A landmark ruling by Dubai Courts has gone in favour of a Claimant deciding that “floating villas” are indeed real estate properties and not ships in terms of the UAE Maritime Code.
The renowned developer's default in completing/handing over the project, on account of its novelty and the delay in obtaining the NOCs from the main developer or delay in obtaining the necessary licenses from government agencies, do NOT qualify or classify as Force Majeure events.
Our lead Counsel in the Middle East (Mr. Ashraf El Motei) representing the Claimant explains;
FACTS of the case
On 30 December 2015, the Claimant had entered into sale purchase agreements (SPA) with one of the renowned developers in Dubai, (Developer/Defendant) for the purchase of two “floating villas” at the iconic World Islands project in Dubai. The Claimant had agreed to pay the amount of AED 12 million, of which the Claimant had paid 80%. As per the SPA, the project was to be
completed by 1 March 2017, however by the end of 2019, the project was still not completed, and the possession of the villas was not delivered.
Following unsuccessful attempts to resolve the matter amicably with the developer, the Claimant decided to file a case before the Dubai Court to terminate the SPA and with the request for the developer to refund the already advanced amounts paid along with interest.
PARTIES’ ARGUMENTS
DEVELOPER’S ARGUMENTS:
The developer primarily argued that the case was not maintainable and therefore could not be heard before the Dubai Real Estate Court as it pertains to “floating villas” which are deemed ships and are not subject to trail before the Real Estate Court. The developer had further argued that it was due to Force Majeure events that had caused delay in the completion of the Floating villas project. These delays were on account of several factors. First, since the project was the first of its kind in the UAE and the Middle East at the time, the main developer had delayed in issuing the No Objection Certificate (NOC) for the construction of this project. Second, the government agencies had also delayed in issuing the necessary licenses. Third, the project is built on an island at sea, therefore weather fluctuations stopped the project at various intervals, as such the marine tankers were unable to transport the labourers and materials to the project site. Especially since this event is a natural event, it falls under the Force Majeure clause of the SPA. Fourth and final, the project was not registered with the Dubai Land Department (DLD), because floating villas are ships and not real estate properties.
Claimant’s ARGUMENTS:
The Claimant had argued that the villa is neither a ship nor a boat, according to UAE Maritime Laws, since floating villas cannot sail by themselves, they cannot be termed as ‘ships’, thus, in terms of the applicable UAE Real Estate laws, floating villas or boathouses are deemed real estate properties.
The Claimant further argued that there was no case of Force Majeure. There is a legal obligation of the developer, before starting the project or selling units, to obtain the NOCs and all the necessary licenses, whether it is from the main developer or from any relevant government agencies, so the delays occurred as a result of its own mistakes. Thereafter, the delays accruing to weather fluctuations, as claimed by the developer were not unexpected accidents, and should have been taken into consideration prior to determining the date of completion.
COURT RULING
The Court found in favour of the Claimant and ordered the termination of the SPA and the Developer to refund the paid amount of (AED7,400,000/-) plus 5% interest as of the date of filling the case until full payment of said compensation is discharged, along with the entire costs of the litigation.
This judgment was passed by the Court of Instance, however, aggrieved by this decision, the developer subsequently appealed before the Court of Appeal, which rightly upheld this decision. Thereafter, the developer again challenged the judgment of the Court of Appeal to the Court of Cassation. The Dubai Court of Cassation decided to uphold the judgment passed by the First Court of Instance, making it final and enforceable against the Defendant.
For further details on the above case, or if you are encountering problems with an investment in the UAE or simply would like more information on our services, a member of our team will be happy to take your call on a confidential basis at 01438 840258 or via email to admin@judicaregroup.com or even arrange a teleconference with Mr. Motei via Zoom/Skype conference to discuss the matter.
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