Dispute over leasehold properties in Dubai should be heard by Property Court, lawyers claim

Real estate investors in Dubai can claim rights on long term leasehold property and seek re-dress from the emirate’s Property Court in the same way as freehold investors, it is claimed.

Disputes for freehold property are heard by Dubai’s Real Estate Regulatory Authority and the Property Court but until now investors were unaware of which legal authority they could go to in the event of a dispute with their developer in the case of long term leasehold property.

The issue has been highlighted by a dispute between 50 dissatisfied investors and Omniyat Properties over units in The Square project in the Hor Al Anz area in Al Mamzar. The investors claim that the Dubai based developer  has breached their lease purchase agreements by asking for full payment of their leasehold units prior to handover.

‘In most of the Dubai real estate laws there seems to be no distinction between leasehold and freehold,’ said Axel Jacob, a legal consultant with Fichte & Co. ‘It is safe to assume that the legal regime for leasehold properties with regards to dispute resolution rules and procedures are no different than the ones for freehold properties,’ he added.

The investors have already given Omniyat post dated cheques and are concerned these will be cashed while the handover is still pending. They claim that their contract states that only 50% should be paid before handover and the rest in instalments three months after the handover of the project.

Investors also claim that the developer has added four additional contracts to the existing lease contracts which include a mortgage agreement, leasing tenancy contract, property management agreement and a deed of adherence. They have refused to sign these contracts saying the developer is in breach of the initial contract.

A spokesman for the developer denied that new contracts have been issued and that as the emirate’s real estate laws have been evolving over the last three years all it has done is update existing contracts in line with changes in the law.

Meanwhile Abu Dhabi has bailed out struggling Dubai based developer Nakheel to enable it to pay a $4.1 billion sukuk bond due to today. The money is part of a bigger sum paid to parent company Dubai World which recently shocked the world’s markets by announcing it is seeking a six month delay on paying its debts.

‘The Government of Abu Dhabi has agreed to fund $10 billion to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World,’ said Sheikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Supreme Fiscal Committee.

‘As a first action for the new fund, the Government of Dubai has authorized $4.1 billion to be used to pay the sukuk obligations that are due today.  The remaining funds would also provide for interest expenses and company working capital through April 30, 2010 – conditioned on the company being successful in negotiating a standstill as previously announced,’ he added.

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