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Should I sign the contract or Should I not?????

Discussion in 'Dubai property' started by Investoman_uae, Jan 7, 2009.

  1. Investoman_uae

    Investoman_uae New Member

    Guys I need some advice, especially from the law genuises out of you.

    Heres the deal!!

    I am stuck.... I paid the first 15% which amounts to 300,000 dirhams... I know, its a risk I took.... and now the second payment has come up and the bank wont give the money. The bank used to give 85% but when my payment came up.... every bank went crazy and dropped their LTV to 65%.

    Anyways... the developer has been understanding considerin the mess in the market. He has asked me to pay it in 3 parts... i.e 100K whenever I can.

    The problem is... the market is kinda slow in Abu Dhabi.... and people have advertised their properties for a lot cheaper than mine (in poor locations though).... so selling is not an option. Although I will keep trying.... I am asking below 0% premium. .. so I want to lose on it.

    He sent me the contracts months ago... and i havnt returned them signed to him. Today he rang (the developer) asking me to send him the contracts.

    Now, am I at a bigger risk if I sign them? Does that mean I am bound to give him the money? Or is it safer to not sign them and keep delaying.

    What puts me in a stronger position.. signing or not signing.

    The positive thing is, they are about to start the foundation works... so he says the firm is doin well financially and are in full swing. The good thing is.... this tower will finish before many towers... and alot of developers wont start construction.... or will delay theirs due to financial issues..

    So when my apartment is finished.... it will be amongst the first completed at the entrance of Al Reem Island. Very good location!!

    Do I continue risking my money not knowing whether I can get a good return at the end and being in this uncertain position... or do I continue delayin the payment and not sign the contract.... what do you guys advice?


  2. SKY

    SKY New Member

    well the way i see it is like this:

    1, if you pay the next installment then u better make sure you have the rest because i don't think u be able sell off plan anytime soon. You don't want to keep paying and then can't pay no more after 40% as you lose your nerve or financial situations gets bit tight.

    2, when u paid the 300k im sure u signed some paper work to except terms. By stalling the contract i cant see wat difference it make as after certain time, if you don't sign, contract will be terminated.

    I think u are like everyone else, you are stuck between a rock and hard ground.

    your choice is simple either carry on then take the 65% morgage or kiss the 300k goodbye
  3. talk

    talk New Member

    Latey property swapping has become and extra way to get out of problems.Down grading to an other cheaper unit with another upgrading to yours.

    Perhaps a business partner may also get involved for a share of the unit.

    Speak to the developer and ask if he can find another person to share the unit with you.Ask can he downgrade you to a cheaper unit.
  4. mpat

    mpat New Member

    If u dont have financial crisis to carry on till u get mortgage , carry on with it, Its going to give u rental returns more than what u r expecting.
    Wish u good luck
  5. Datum1m

    Datum1m New Member

    You will have signed a Reservation contract when you agreed to buy your unit and have paid your 15% on the strength of this document protecting your invested money.

    Reservation contracts tent to have limited terns & conditions, so the main thing I would look for before signing the SPA, is what it says about defaults in payment. There will be a clause in the SPA covering payment default and it may say that should you default that you would still be liable for the first 25% of the contract value. So if you have paid 15%, you could get the Developer taking you to court to claim a further 10%. Although you may still have the clause in your Reservation contract, but if you haven’t, then it is worth checking that it is not in the SPA
  6. Investoman_uae

    Investoman_uae New Member

    Thanks for your input (all).

    I did sign a kinda purchase agreement .. . its not a contract.. . just a few pages sayin what the property is, givin details and showin the payment plan. I dont think it can be treated as a contract.

    Anyway.... the option i am considerin right now... and i made my decision not to dig myself a deeper hole...... A) I dont have the money to continue paying.... the due date has passed.... and the developer has been understanding so far.

    He said you can pay the next 300k in 100k payments... when you can (for the next 6 months). To be honest... the bank wont lend me the money and i dont have 100k.

    So am selling this apartment at a loss.... i invested 300k and now i want 200k back.

    The developer and other agents... said that the apartment will easily let for 200k per annum because it will be amongst the first projects completed and demand will be extremely high in 2 years time.... completion date is Oct 2010.

    So this is a 10% return on a 2M dirham property. Which is good and the investment sounds good. But I wish I had the money and I wish the bank didnt bring down its LTV.

    Any further ideas? I am left with one option to sell at a loss.... I want to recover whatever I can so I can invest it elsewhere and perhaps recover the losses.

  7. Investoman_uae

    Investoman_uae New Member

    Oh and I am not signging the friggin contract..... someone else confirmed, they could take me to court and it will get messy. . . cos a signature means its binding.... and its a 50 page contract... so theres alot of crap in there that cud get me in trouble.

  8. zombie

    zombie New Member

    May I suggest you get a lawyer to poke a lot of holes in the PSA contract v/s the original agreement & send this via legal notification to the developer, because lets face it in 50 pages & legal jargon they got you.

    If you haven't the money to continue let them try get it out of you. There are too many people defaulting on payments the govt doesn't have the resources to run after every one of them.

    BTW is there anything mentioned in the original agreement about payment terms & Mortgages financing?

    Best of Luck
  9. Roshan

    Roshan New Member

    Considering that you are not in distress to pay the installments, I would suggest you keep it. Selling now will not help you.

    The very fact that he has agreed to split the installment as per your convenience suggests either he is too scared - OR - he would like to help you, however the end result is the same and you could also expect him to do it on the future payments. My developers also have been very helpful.

    There are so many other developers who are threatening with legal action, so you should consider yourself lucky.

    I would love to see such a place going on rental. Get the rents in and be financially free, never more to rely on your job. Once in a while you can tell your boss to take a hike :D

    I suggest you keep it if you have no pressure on paying installments. As the saying goes...there is no gain without pain. If you have to sacrifice to do your payments, do it...the end result will be good.


  10. memo123

    memo123 Member

    can you recommend a lawyer to do such job

    the last lawyer I asked and told him that all terms in the SPA were not in the MOU , the lawyer said it will take him 3 hours to read the SPA and he will charg me 1600/hr .............
    please if you know any lawyer at normal rate can u please recommend them
  11. With heindisght I think you need to specculate that with foundations only just being broken a release date of 12-18mths is not likely? Therefore that 10% return (which imo is a little ambitious) is rather a long time away, and as you state 300k of your own savings/bank neg.

    I feel for you. Many others wouldn't as they blame 'property flipping' for part of the current slow-down. But not being in control and out of pocket is bad news for anybody and I hope you can resolve this.

    I agree the best solution is to wash your hands of it. Either at a loss (to a potential someones gain), or quite rightly said as a swap. I would do all you can to research these options. I know Smith & Ken have just setup a team to offer Property Swaps. So maybe they can support you.

    I don't believe in Abu Dhabi or even Dubai that 2 beds or 2m aed properties are at 10% rental return on current distress sales. I have seen proof around 8%. Its only the studios/1 beds that get 10-14% currently on our books, and without doubt the best current investment in areas such as Discovery Gardens.

    Wish you all the luck with a good fast resolution on this.
  12. Investoman_uae

    Investoman_uae New Member

    Thank you Tim for your comments. Appreciated!!... I will try to lead the discussion forward and am interested to hear more of what you (and others) have to say.

    The property OP is 2Million. It is a large one bedroom (1119 sq.ft) with sea view, at the entrance of Al Reem with the biggest mall on the island behind it and a marina next to it. Najmat's big marina near the entrance.

    Anyway, thats some info. Currently, if you can find a one bedroom in Abu Dhabi,... how much would you be prepared to pay? I believe the market is at 130K?? Perhaps even more??

    If the rental market continues growin strong with demand outstrippin supply... perhaps in Oct 2010 (completion date)... the rent would be what... 160k? to be conservative? Thats 8% already. It could go more because this tower will be completed amongst the first towers in the island.... and that will be of very high quality (so am told).

    I am not a property flipper. I am a long term investor. I wanted to keep this property and had the intention to do so. But since the bank dropped their LTV from 85% to 65% (70 with your salary transferred to them).... then i was kicked out of that bracket... i have to come up with the next 15% to make a total of 30%.... thats when they will kick in for the remaining 70%. It will be a nice property and i have no doubt they will complete it... they are on their way up.

    Yeah i'll give them a call and see what they will suggest. Thanks for the info.

    You cant really compare Abu Dhabi with DUbai.... because dubai has supply and currently you have JLT and Dubai Marina completing.... you have properties coming to the market.

    In Abu Dhabi you dont have that. This is why demand there is massive. Yields will be achievable i believe once those initial towers complete. 8-10%. ... but 8% is acceptable if the market conditions remain the same in 18 months time.

    We will see!!

    I dont know what to do about the other 15% to be honest!... I spoke to the bank yesterday... they said no chance!

  13. Pietman0_0

    Pietman0_0 New Member

    Contract complication


    I need a little help myself. I have purchased a property in July 08 with a 5% booking fee. Since that date i have not yet signed the contract. My next premium is due on 16th of Jan 09. I have planned to finance the property through AMLAK back in July 08 and unfortunately as we all now they are not providing financing at the moment.

    I have visited my developer's office today to negotiate better terms, so I just inquired what the repercussions are for defaulting. Again i must state that i have not signed the contract. I have merely signed the Payment schedule which suggests 10% to be paid in Jan 09, and then 5% premiums every 3 months till 30% of the property value is paid. The balance 70% will be paid on completion.

    To my amazement the Developer informed me that under new law a person is obligated to pay 50% of the property value in case of defaulting, irrespective whether or not you signed the contract.

    Does that mean if i default today i need to pay the developer 45% of the property value in order to clear my name?

    This makes me really nervous. Can someone please advise. Do i need to speak to a solicitor? If so can anyone reccomend a good lawyer.

    My strategy really is to exit the market now and loose the 5% i have paid to the developer. I have no problem with cutting that loss. Then when Amlak gets back on board i will try to re enter the market and obviously at much reduced property rates, hence getting a much better deal.

    What should i do?

    Any help will be much appreciated
  14. zombie

    zombie New Member

    Have you got the PSA from the developer?

    At the time of purchase what was your original plan regarding the property? How were you planning on financing the property? Did you not get an approval from Amlak regarding the mortgage(i.e the amount, period, finance rate etc.) at the time of purchase.

    What about escrow & construction for the project, when is it slated to begin & complete?

    Second part, is Amlak the only mortgage provider? Can you afford to make payments i.e. 30% of the value, which you have to pay during construction?
  15. Pietman0_0

    Pietman0_0 New Member

    Yes the PSA is directly from the developer. The “Booking form” was signed in July 08. See below:

    July 08: 5% of property value (Booking fee)
    1st installment (10% of property value) 6 months from Booking fee (16-01-09)
    2nd installment (5% of property value) 3 months from 1st installment
    3rd installment (5% of property value) 3 months from 2nd installment
    4th installment (5% of property value) 3 months from 3rd installment
    5th installment (70% of property value) On completion of project

    The property was advertised by the developer and stating that AMLAK will be giving up to 90% financing. I signed the booking form at prelaunch stage. At this stage AMLAK has not yet officially included the said project on their list of approved projects to finance. I was promised by the developer though that it will be available to finance after project is launched at city scape. Unfortunately this was the same time AMLAK declared that they won’t finance anymore projects.

    What I have done though was to obtain pre approval with AMLAK to ensure I can actually afford the apartment. The SP was 1.15M and my pre approval was for 1.55M thus to get 90% finance would not have been a problem.

    AMLAK at this stage is the only mortgage provider for the project and I sincerely believe I should not have fully relied on them to finance this for me. To answer your question “If I can get 30% at least for the construction phase?” The answer is No I can’t. I have always bargained to get the 90% finance which was promised to me can be provided. And with our current market situation I believe it would be more prudent to protect my funds and cut out of this deal only to re enter once the situation with AMLAK is clear.

    The money is paid into an escrow account but only from the first installment. The booking fee was made out directly to the developer. The property is currently at mobilization stage and progressing well. The due date for handing over is September 2010.

    My question though is still whether or not it is possible for me to default on only making the 5% booking fee and walk away without any penalties. Remember I have not signed the contract yet.

    I’m not looking for a refund. Do I need to see a lawyer about this? Thanks for the help
  16. zombie

    zombie New Member

    I think it would be better if you did get legal counsel. Your case with the letter of preapproval from Amlak & their advertisement stating that amlak would finance should work in your favour, but only a certified lawyer can tell you the same.

    Is there any company who is providing finance, if in the past you got a preapproval from amlak I am sure the other finance co would be able to finance it, however I am sure that they have reduced their LTV ratio from 90% to 60/70%, thats going to add to your woes.

    This example is the callousness with which developers have been ripping people off & binding them into contracts on the basis of false promises.
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