Thread Status:
Not open for further replies.

Taking our money from Escrow Accounts

Discussion in 'Dubai property' started by Datum1m, Nov 24, 2008.

  1. Datum1m

    Datum1m New Member

    I have questions that need answering by an expert

    1) With respect to Escrow accounts, I understand that the developer can legally claim the following amounts from an Escrow account without actually starting the on site construction or even appointing a Building Contractor.
    a) He can ask the Escrow account manager to release 5% of the total development sales value for Marketing and Advertising expenses.
    b) He can ask the Escrow account manager to release 5% of the total development sales value to pay for his company’s administration costs, which he incurred during his Marketing campaign.
    c) He can ask the Escrow account manager to release money from the total development sales value to pay for his land purchase, which could equal another 20%
    d) The Developers are asking Escrow account managers to allow them to draw money from their clients Escrow accounts to buy raw materials such as steel reinforcement bar, stating they need to take advantage of market prices and the Escrow account managers are giving in to their demands, without any dialog with the Investors.

    2) I have looked at the RERA web site and all the Laws are made by HH Mohammed bin Rashid Al Maktoum, Ruler of Dubai, but I note the interpretation of the Law 13 dated 10th November is signed by Sultan Butti Bin Magrin. So does he have the power to overrule a Law written and blessed by the Ruler of Dubai and if it is just the Land Departments interpretation of the Rulers Law then can’t this interpretation be taken to task within a Dubai Court. And as Investors can we not get the Ruler of Dubai to come forward and tell us why he is allowing the Land Department to twist and misrepresent the wording of how his Law was originally written.

    Your valued input on these important issues would be most appreciated

    Regards

    Nigel.
     
    Last edited: Nov 24, 2008
  2. propertyconsultant

    propertyconsultant New Member

    Hi Nigel,

    I can note pretent to be an expert in the matter but i am sure that the developer can ask the escrow manager to release some money from the escrow account for the different reasons you mentioned in your post. However, i am not sure about the percentage you mentioned. Also, i heard that the accounts can be audited and if they find irregularities, the developer can be fined and even can hold his license.
    Experts opinions are certainly welcome, we are listening!

    propertyconsultant
    dubaipropertycrisis dot blogspot dot com
     
  3. Ajmanprop

    Ajmanprop New Member

    Nigel:
    In answer to your questions on drawing from the escrow account - there is a forum set up for investors who are trapped in the Dubai Lagoon project (SCHON). Based on the posts there - a lot of discussion about RERA and similar queries. No concrete answer, but your understanding seems to be at least partially / fully correct. The URL is below.

    dubailagoon - proboards81 - com

    Re: Part 2 of your question, the article may shed some light. I came across this today, and posted it in relation to another question. By the way, there was a comment by another forum participant - that the law firm that authored the article is pretty reputable.

    Hope this helps.

    ----------------------------------------
    Mod: If reposting is not permitted, pls delete. I cannot post the URL, so did a cut and paste of the article.


    This is an interesting piece - from Wadi online - Story #6842.
    (news - wadionline - com)

    Disparate circulars add to confusion
    Publish Date: 2008-11-24 02:00:05 Story Code: 6842

    This article, the latest in a series of articles we have published regarding aspects of Dubai's legal regime, aims to answer some questions created in the wake of certain recent real estate legislation in Dubai. This legislation was issued in order to organise Dubai's real estate legal regime, but has instead opened the door to disparate circulars designed to clarify, modify or amend existing legislation, thereby exacerbating the confusion and deepening the chaos.

    The latest contribution to the recent real estate legislation was the Administrative Circular issued on November 10, 2008 explaining inter-alia Article 11 of Law No. 13 in relation to the Organisation of the Preliminary Land Register in the Emirate of Dubai for the year 2008.

    Article 11 provides that:

    "1 - In case the Buyer violates any of the terms and conditions of the real estate unit sale agreement entered into with the Developer, the latter should notify the Department of the same. Then the Department shall give the Buyer, whether in his presence, by registered mail or by e-mail, a deadline of (30) days to fulfil his contractual obligations.

    2- In case the deadline indicated in Paragraph (1) hereof expires without fulfilment by the Buyer of his contractual obligations, the Developer may revoke the agreement and return the amounts received from the Buyer after deducting maximum 30 per cent of the amounts paid by him."

    Clarification needed

    Article 11 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. Article 11 mandates liquidated damages in favour of developers, limiting the judge's discretion in assessing the damages, in direct violation of the UAE Civil Transactions Code. This situation begs legislative clarification. However, instead of waiting for such clarification, the Land Department issued the Administrative Circular.

    For the sake of argument the second clause of the Administrative Circular provides that "in case the contract is cancelled, the developer may retain 30 per cent of the contract's value, and the rule of (30 per cent-70 per cent of the money paid) shall be applied on amounts exceeding 30 per cent". Article 11 is clear when it states that if the buyer does not fulfil its obligation under the agreement, then the developer has the right to cancel the agreement and "return the amounts received from the Buyer after deducting maximum 30 per cent of the amounts paid by him".

    In contrast, the Administrative Circular interprets Article 11 as follows: "in case of cancelling the contract, the developer may retain 30 per cent of the contract's value, and the rule of (30 per cent - 70 per cent of the money paid) shall be applied on amounts exceeding 30 per cent". In examining this clause and comparing it to Article 11, it is clear that the Administrative Circular has the effect of amending and adding to Article 11.

    In our view, Article 11 is very clear and the Administrative Circular contradicts Article 11's intent. Article 11 was issued by the highest authority in Dubai. By law, an administrative decision may explain the law but may not amend it or add to it. Therefore, the Administrative Circular is, in our opinion, illegal. In addition Article 15 of Law No. 13 states that "this Law shall be published in the Official Gazette and come into force from the date of its publication". On the other hand, clause 5 of the Administrative Circular stipulates that "Law number 13 shall be implemented with immediate effect, therefore the contracts executed prior to the Law shall be subject to the terms of the contract entered by the developer and the purchaser, but the contracts executed after the enactment of the Law shall be subject to the rules of the Law." The law cannot come into force with immediate effect when its basis must necessarily follow publication. The Administrative Circular cannot amend Law No. 13 and enlarge the scope of Article 15 beyond its legislative intent.

    The Land Department should have waited to issue administrative circulars till the requisite Executive Orders are issued. Laws exist to further justice and not to give a party such as the developer or the buyer an advantage over the other.

    If the implementation of laws and regulations grant advantages to the developers at the expense of buyers and/or investors, it would likely discourage investors and buyers, which in turn would negatively impact the economic boom that Dubai is experiencing.

    - The writer is managing partner of Dubai-based Habib Al Mulla & Co law firm

    © Gulf News 2008. All rights reserved.
     
  4. Ajmanprop

    Ajmanprop New Member

    Nigel:
    There is a user by the name of ESCROW_OFFICER - answering questions under the Thread titled
    "ESCROW RELATED INFO". You may want to ask the escrow related question there.
     
  5. escrow_officer

    escrow_officer New Member

    As per Latest Rules & regulations.


    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.



    Thats why I say please put your money into escrow " Directly ". I have seen another post where buyer claims developer ran away with his 1.1M. I am sure he didnt put that money into escrow account of that project.

    Please becareful " if it is a Hard Earned money of urs. "

    Regards
    Escrow
     
    Last edited: Nov 24, 2008
  6. Datum1m

    Datum1m New Member

    It would seem to me reading the Solicitors opinion, that there is a reasonable amount of doubt concerning the legality of the interpretation issued by the Land Department of Article (11) contained within Law 13. Is it therefore not possible for the Investors to jointly go to the Dubai High Court and have an injunction put against the Land Department stopping them from cancelling contracts based on their interpretation until the Ruler or the High Court clarify its legal status?

    Would this not happen in any other mature country where peoples rights are put at risk and doesn’t Dubai want to show the investors around the World that it is a fair place to invest and that it does not buckle under the pressure from weak and under financed Development Companies. I have been told the Law was changed because the Government felt the Investors would take their 70% refunds and leave the country with the money, but what do the Government think the Developers will do with our money, do they really think they are going to stay with know one buying their off plan units.

    What a complete and utter mess.
     
  7. zombie

    zombie New Member

    Nigel, I had the "priviledge" of reading through law 13 downloaded from RERA website, the language is "may" revoke the agreement, WHATIF the developer decides not to revoke your agreement, as supposedly EMAAR is doing, then what??

    This mess will take time & a lot of negotiation.

    UNfortunately I believe that only few of the major developers will come to the table, those people who invested through private developers are going to lose their money.

    Who says Crime doesn't pay, Its very easy for the guy with money to run, get another passport in another name & you can probably go anywhere, palms can be greased. Even if you were stupid enough to be caught, would you not sit in prison for any period of time, if you knew at the end you OR your family would have access to a big lumpsum burried somewhere. MONEY TALKS IN THIS WORLD. THERE IS A SAYING "OWE THE BANK A MILLION & THE BANK OWNS YOU, OWE THE BANK 100 MILLION & YOU OWN THE BANK"
     
  8. saiqa khan

    saiqa khan New Member

    escrow acc

    MY developer is asking me to take the ready appts from him in anyother project against my money and sign infront of escrow so that his that much amount which he has to give me,will be released..is that possible?if yes then whats the procedure and how much time escrow will take to release the money??
    kindly reply...
     
Loading...
Thread Status:
Not open for further replies.

Share This Page