Property legal expert answers questions on real estate most affecting investors and the market
I am an American national who has been living in Dubai for the past three years. About two years ago, I leased (purchased) land in Nad Al Hamar, Dubai, for 99 years.
The land had a structure for a villa which was not complete, and we had plans to tear it down and build a new villa.
We were visiting the property one day when another person showed up claiming that he was the owner and that the same person we had purchased the land from had sold it to him as well.
The person has told us that it is his property and that we should get out. We have tried to get in contact with the seller for a year but he just ignores us.
The other party is also suing him for selling to two different people, and we would like to do the same.
We have a loan note and a contract for the property with a value of Dh4 million. We would like to get our full money back for the property, the commission paid, any additional money paid towards the land during the time of ownership for maintenance and miscellaneous costs, as well as any fees or damages which have occurred from this.
I would like to know how we would get our money back and what you think would be the right course of action to go about getting this done.
The same property being sold to several individuals is a problem that might have been caused by lack of title deed for the property.
The purpose of the title deed is to keep an official record of the property ownership history.
Title deed serves, among other things, to establish that there are no competing interests or to record priority of interests to the property.
In Dubai, title deeds are supposed to be held by and registered with Dubai Land Department (DLD).
Before purchasing the property, title deed search should have been performed to ensure that the property was owned by the seller.
Immediately after buying the property, the new purchaser should have registered the transaction with the DLD, by updating title deed to reflect the new purchaser’s right of ownership.
If this has been performed, then the purchaser whose name is registered on the title deed should prevail, especially if it can be shown that the transaction occurred before the seller sold it to the other purchaser.
In this event, the advice is to seek DLD’s assistance first. If that fails, a case could be brought against the second purchaser to establish clear title. Another case can be brought against the seller for damages.
If, however, the property does not have title deed and it was not in any way registered with the DLD, then a case should be brought against the seller for, among other things, misrepresentation and possibly fraud, along with a claim for damages.
A claim for damages, however, may be to some extent offset due to, what the court may hold as, lack of due diligence on the part of the purchaser.
In other words, the court may penalise the purchaser for not having performed the title deed search, of the equivalent therefore, and for subsequently failing to register the property with the DLD and/or update title deed.
Another complicating factor could be the location of the property.
If foreigners are not allowed to own property in Nad Al Hamar, then the second (local) buyer would prevail, even if the property is registered with the DLD on the name of the first buyer.
In this case, the buyer should bring a case against the seller for, among other things, rescission of the contract and misrepresentation.
What is particularly surprising in this case is that the buyer has a mortgage over the property. Prior to offering the mortgage for the property, the bank should have performed its own title search and, more importantly, registered its interest to the property on the title deed and/or with the DLD.
Therefore, the bank itself is at fault as well.
And the issue arising with the mortgage should be addressed directly with the bank, bearing that in mind.
In this even, the bank could bring its own case against the seller for damages and/or against the second buyer for clear title.
Given that most mortgages are secured by post-dated cheques and based on practice thus far, it is more likely that the bank would prefer the borrower to do all the fighting.
I am due to take on a completed property later this year (May or June) in Abu Dhabi.
I will have to pay handover costs/ builders’ profit and then monthly mortgage repayments.
I have a Dh2m loan from an Islamic home mortgage provider @ 7.9 per cent interest.
The property has lost 50 per cent of its value and the rental income will be 50 per cent of the monthly repayments. Do I have the option to not complete and remain in the country?
Will the mortgage company take back the property (as the security on the loan) and recover their costs and I lose the 10 per cent deposit?
Today, hundreds of borrowers find themselves bound by mortgages worth double and more the current value of the properties, e.g. negative equity.
This is a problem that many countries, and especially the United States, face today. In most countries, there is a foreclosure law that allows banks to cease the property if the borrower defaults, intentionally or otherwise.
Some foreclosure laws allow the bank to pursue the borrower for the balance of the mortgage.
But in most cases, this practice is not followed, as it is too expensive and legally complicated.
Banks prefer to foreclose on the property and write off the loss.
In the UAE, however, defaulting on the mortgage is far more complex.
One reason is that the UAE does not have a well-established foreclosure law and/or foreclosure practice. The other reason, and one that is of most concern to borrowers, is that mortgages in the UAE are secured by post-dated cheques.
If a borrower defaults on his/her payments, then the bank has the right to cash the post-dated cheques.
And if that cheque bounces, which it will, since the borrower default due to the lack of funds, it becomes a criminal offence.
This is because in the UAE, a bounced cheque is on its face a crime, punishable by immediately jail sentence. Therefore, a commercial transaction quickly moves into the criminal realm.
It is this threat of the bounced cheques that all borrowers fear.
Many have left the country already because of it. And many more are considering leaving for the same reason.
It is not in anyone’s benefit for borrowers to default completely and leave the country and/or have them be jailed.
It is far more beneficial for the banks to refinance on more palatable to the borrower terms or foreclose on the property, write off the loss and re-sell later.
Yet, this not a practice that the UAE banks have followed thus far.
That being said, it is advisable to first negotiate with the Islamic mortgage company to either refinance the property or to foreclose on it.
The advise, therefore, is that should the negotiations with the mortgage provider not yield any positive results, borrowers could bring a case before the special committee set by the Dubai government for the two Islamic mortgage providers and seek their assistance.