Off-plan property consolidation questions answered:
Cancelled Projects:If a developer offers consolidation from one off-plan property into another off-plan property, it is up to the developer to formalize that agreement and it should not require RERA approval. The issue of refunding the difference due to the consolidation, however, may require RERA approval, if it involves withdrawing money from the escrow account. This is so because RERA has announced that all of the Dubai’s escrow accounts are now under its supervision and management. Therefore, releasing money from the escrow account would require RERA’s approval. Also, from the practical standpoint, it may be unrealistic to expect for the developer to actually refund cash. Most developers are strapped for cash. It is more realistic for them to refund the difference in the form of an offset from future payments. And such future payments exist in every case, even in those cases where the property has been fully paid for already.
Even if the developer has committed a series of breaches of the applicable laws and contractual violations, unless he voluntarily agrees to refund, the investors will have to enforce their rights against him in court. Court proceedings, however, are expensive and time consuming. In many cases, the cost of litigating a case may exceed the amount to be claimed. Litigation is also inherently uncertain.
Besides the payment of the purchase price, developers require that investors pay a series of other payments once the property is handed over. For example, today, such additional payments include 2% property registration fee, handover administration fees, service fees, deposit for service fees, deposit for cooling fees, master community service fee and the like. All in all, these additional payments can amount to a significant sum. To offset these charges against the refund does not require RERA approval. It is important, however, to document this agreement with the developer as soon as possible, before any changes take place, internally or externally.
Late Handover:The issue of late handover and developer’s lack of update on the status of handover are more complicated. Reputed developers should respond, in one way or another. If the developer does not respond, however, it is important to take a proactive role in determining the status of the developer and the project, be it through visits to the developer or RERA. If the developer continues to fail to reply, there is cause for concern. It is possible to petition RERA to have them contact the developer and request response. Alternatively, if the contract provides for timelines on the completion date and those timelines have already passed, there may be a legal case against the developer for failing to deliver the property timely.
Banking and Mortgages:Any case involving banks and mortgages is a complicated one. This is because most mortgages involve issuance of post-dated cheques to secure them. Therefore, the line between, what would otherwise be a civil matter for breach of contract, blurs quickly into a criminal matter for bouncing a cheque.
Regarding the terms of financing, the best way forward is to approach the bank directly to ask them to restructure the mortgage in line with the current state of the market. Thus far, however, banks have not been overly receptive to such negotiations, but it is not unlikely that the trend should change soon. Many borrowers have signed up for terms which they cannot carry under today’s market conditions and, unless the banks offer to refinance, borrowers may be forced to default. Banks may start re-evaluating their corporate strategies and offer more realistic rates to avoid massive defaults.
Source: Emirates 24/7