In a recent noteworthy ruling, the Dubai Real Estate Court annulled a residential property sale contract worth Dh2.386 million due to the buyer’s failure to comply with scheduled instalment payments. The court also ordered the re-registration of the property back to the seller and awarded Dh250,000 in compensation for losses suffered by the seller, affirming the binding nature of contractual obligations under Dubai’s real estate regulatory framework.
The dispute originated from a 2019 sale agreement in which a fully completed residential unit was sold, requiring a 10% down payment with the remaining balance payable in 21 fixed instalments. Despite the unit being registered in the buyer’s name in December 2019, the buyer defaulted on subsequent payments, prompting the seller to seek legal recourse.
Contractual Obligations
Dubai’s Real Estate Regulatory Authority (RERA) https://dubailand.gov.ae/#/ plays a pivotal role in overseeing real estate transactions and enforcing compliance with contract terms under Law No. (7) of 2006 Concerning Real Property Registration in the Emirate of Dubai (PDF) regulating real estate activity in the Emirate of Dubai. RERA-protected contracts must clearly stipulate payment schedules and consequences for default, providing security for both developers and buyers.
The court underscored that while the seller is obliged to deliver the property as per contract terms, the buyer is equally obliged to meet payment deadlines. Importantly, although contractual penalty clauses may become void once a contract is terminated, this does not preclude the seller’s right to seek monetary compensation for damages and lost profits resulting from the buyer’s breach. This principle aligns with general contract and civil laws in the UAE, enabling sellers to retain ownership rights until full payment is received even if registration has taken place.
Key points about contractual obligations and RERA contracts in Dubai:
- Both seller and buyer have reciprocal obligations: The seller must deliver the property as agreed, and the buyer must adhere strictly to payment deadlines.
- RERA mandates specific contract forms that structure these obligations, including:
- Form F, also known as the Memorandum of Understanding, is the official purchase agreement between the buyer and seller, detailing payment terms, property specifications, and agent commission arrangements. Our firm can guide you in understanding Form F as well as other regulatory forms that govern agent relationships and buyer engagements, ensuring transactions are conducted with the highest standards of professionalism, transparency, and compliance.
- When a buyer breaches contract and payment deadlines are missed, although penalty clauses may become void once the contract is terminated, the seller retains the right to claim monetary compensation for losses and damages, consistent with UAE contract and civil laws.
- Notably, the seller can retain ownership rights to the property until full payment is made, even if registration has taken place, providing additional security to developers. all contracts must comply with RERA regulations and be approved by the DLD’s systems.
Case Outcome and Rationale
Examining submitted evidence including the sales contract, payment receipts, a completion certificate, and title deed, the court concluded that the buyer failed to uphold their payment obligations. Consequently, the contract was declared null and void, the property reverted to the seller, and compensation of Dh250,000 was awarded to cover financial losses, opportunity costs, and damages arising from the payment default.
Legal experts note that this verdict reinforces the integrity of contractual commitments in Dubai’s real estate market, sending a clear message that buyers must adhere strictly to payment plans, or risk forfeiting ownership and incurring compensation liabilities.
Dubai Real Estate Implications for Stakeholders
This ruling serves as a significant precedent within Dubai’s robust real estate sector, which balances swift transaction processing with stringent regulatory oversight. Buyers are reminded to fulfil contractual payment terms diligently, while sellers gain reassurance that the law upholds their rights to protect investments against defaults.
For similar regulatory scenarios and contract disputes, stakeholders you may refer to our law firm for queries related Dubai Land Department – Contract cancellation application and RERA’s comprehensive guidelines, which detail rights, obligations, and procedural frameworks in real estate dealings.
