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How to convince developers to restructure the installments?

Discussion in 'UAE Property' started by Green_age, Dec 3, 2008.

  1. Green_age

    Green_age New Member

    Hello there,
    I have 2 off-plan properties in Ajman, and the project has not been started yet, and the developer is stuck to payment schedule regardless of current crisis in financial market and recession, which affected a lot of people including myself. I am aware from legal point of view, developer can refer its right to the contract, but actually customers and buyers facing trouble in the market which eventually the consequences could back-fire to the developers. Thus it seems that both sides should reach to certain degree o f understanding, up-dating the contracts, installments, delay and so on, according to current situation. How we can convince developers to put a hold on not-started pojects or re-structuring the payments? Anyone has any idea to share?
  2. Ajmanprop

    Ajmanprop New Member

    The only suggestion I have - is if you can get a significant amount of buyers.

    1) You can ask nicely. If you represent enough buying power, they may take you seriously. Afterall, the developers that haven't even started construction - shouldn't be needing the 40% and above payments.

    2) Consider initiating a discussion on excercising the default option in significant numbers - no developer would want that. For those that are wiring in the money, it'll be easy. For those that have post dated cheques outstanding, they'll need lawyers, and it will take time and more money.

    Alternatively, all of you could join together and litigate - again, time consuming - and no guarantees. Even a simple demand letter from a lawyer may urge the developer to consider. There are laws on the books (Ajman escrow, construction start regulations) that are supposed to help you - but those laws themselves don't seem to have an implementation date. I guess it depends on the perspective of a lawyer - and then the perspective of the court.

    By the way, gathering buyers will not be that easy. For instance, those that bought 1 year after you, probably have a payment plan that stretches out 1 year more than yours ... and thus won't have the same sense of urgency.

    I bought into an off plan, which was widely advertising milestone payment. The contract came very late and when it showed up was simply calendar based. Now walking away.... 35% paid...50% cancellation charge as I am more worried about the developer's flight risk, or equally bad just dragging it on and on.
  3. Green_age

    Green_age New Member

    Thanks for your helpful post. I am trying to call the broker who bought these for me, and get to learn more about the buyers who share the same feeling with me. I'm not sure if the broker is ready to let go some information about buyers or not.
    Otherwise I have to take stand individually which may look weaker but still have free hands to make decision.
    If you live in UAE, you may have a better image about the general mentality of people these days. Are they optimist about the near future, or just waiting for worse things that have still to come?
    If the market doesn't look to change for better soon, then there is a slim chance for people like me, to stay in roll and developer is not going to cancel the contract, cause there is nobody else to fill the place.
    Anyhow, I try to find a lawyer in UAE and see what happens next. ofcourse even if I manage to get 70% of my money back, I'll be very happy.
  4. Ajmanprop

    Ajmanprop New Member


    Great idea. This is a good opportunity for some of the more honest brokers to salvage their reputation and do the right thing - that is if they have a long term mentality. On your part, you may need to think about what's in it for the broker...and find a way to motivate - eg. some fee contigent on a successful outcome. Your broker may have some clout with the developer - esp. if they helped sell a number and may want to see if they can intercede on your behalf. Nothing to loose, worth a try. If you can, a face to face meeting to brainstorm with the broker may be good.

    You may want to google your projects - eg. skyscraper city - has a thread on almost every project that has been launched. In other cases, buyers have also launched independent online forums to discuss their projects. Now, getting even some of them together for legal action will be a massive challenge - you usually find eternal optimists, eternal pessimists...and a variety strewn inbetween. Even most that want to litigate will be in denial and won't actually start. If time is of the essence, get started by yourself. You can then ask someone else if they want to join. I am not a lawyer etc. but have not determined that having multiple parties to a case is of any added benefit in the court system other than sharing expenses. I don't know if there is US style class action. Of course, several litigants will make the developer take you more seriously.

    I don't live in the UAE. I have no feel for the markets, but can guarantee that unless the regulatory regime becomes transparent and the authorities truly independent arbitrators, experience will be more "luck" based. Today, the developers are seen as the investors. End consumers seen as just that.

    This is a system that most developers have gamed - through vapor projects, each one helping to sustain the previous one and also relies on masses of new buyers, walking in. Just like in a down stock market, there are stocks that do well, I am sure there are projects that will do well.

    I myself am getting out at a 50% loss... having paid 35% for zero construction. The developer has gamed the system every step of the way, I see now reason why he would change. The process seems to be drawn out. Working against the clock, because each day delayed, means another check cashed by the developer. Each check he cashes, means I loose 50% of that amount too.

    My fear for those staying in - for projects that show no sign of construction etc.. is that on a collective basis, the beast is getting too big to tame. Look at the total off plan, where no construction has begun, vs. the GDP.
  5. InsideProperty

    InsideProperty New Member

    Hi Guys,

    I (Inscape Property)represent developers in the UAE and I'm totally on board with restructuring the payment schemes given the current climate. I try and only work with one developer at a time as you wouldn't believe the effort that goes into making sure a professional on going service is provided to customers such as yourself. It's Fortune Park Tower incase you're wondering. (Couldn't help the plug!)

    I've encouraged the management company to talk to the master developer and to be honest they have been really responsive. After all they they want sales and if you appeal to their bottom line they'll do pretty much anything.

    Right now we have negotiated 20% and then NOTHING until completion when buying floors. How does this help you?

    Well, firstly it makes a floor affordable for more people. Obviously you have to sell it before completion, but thet shouldn't be a problem considering how low Ajman prices are right now (450 AED).

    Secondly this means that agents who do buy wholesale to sell onto you guys can be more flexible with the payment schemes they offer you. Hopefully they will pass the benefits down to you. That's the idea anyway.

    If you buy retail direct from the developer right now it costs 525 AED with a payment scheme of 5% deposit, 10% after the first month, 9 payments of 7% every 3 months and then 22% upon completion. We're trying to push through a scheme of pooling retail purchases so they can effectively be made at wholesale prices, but we are meeting some resistance on this. Construction is due to kick off by April latest so I can understand this to an extent.

    If you guys have any other ideas on restructuring retail sales I'd be happy to put them forward when I next meet with the developers at the end of December. Hopefully this will encourage others to follow suit.

    Incase you're wondering we are intentionally trying to keep the prices down but I'm not sure how long we can keep them this low as prices in Park View City have already exceeded these prices by quite a margin.

    I look forward to hearing you throughts on this.
  6. Green_age

    Green_age New Member

    Hi there,
    I have managed to contact a group of buyers and we are going to send a cosigned letter, asking developer to restructure the payments and wait untill the market revokes. I have also in contact with a lawyer who works with different parties in property biz. I was told, in first quarter of 2009, serious decisions will be taken to ease the situation for buyers and reassure them.
    Lets see what happens and I'll let you know about my share of progress
  7. chuckday

    chuckday New Member

    Interesting reading... I need advice too - I have invested in Solitaire, Al Reem Island Abu Dhabi (Damac) - paid 35%, with another 10% due in March. Construction hasn't started yet, as Damac haven't got the land from the master developer. As such I only have the reservation form with Damac and nothing else. The contract has nothing about delays/completion dates etc. Damac refuse a refund

    I'm told unofficially 2012 completion but rumours are soming of a further delay! only bright side is my next payment after march is due when construction starts so maybe I can sell before then (assuming things have truned around) - is there anyway anyone can think of how to get out of this ????

    Any help would be greatly appreciated.

  8. verity

    verity New Member

    Hi Ajmanprop

    I also invested in an off plan in Emirate lake towers-Ajman
    also worried if project will ever go ahead
    You say cancellation penalty would be 50% of what you paid to date ??
    or 50% of total unit price ??
    I paid 20% and cancellation fee is 30%
    can they ask to pay 10% more at cancellation ?
    contract is under Ajman law- invalid in UK where I live, in case they would want to persist !
    your advice is appreciated, thanks
  9. verity

    verity New Member

    Hi Greenage

    Is the project you invested in 'Lake Signature 1' in Emirate lake towers- Ajman ?
    is where I invested and also looking foe other buyers there
  10. shazy

    shazy New Member

    Ok people i'm not sure how to start a new thread so i'm just going to ask on this one. i started investing (not sure i'd call it that now though!!!!) a year ago or more bought into five projects with acw holdings all of them were in JV but two were in dubailand anyway had to drop the two in dubai land because i could not pay . but the 3 in JV i have paid all but the last and al through i kept saying why do i have to pay if you haven' started the work and all i got was if you don't you will loose these so after taking loans here i did. now some one has told me that you only have to pay 30% of any project untill they start the project and this a RERA ruling. Is this correct? does anyone now for sure ?

    And if you defult on your payments can you expect to get anything back ? we were told no acw ont the two dubai land ones.
  11. Ajmanprop

    Ajmanprop New Member

    Hi Verity:
    In response to your question - The 50% I referred to is based on my contract (in another Ajman Project) and is 50% of payments made to date.

    Just some opinions (also a lay person not living in the UAE);

    1) You have no post dated cheques outstanding, you are not violating anything if you decide to stop.

    2) The cancellation penalty is levied against what you have already paid, not based on the entire as in your contract. Having said that, in the case of Dubai, they reinterpreted the law, without rewriting it - and said it was based on the total project etc.

    3) If at all you decide to continue - ask them for details of the project's escrow account and make all future payments to that account. All developers have been asked to set this up. Ask them for their construction permits, project licenses etc. I haven't seen a copy of the law, but it may also have a provision that developers have to reach a certain construction milestone (30%?) before demanding more payments.

    4) Even if you walk away, there is not guarantee that the developer will refund you in any reasonable period of time. No law forcing them to, so expect it to drag out.

    As for your specific project - you may want to see or to see if there are other buyers, project photos etc.

    Hope this helps, regards
  12. verity

    verity New Member

    Hi Ajmanprop

    thank you for advice
    I am still not sure about Cancellation penalty

    In my Prel.Contract signed at reservation it says
    ' all payments previously made, subject to max 30% of the Total Price (hereinafter referred as Agreed amount' will be forfeited'

    Is it 30% of unit price ? or of total paid to date ?- as you mentioned law stipulating 30% of the last

    In SPA (which I hold off to sign, because of so many differences with Prel.Contract)
    it says
    ' seller will retain 30% of the total price ( the Agreed Amount) as pre-estimated liquidated damages ' and in other para.
    ' in case of cancellation the entire amount paid will be forfeited'
    Should I also insist on SPA to conform to Prel. Contract at reservation ?
    think I should

    any thoughts ?
    thank you
  13. Ajmanprop

    Ajmanprop New Member

    Here's my own situation - and lessons learnt.

    The Developer was advertising a payment plan that said pay 50% until completion, 25% on handover, 25% post handover. When I was shown the Reservation agreement, it made no reference to completion rate, instead, just had a quarterly payment schedule. Ajman's first villa project.

    The reservation agreement, didn't raise any major flags in my mind - the quarterly payment schedule was set up such that if the developer started construction on time, 50% would have been payable by the time of completion. Nevertheless, we asked the developer - and he said all would be in the contract (Sale Purchase agreement).

    The contract showed up, late, once we had paid close to 20% - but didn't have any completion clause. We're fortunate, it contains the clauses it does.... like if the project is not delivered by 2012, we get all our funds back etc. Or forfeiture of 50% of amounts paid, rather than 50% of the total price etc.

    Mind you, I think the developer in my project has been amending the contract to be more favorable to them, as time goes by. The initial ones reflected their completion linked payment plan, later they took that out, increased the forfeiture for cancellation etc.

    Lessons learnt:
    1) Should have asked to see the Sale Purchase Agreement, before putting a deposit down. It is very common for the Sale Purchase agreement to show up after you've paid 20%+ by when it is too late to do anything.
    2) Should have walked away from the initial deposit, when the Reservation contract didn't reflect the terms the developer promised.
  14. Ajmanprop

    Ajmanprop New Member

    Ajman Property

    By the way, today, I had someone go by and visit ARRA (Ajman Real-estate Regulatory Authority). They are just getting started - website is not fully functional, but see :: ARRA :: There is a phone number there.

    In my case, they recommended stopping all further payments. I have paid 35%, with no meaningful construction by the developer. Their advice was to let the developer know that payment will be made only after the new escrow account has been set up. In addition, the escrow account can only be tapped by the developer once construction has progressed to a similar level - so 40% of payments should equate to 40% construction.

    As for your own case, I would recommend you have someone visit ARRA, and get their advice.

    The issue you will have;
    1) Is if you decide to walk away, how do you retrieve your initial downpayment?
    2) In order to force the developer to refund the initial downpayment, you may have to go to court. Court filing fees are 30,000AED + lawyers fees... so a very expensive proposition, and if the amount to be recovered is less than this forget it.
    3) If you decide to go ahead with the purchase, you should insist on the contracts being worded as you see fit. Your protection, or lack thereof, would be based on what is written in the contract... If it is not there, then forget about it.

    4) If this purchase was based on the basis of an advert in the UK, you may want to see if there are any remedies available to you there (via court).... ie if the developer has an office there.

  15. Ajmanprop

    Ajmanprop New Member


    To the points you made from your contract:

    ' all payments previously made, subject to max 30% of the Total Price (hereinafter referred as Agreed amount' will be forfeited'

    Based on the above,
    The logical interpretation, would be that the developer has written it so that they intend to forfeit 30% of the total purchase price, rather than 30% of whatever you may have paid.

    I am guessing here, but the inconsistency you point out.....may be written so that they can forfeit at least 30% of the total purchase price, or if you have paid say only 20% of purchase price then they can take all of it.

    Definitely sounds as if the agreement is one sided. Also, look at the SPA, and see if it puts any burden of performance on the developer. If they don't deliver say, by 2015 - then are you entitled to anything?

    If you need a lawyer to look at it - I can give you the name of one in Dubai. They are not cheap... and lawyer or no lawyer, I don't expect the developer to change the SPA. You'll probably just be spending money for the lawyer to tell you something you already know.

    Hope this helps,
  16. verity

    verity New Member

    Hi again and thank you

    I went on Emirates City Forum, Ajman - Properties & Real estate Owners Forum and learnt about ARRA today
    All sounds promising
    and brings relief to all of us
    Your advice helped !
    Should we insist on SPA terms to be changed ? to accommodate eg.penalties to developer when completion delayed for , say 1 year or more ?
    We are group of buyers which may help to convince them to respect our needs
    Pls recommend us your lawyer

  17. Ajmanprop

    Ajmanprop New Member

    I think if you have multiple buyers, that'll definitely strengthen your negotiating ability.
    I strongly recommend that you ask them to re-write SPA with whatever protection you want to see - if it isn't explicitly written, don't expect any relief. Even when it is in writing, suing for any damages is an expensive proposition - with no guarantee of winning.

    By the way, engage the lawyers only after you/other buyers have spent some time modifying the SPA yourself....and that too have them recommend any major issues to you guys directly. The last thing you want is large lawyer bills, the lawyers spending time with the developers only to be told that the developer won't change anything at all.

    Law firm is;

    Habib Al Mulla & Co.
    18th floor, Al Attar Business Tower
    Sh. Zayed Rd.
    P.O Box: 2268
    Untitled Document

    Tel: +971 4 331 6868
    Fax: +971 4 331 6050

    I'll send you individual contact by private message.

    Good luck
  18. financier888

    financier888 New Member


    If you go to court in Ajman, the magistrate will rule on the contract terms spelled out in the agreement you signed. (whether it be a reservation form or SPA) The only caveat to this, would be if the govt enacted a law / decree - which states the payments MUST be linked to construction and covers a retroactive period. (just not new contracts AFTER the law has been passed) My guess is, that the law will cover the retroactive period... This would mean that the new law supercedes the contract payment terms.

    If I were you, I would first gather as many buyers as you can, formulate a proposal and then contact the developer directly to renegoitiate the terms. AS previoulsy stated, the atty's here are very expensive and at the end of day, if the ruling will be based on the contract you signed, you will strengthen the position of the developer. - 'take it or leave it' If the new law that links the payments to construction is in effect, then as a collective group you approah ARERA - and they will ensure the developer complies.. I'd try this approach before I start writing checks to law firms.. You can always use an atty as a last resort. You may also gain the sympathy of ARERA if you can illustrate that the developer represented different more attractive terms to induce you to buy but then didn't place said terms into your reservation form etc... Although - the mistake was yours becuase you did not insist that the terms offered were included in the original contract you signed. In essence - you agreed to different terms and paid - so there is little recourse on the developer.

    On the other hand, from a realistic point of view - from the developers side. If he has already spent the first 30% or so - on land payments, marketing, commissions, over head including a new SUV Cayenne, he has to come up with money to start the contruction. Without the payments coming in and unable to raise funds - you and he are dead in the water... That's why I suggest you organize and talk to him first before starting to insitute legal action.

    I dont know who you developer is, but many, many of the developers in Ajman were not experienced and doing deals up there with smoke and mirrors.. as well as using proceeds from off-plan sales to buy other plots - rather than segregating the funds for said project. Once Dubai started the escrow laws, other players went up to Ajman specifically, becuase they would not be held accountable and could 'play with the funds' - primarily to buy other plots... Which the Dubai escrow law preculded.. This is exactly why Ajman was considered Higher Risk with little in the way to protect investors.. If the developer has already spent the money he has collected and not started construction - that money may already may be gone and unless he can raise more funding - he's finished and your chances of seeing any money back is also finished. Best to organize and try to work it out with him first before throwing the gauntlet down, provided he'll conduct himself in a transparant manner. Some developers up there are quite expereinced and have the resources, other dont.

    good luck
  19. Josen

    Josen New Member

    This was posted in a local newspaper

    My lawyer expained that this means

    Basically in case of a house sold at a contract value of 1M against which (say 80%) 800K has been already paid, and the buyer defaults - then he is penalized

    1) 300K - 30% of contract value
    2) 150K - 30% of excess payment (800K - 300K = 500K x 30% = 150K)
    3) Refund of 350K (800K - 450K) only on completion of project
    4) Refund only after developer has resold
    Nothing in law regarding penalty to developer on delays in project handover :(
  20. hatimk

    hatimk New Member

    1. I booked a 2 bedroom flat in The Garden City (Al Jurf) Ajman, Mandarine Tower M1. (Developer is Real Estate Investment Est.)

    2. I started paying my monthly installments since Dec 2007. After paying the booking charges and advance in Nov 2007.

    3. After every six months I visit them and give them 6 cheques for 6 monthly installments. So I have given them cheques till May 2009.

    4. Till May 2009 I have paid Dhs. 125,082/-

    5. Now, the contract clearly states completion date to be Dec 2009.

    6. The tower M1 comprises of G+3P+12 Typical Floors and uptill now the have just put one ceiling of the ground floor (3P and 12 Floors are yet to be built).

    7. Which means the completion date of Dec 2009 is impossible to be achieved (Also Seeing their progress of 19 months we can make out we can make out what they could do in the next 7 months.

    8. The Contract binds both the parties, the buyer and the seller, to stick to all the clauses.

    9. We are, on our part sticking to all the clauses of the Contract. But if the do not complete by Dec 2009, then this would clearly be against the contract.

    10. The contract only allows them a delay in handing over if the authorities like FEWA etc. delays. But does not permit them a delay in construction.

    11. On the basis of the above can I give a gap of 6 months in my installments to make my payments in line with their progress of work.

    12. At the time of purchase of this property, they confidently told me that after Dec 2009 I can give the apartment on rent and pay the future installments with the rent amounts.

    13. Is there any authority who can check the developers for abidig by the contract clauses.

    Best Regards.

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