A real estate court in Dubai has ordered a property developer to refund Dh185,000 to an investor, ruling that significant construction delays justified reducing the amount the company could retain after terminating the contract.
The court also awarded 5 percent legal interest from the date the lawsuit was filed until full payment is made. It cut the developer’s retention entitlement from 40 percent to 10 percent of the value of the off-plan unit.
The dispute began in 2017 when the investor purchased three units in a residential project, including one valued at about Dh463,000. The unit was scheduled for handover by the end of 2018, with a contractual extension allowing completion until December 2019.
Court records show the investor paid approximately Dh231,000, nearly half the unit’s value, plus registration fees before halting further installment payments.
However, a report from the Real Estate Regulatory Agency indicated that construction progress had reached only 15.17 percent by January 2019. The project was eventually completed in February 2023, more than three years after the final agreed deadline.
In 2023, the developer sought payment of the remaining installments. When the investor failed to pay, the company initiated termination procedures under Dubai’s off-plan property law, cancelling the unit’s registration and retaining the amounts already paid.
The investor did not contest the legality of the termination but filed suit to reduce the penalty, arguing that the prolonged delay amounted to a contractual breach and that his funds had been held by the developer for years.
The developer argued it was entitled to retain 40 percent as permitted by law and said it had issued a manager’s cheque covering part of the amount.
The court ruled that while developers may retain a percentage of payments in termination cases, judges have discretion to determine a fair amount based on the circumstances. It found that the extended delay constituted a serious breach and that retaining the maximum percentage would be unjust, especially since the developer had regained ownership of the property and benefited from the payments since 2017.
The court limited the retention to 10 percent of the unit’s value and ordered the developer to refund the remaining balance, along with legal interest, court costs, and lawyer’s fees.
