Dubai: No more will property buyers in Dubai be subjected to a veil of secrecy during their unit purchases. Under the Strata Law guidelines, developers are now obliged to make extensive disclosure statements when selling units in a jointly owned property. Although a limited disclosure regime has been in place since the Strata Law was issued in 2007, "full form" disclosure became mandatory from January 13.
The disclosure statement must include a number of specific details on the project such as an estimate of service charges, anticipated completion and handover date, copies of Jointly Owned Property Declaration, the intended land uses within the building, etc. Developers are obliged to give disclosure for a proposed or an under construction unit, or a completed unit where the title deed is yet to be issued.
"A proposed unit is a unit that is under construction or proposed to be constructed in a jointly owned property, or in a completed project where the title deed has not been issued by the Land Department and the seller is the developer. If the title has already been issued by the Land Department, disclosure is arguably not required," explains Brent Baldwin, associate at law firm Hadef & Partners.
In case of completed freehold buildings where purchasers have already taken ownership, developers are not required to provide disclosure, but are, instead, required to prepare Jointly Owned Property Declarations and create Owners' Associations.
Developer liable for damages
The developer is liable for damages if the disclosure statement is found to be materially inaccurate or incomplete within two years of the date of unit transfer. "A limited form of disclosure has been in effect over the past nine months. If a developer did not provide disclosure in relation to proposed units, they could find that even if the title to a unit has now been issued, they could still be liable for a claim that a contract is void for failing to provide adequate disclosure during the previous nine-month period. But, purchasers would need to obtain specific legal advice on this point," clarifies Baldwin.
Under the new disclosure regime, purchasers who onsell proposed units to third parties are required to give the new purchaser a copy of the disclosure statement received from the developer, and the developer can also be liable to third party purchasers for breaches of that warranty. "But if the building is complete and purchaser has taken ownership, they can onsell without providing disclosure information to the purchaser," Baldwin adds.
Although a Sales And Purchase Agreement (SPA) for a proposed unit can be rendered void if the developer has failed to provide the purchaser with a disclosure statement, legal experts are still debating how the courts will apply this in practice. "It is possible a purchaser will be able to get out of an SPA without application to the courts," he hints.
With the vast majority of the developer breed dragging its feet on strata compliance, it remains to be seen whether this regulation will be flouted or followed. "We have, however, noticed an upturn in developers seeking to comply with the disclosure requirements," Baldwin says.
Homeowner view
- From Jan 13, developers are required to provide full disclosure to unit buyers.
- If a sales contract has no disclosure statement attached, it can be made void.
