law No. 13/2008, as amended by Law No. 9/2009, as those of public policy as follows:
“If the legislator has issued Law No. 13 of 2008 on the regulation of the initial land registry in the Emirate of Dubai amending some of its provisions under Law No. 9 of 2009 and article 11 of which stipulates that…It should be noted that the legislator has established rules under this article that the developer, the Department and the Real Estate Registration Authority must follow in their respective fields. Of these rules is to achieve the principles of justice to maintain the balance of interest and the rights of both parties and to ensure the stability of transactions in the field of real estate which are activities of interest to the economy in the Emirate of Dubai, hence such rules are considered public policy.”
In the above judgment, the court concluded that its jurisdiction to decide over developers’ use of the right to terminate under Article 11, which was not denied by the court when it complies with the requirements of Article 11. In this particular judgement it was found that the developer had deducted more than is permitted under Article 11, hence invalidating the use of Article 11 to terminate the contract.
Another Court of Cassation decision on the same principle stating that the provisions in Article 11 are that of the public order was seen in Cassation Judgement No. 352/2011 which provided:
“… Additionally, if the legislator intervenes to establish legal grounds that regulates a specific situation in a specific manner, it is not permissible to derogate from it in accordance with the requirements of public policy or for sake of different individuals having different private interests, in which case the peremptory norms relating to public order are considered to be a complementary rule to the will of the parties to the agreement. The provisions of Article 11 of Law No. 13/2008, as amended by Law No. 9/2009, provided that the provisions of this Article shall apply to all contracts concluded prior to its coming into effect, which means that the requirements and obligations apply retroactively to off-plan purchase agreement, even if they were concluded before the law was issued. “
It is apparent that jurisprudence has recently taken a different stance, depriving the developer’s right to terminate form any legal value since the courts considered that the developer’s termination of a contract and deduction of the specified amount act contrary to the law which allows for termination only either by court judgement or arbitral award.
In this decision the court found termination of the contract void when the developer has terminated without resorting to the courts or arbitration, unlike prior jurisprudence that confirmed the developer’s right to terminate under Article 11.
The two more recent judgements on this matter were unpublished.
Law No. 19/2017:
Law No. 19/2017 dubbed the measures provided for in Article 11 the “Rules and Procedures” rather than as provisions in Law No. 9/2009.
The most important amendments to Article 11 are the addition of new rules: granting the developer the right to terminate and discount without resorting to courts or arbitral proceeding; addressing public policy and the invalidity of the contract if such public policy is breached; and recognition of the buyer’s right to resort to the courts or arbitration in the event of breach by the developer of Article 11.
Interpretation of Article 11 in the Explanatory Note:
The explanatory note did not interpret the law itself, but rather took a position concurrent with the understanding prior to the jurisprudence referred to above, it confirmed the right of the developer to terminate without recourse to the courts or arbitration, and did not restrict the developer’s ability to rely on Article 11 should the buyer resort to the courts or arbitration.
This elaboration confirms the protection provided to both the developer and the buyer under Article 11, and removes the burden of having to resort to the courts or arbitration hence not hindering the development itself.
The interpretation of the explanatory note to the paragraph relating to the retroactive application of the article is an interpretation of the Constitution, law and judicial application as stated in the memorandum. It is not correct for the court to issue a provision that contravenes rules of public order under the law that provided for those rules. Before the law is enacted, must take into account these rules.
There is nothing in the interpretation that is detrimental to the buyer, who has the right as we mentioned in resorting to the courts or arbitration in case of default by the developer or non-compliance with the law. If the developer violates any of the rules stipulated in Article 11, or fails to provide the required information, fails to issue notice as required, deducts from the buyer’s payment more than stated in Article 11, fails to refund to the buyer the remaining amount after deduction in the specified period, or other violation of any provision of Article 11, any action by the developer will undoubtedly be considered invalid.
In our humble analysis, the commitment of this correct interpretation will bring justice to the parties and contribute to the stability of the judgments, as well as support the real estate market sector.
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