Investors against interpretation of law no 13

[TommyC]

Money can be released from escrow under four categories.

1- Marketing - 5% of Project Value.

2- Construction - As per Contractor contract.. ( Approved by bank's consultant )

3- Managemenr & Administration - 5% of Construction Cost. ( approved by banks consultant)

4- land- Now only the due instalment. (In Past were use to get even Paid Installments. )

Apart from these bank deducts escrow account for its charges and consultant Fee.

In the past developers were having a windows as per RERA rules to take any money out of escrow if it was exceeding " Cost & Revenue " form of that escrow account. But even this rule has been changed. So deductions would go through only under above mentioned categories.

I would also add here that After 6 Months of opening escrow, they are suppose to start Construction. Consultant approves every release under management and when that is over then consultant will approve every release under construction as per the progress.

Here's another quote regarding usage of escrow account money, 5% of VALUE for marketing. That means, if they sold 70% and out of those 70% have 15% been paid = they've so far collected apx. 10,5 % of the project value in the escrow account, of which they could have withdrawn almost half of it for "marketing"...

 

[Datum1m]

What a scam

I quote this from a Gulfnews article, can any one please explain it:
An escrow account means that investors in off-plan acquisitions are protected because their investment is held in a bank account under the stewardship of a neutral third party. The developer has a limited amount of access to the funds to cover essential costs - with the approval of the authorised account operator - but the bulk of the investment remains within the account until the property is ready for handover.

Full article:Gulfnews: Escrow account investment

I have read the article, but I do not believe its content to be correct, the Developer does not have to wait until the construction is complete before he can draw against the Escrow account, all he has to do his show the Escrow account manager a payment application from his building contractor. The Developer and Building contractor will have agreed with the Escrow account manager a payment schedule based on key stages of the construction program, once the Building Contractor completes work according to this schedule he can ask the Developer for a payment and in turn the Developer will take his Builders application for payment to the Escrow Account Manager. Basically the Developer uses your money to finance the Development and is allowed to take is profit out at the front end calling it Administration and Marketing expenses, this is why Law 13 was changed the Developers have already spent the first 20% or more of any money held in Escrow accounts without even starting the construction work. We all need to wake up to the fact that this could be one of the biggest cons in Dubai legal history, because the Government is allowing it to happen right in front of our noses. It as only really come to light because of the downturn in the market and now the Developers realise Investors will not want to carry on paying for projects that are under financed, by the Developers because the Developers have not been able to sell all the units, but have still been dipping into the Escrow accounts and taking our money, WHAT A SCAM

 

[Datum1m]

Land Department Petition

This is a copy of a petition sent to the Land Department, if any other investor or purchaser feels it voices their own concerns upon how their rights are been taken away by this very bias interpretation of Law 13 in favour of the Developers. Then please email [email protected] and we will send you a copy to fax to the Land Department. Name: __________________________

Address: __________________________

Phone: __________________________

Email: __________________________


To

Government of Dubai Emirates Business 24/7
Land Department Fax No: +971 4 306 2299
Real Estate Regulatory Agency
PO Box 1166 The National
Dubai, UAE Nathalie Gillet
Attn: Mr. Marwan Bin Ghlaita Fax No:
Fax No: + 971 4 222 2251

Dear Mr. Marwan,
Dear newspapers,

I am against the interpretation of law 13 by the Land Department, because it is clearly not an interpretation, it totally changes the context and also adds further legislation to what was the original wording and in so doing it takes away my rights from how Law 13 was written. Therefore the changes made to Law 13 by the Land Department constitute an amendment and not an interpretation, which we believe are beyond the scope and powers of this Government Department. This amendment contravenes the UAE Civil Transactions Law, which provides that monetary compensation for damages should be in direct relation to damages incurred. Therefore, according to Article 389 of the UAE Civil Transactions Law, it is left to the discretion of a judge to assess monetary damages.

The new interpretation of article 11 mandates liquidated damages in favor of developers only, limiting the judge's discretion in assessing the damages, in direct violation of the UAE Civil Transactions Code.

We want the Dubai Government to protect our investment by the following actions:

In order to protect our interest we suggest the following actions:


1. Changing the payment plans for all projects according to construction progress

Not more than 20% shall be paid prior to construction. From 20% onwards the payment plan shall be linked to construction and the next payment shall not be due before finishing the foundations.

2. Audited Statements

Developers can not terminate any contracts or carry on claiming for further installments without and audited escrow account which has to be submitted to the Land Department. The Land Department shall provide an NOC to these Developers where no irregularities are found on the escrow account.

3. Performance Proof

Developers shall provide an audit of their escrow account and provide proof that they have put 30% of the total project costs as equity in the project.

Developers who can not demonstrate this level of liquidity within a project shall not be entitled to claim further installments or to terminate purchases contracts.


4. Termination of contracts

Termination of a purchases contract shall not be allowed by the developer if the purchaser has already paid 20% of his contractual payment schedule and the foundations are not complete.

In case of cancellation due to a breach of the sales contract by the purchaser the developer must return a minimum of 70% of all the money paid by the purchaser within 30 days after the cancellation.


My personal statement box and my current situation:















Dubai was and should be in the future a safe investment place and speculative developers who misused the trust account shall be removed from the Dubai market.

I hope that the Dubai Government will take my concerns and suggestions seriously, and will implement our suggestions to bring back the confidence and stability to the Dubai market.

Transparency is the key to a successful Dubai



Kind regards

 

[Datum1m]

Land Department Letter of Complaint

This letter was sent to the Land Department on 27 11 2008

Government of Dubai
Land Department
Real Estate Regulatory Agency
PO Box 1166
Dubai, UAE
F.A.O. Mr Marwan Bin Ghalaita,


Dear Mr. Marwan 27th November 2008


Dubai Investors against Land Department Interpretation of Law 13 Article (11)

We write to you as a group of property investors who have collectively invested over one Billion Dirhams into the Dubai Property Market and we cannot believe how you have changed the wording of Law 13 Article (11) at the sole and total request of the Property Developers. We know that many Developers have claimed as much as 20%, of investors money held in Escrow accounts without even starting the on site construction work. It is this abuse of investor’s money which is preventing Developers from adhering to how Law 13 was originally written, because they have already spent our money.

It would seem to us the biggest speculators within the Dubai Property Market are the Developers themselves. They have been allowed to set up companies without adequate financial resources, they are then allowed to purchase land on an instalment basis and once they have made their first instalment, which can be as little as 10% of the land value, they are then allowed to market their units and enter into legally binding time related financial contracts with investors. The system then allows them to take the investors 10% deposit money out of the Escrow Accounts, to cover the costs of the Developers marketing and advertising campaigns, the system also allows them to claim against the Escrow Accounts for the initial cost of purchasing the land. All of this is allowed without the Developer formally appointing a Building Contractor and it is solely the investor’s money paid against the contractual time related payment schedules that is paying the Developers costs and making them solvent.

By changing Law 13 on 10th November 2008 to protect the interests of the Property Developers, the Land Department is sending a clear message to all investors around the World. It is saying to them that they condone how the system is being abused and that they are putting the interests of the Developers in front of what is the life blood of the Dubai property market the investor.

It is wrong that the system allows the Developers to get their costs out at the front end; it encourages speculation amongst Developers that would not have the financial resources to contemplate development projects, which are beyond their financial means. As investors we have the cost of having to pay for the units against a payment schedule and therefore do not recover any of our costs until the unit is sold or rented out. The Escrow accounts should only be used for paying the Building Contractors and only when the building is complete should the Developers be allowed to take the remaining money out of the Escrow accounts. If the Developers do not have the financial strength to purchase and finance the cost of the land along with their Marketing and Administration costs through the development stage, without claiming against the Escrow accounts then they should not be allowed to develop.

By changing Law 13 to allow Developers to keep a maximum of 30% of Investor’s money, against the sales value of the Units, without the Developers having to start construction work. The Land Department is effectively gifting the land to the Developers; all the Developers have to do to claim this gift is to get the Land Department to issue cancellation notices to investors for none payment of their time related payment schedules. The Developer then has a plot of land paid for by the investors, which he then holds onto until the market picks up again and makes it viable for him to develop it, but now the development is a lot more profitable, because the land is free.

We consider ourselves to be mature and seasoned investors and realise Law 13 was changed by the Land Department to stop Developers from going bankrupt within a matter of a few weeks, but this is only a short term fix for the Developers. So many of our members are looking at ways to resolve the situation we find ourselves in with the Developers and with the help of you the Government. We do not want to make anymore payments, because we do not have the confidence that the Developers, have the financial ability to deliver with the number of cancellations of contracts that they are going to force RERA to make. We see no other sensible solution other than the Developers scaling down their operations to suit the decline in demand and as investors we are willing to consolidate our investments on a joint venture basis with other investors, thus securing the successful out come of a project, because there would be little or no requirement for further finance.

We feel however the Developers need to be more realistic with their selling prices, while we realise and expect the Developer to make a profit this should be a predetermined amount obtained through an open book policy of negotiation between the Developer and his building contractor. This would then give us the Investors a product that is reasonably priced and more importantly a product that can be sold on the open market; because it would be a tangible asset rather than an off plan Developers promise and something we could take to a mortgage company.

If action is not taken now to resolve this situation, there will be countless Developers, who have actually started construction claiming themselves bankrupt, once investors stop paying them and with no new Investors filling their shoes the Dubai Property Market will come to a grinding halt, with lots of holes in the ground and unfinished projects.

We as investors are willing to form a cooperative and consolidate the money we have already invested with Developers into fewer projects. Many of the Developers we have invested in have more than one project within their portfolio and they are at different stages of procurement, so we want them to cancel as many of these projects as possible and then use the investor’s money on projects that can be built without any further finance. For this to work the Master Developers, who have sold numerous plots to one Sub-Developer, will have to allow the Sub-Developer to default on its contractual obligations to purchase all these plots. The Master and Sub-Developers will have to formulate a plan based on the value of investor’s money they have and only build Units that can be financed from this money.

We know this radical approach is not without its complications, but we feel it will safe guard the future of at least a quarter of Developments that are already planned thus preventing the Dubai property market from totally collapsing and show Investors around the World that the Dubai Government really do care.

Many of our members signed contracts between when Law 13 was first issued 14th August 2008 and 10th November 2008 the date of the interpretation. During this period Developers and Real Estate companies were marketing their Units with the benefit of a minimum of 70% full refund on any monies paid by a purchaser. Also many other members bought during this period or carried on with their payments knowing that there was a Law in place protecting their off plan investments to a sum of at least 70% of their total invested money. So we seek clarification from you regarding off plan contracts signed during the period before 10th November 2008, we want to know if our members are entitled to at least 70% back of any money they have paid to the Developer, should RERA cancel their contract, which would clearly be in accordance with how the Law was originally written. We require further clarification in the form of a formula of how a Developer will be allowed to calculate his costs up to a maximum of 30% of our totally invested money, because we feel no Developer should be allowed to profit from our loss.

We will be sending you individual petitions signed by all our members asking for changes to Law 13, these changes will need to be implemented by you with immediate affect to prevent the developers from taking our money. If we do not get a sensible response, we will go to the World’s media and let them know how the Dubai Government treats its investors, when the going gets tough.

We would welcome the opportunity of meeting with you to discuss our concerns and proposed solutions; we feel if we all work together we can continue to build a successful and prosperous Dubai which will be there for all our tomorrows.

Yours truly,



Nigel Knight

For and on behalf of the Dubai Property Investors Group

 

[TommyC]

Thanks for the update Nigel, we are all looking forward to see the reply and what will happen!

 

[TommyC]

Marwan Bin Ghelaita reveals complications in residential loan repayment in Dubai

Found this: Marwan Bin Ghelaita reveals complications in residential loan repayment in Dubai | - Video

Could someone with the necessary language skills please translate?

 

[zombie]

Found this as well, not a good sign!!
Nakheel lays off 500 employees | ?????? ???? ?? ????? 500 ???? ?? ????? ??????? ? ???????? - Video

 

[therealdubai]

hi tommy, would u like to go online?

 

[therealdubai]

Nigel this is brilliant work, we do all thank you for your deep understanding and efforts

 

[memo123]

Thank you very much Nigel for such good work and your efforts are highly appreciated

 

[TommyC]

Concerns about payments to Schon

As posted in the escrow thread:

Hi Escrow officer, I have a question for you:

They money I've paid so far for my apartments in The Signet by Schon properties have been adressed on the cheque to "Luxor Investment Limited". Are they the holder of the escrow account or whom have I paid to??

The reason I'm asking is because of this ad: http://www.realtyna.com/dubai_real_estate/ezrealty-21.html

The seller is claimed to be "Luxor Investment Limited" for an UNSOLD apartment. How does that make sense? How can I be sure my money have actually been placed in an escrow account when the name I put on the cheque is selling UNSOLD apartments according to this ad?? Doesn't make sense to me, or have I missed something?

From RERA's website:
When buying "off-the-plan" only pay into a RERA approved trust account. The cheque and receipt must read in the name of the project. If you pay your monies into the developer, agent, or any other account, the person or company you are dealing with is breaking the law.

Luxor Investment Limited is listed as DEVELOPER!!

I'm feeling concerned that this is some kind of scam by Schon to circumvent the escrow account!

According to the projects list on RERA/Land Department website, the developer for "The Signet" is "Luxor investment limited" and the escrow account holder is "Badr Islamic Bank". Shouldn't the cheques have been adressed to "Badr Islamic Bank" in the first place, or possibly "The Signet"?

Anyone experienced the same?

 

[therealdubai]

The bank account is the same in the reservation form and the payment reminder, if this what you meant.

 

[TommyC]

The bank account is the same in the reservation form and the payment reminder, if this what you meant.

If you read the post you will see that I mean that the "bank account" I've paid my money to is selling UNSOLD apartments. What's going on?

 

[TommyC]

International coverage of the bubble burst in Dubai: Final nail in the coffin for Dubai's property market? - Building

 

[zombie]

Just a quick thought, I don't think this article which change anybody's mind, people are already sure that investing in Dubai Off Plan Market is a very Bad Idea,

The final nail has already been driven in a long time ago. Now investors are just waiting to see how these legislations are modified in the future & what is the total loss they are expected to bear.

Like I have mentioned in some other posts here, 30% of contract value basically equals 50-70% of project cost to the developer, the government tried to control the losses its own companies face if contracts are canclled & in this dead market reselling off plan is a lost cause, thereby trying to keep its bottomline from going bust.

We just hope that somewhere some sense prevails & someone sits down & does the math that if the investor is kicked in his B****, this market will take decades to recover, & only when the next greed cycle comes up.

International coverage of the bubble burst in Dubai: Final nail in the coffin for Dubai's property market? - Building

 

[Ajmanprop]

I liked the article - agree it may be preaching to the converted - but even if it gets to a single reader considering a purchase and gives them pause about buying off plan, it would have been well worth it.

There are guys peddling off plan daily, brand new launches, 15 month old launches with no construction and no one to stop them. Most new off plan buyers are risking the equivalent of walking into a Ponzi scheme - new launch funding transferred to overhead &/or adding a bit to a prior partially sold project.

No matter how many people get burnt, there are queues of new ones who think it will be different for them.

I think we'll see more developers throwing the towel in - although this guy was an aggressive scammer. He should have done it like the others.... collect the money, don't build and buy back in 5 years instead of 5 months...without postdated cheques.

Police seek Al Barakah executive - The National Newspaper

 

[DelboyG]

Gents, an excellent article can be found here:

Deconstructing property law - Real Estate - ArabianBusiness.com

Could be helpful for anyone with difficulties.

 

[therealdubai]

Any body have news about Al Humaid City-Al Rashed development?

 

[dbxdude]

I liked the article - agree it may be preaching to the converted - but even if it gets to a single reader considering a purchase and gives them pause about buying off plan, it would have been well worth it.


[/url]

Just to re qualify that - there are some amazing deals such as on villas in Dubai and palm appartments that are almost complete, by off plan you mean the new launches and projects far away from completion - yes you would have to be brave to get involved in those now.

Also i still think anyone invested in projects by the Dubai Big 3 has a low risk compared to anyother developers in the UAE since if they do cancel projects they will return the money.

Dubai has had a very public profile and so alot of the global press are enjoing taking a bash at them but the lights arent going out anytime soon. . .

 

[escrow_officer]

Update After Meeting With RERA.

1 - Law 13 with amendment applies to all projects registered after 31/08/08 and LAw is

" Developer is entitaled to retain 30% of the money deposited and on top of that 30 / 70 on remaining. "

Projects registered before 31/08/08 would be treated according to their respective contracts.


2 - Payments would be linked to Construction from now on though wouldnt be avilable in written for some time But decision has been taken.


3 - Developers are not entitled for any kind of interest for the money deposited by the investors. Developers wouldnt be able to claim it.

4 - Developers wouldnt be able to withdraw funds from Escrow anymore as previously was allowed under Cost & revenue Excess.


Regards
Escrow