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Dubai Ruler Issues New Law on Real Estate Projects Cancelled/Unfinished

As per the new decree issued by Dubai Rule and UAE Vice President, HH Mohammed bin Rashid, a special committee will be set up for overseeing liquidation of unfinished and/or cancelled construction developments and regulate such projects within Dubai. The special committee is referred to as the Special Tribunal for the Liquidation of the Cancelled/Unfinished Real Estate Projects. This new entity is responsible for conducting surveys of claims that are related to all cancelled developments in Dubai.

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The special tribunal, according to Dubai Judicial Council, will also be responsible for the following:

  • Resolving all disputes and complaints that weren’t finalized by previous committee set up by the emirate for the same purpose (for unfinished and/or cancelled projects) 
  • Define the rights and obligations of purchasers and investors following liquidation of assets of all cancelled projects 

In addition, cases related to the suspended and/or rescinded projects can’t be filed with any local court in Dubai, even in DIFC Courts as the new tribunal has complete jurisdiction with all related real estate disputes. All judgments that are made by the new tribunal will be considered final and incontestable. All decisions will also be executed at the Execution Court of the Dubai Courts. 

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What are the causes of cancellation or suspension of Dubai construction projects?

A real estate project in Dubai can be led towards failure and cancellation or suspension for various reasons, including the following:

  • Lack of leadership – A construction team has to be driven by the project leader who possesses not only the best expertise, but also sound decision-making ability. A project leader of a real estate construction in Dubai is required in making the correct decisions during the appropriate time as all poor choices can have extreme repercussions with a project’s progress. Lack of supervision also deteriorates efficiency of a project, leading to schedule and budget overruns. Eventually, conflicts among the team members arise and the conflicts affect various tasks that are interdependent. 
  • Poor communication – Poor communication of the managers of real estate projects with the stakeholders and cross-disciplinary teams can lead to a huge communication gap. This further causes low productivity and organizational chaos. 
  • Insufficient planning – Poor project planning is a prominent reason as to why real estate projects in Dubai are cancelled or left unfinished. Construction projects will be spinning out of control without proper planning. Real estate development planning includes defining the management strategy; however, insufficiency or lack of efforts towards crucial factors can lead to project failure. This includes: project scope, task dependencies, work breakdown structure, project risks, project resource schedules, delivery schedules, site surveys, and logistics. More often than not, the use of silos of spreadsheets and conventional tools for project management can cause inconsistencies because updates aren’t made available in real time. There may also be alteration with the scope with the project’s scope undergoing changes, most especially with the scheduled plans. Any miscalculation with the work breakdown structure, including cost of labor and supplies and a changing market condition contribute to massive loss. 
  • Cost overruns – Cost overruns with real estate projects in Dubai are uncertain expenses which have exceeded the initial budget estimates. It’s often the due to the changes in the estimates or scope and delays with completing tasks because of incompetent resource allocation. Schedule delays can also happen because of several different reasons such as resource shortages, weather conditions, machinery failure, and conflicts or risks. 
  • Failure in making a contingency plan – Due to state lockdowns and unprecedented pandemic conditions, a project operation in Dubai can come to a halt. Construction is most definitely a risky business. As there are complex real estate projects that have tight schedules, they become even more difficult. Without the ability of formulating a contingency plan, construction projects in Dubai are cancelled or suspended. In order to mitigate risks, contingency plans of managers should consist of hiring contingency labor and buying insurance plans.
  • No proper approvals – There are investors that start projects in Dubai too early as they assume processes have been approved already or they are guaranteed to get approvals later on. There can be aspects of real estate projects in Dubai which are changed or rejected altogether. This greatly affects project budgets. Not having comprehensive plans set out to secure the right permits for construction is one of the main causes for construction cancellation or suspension.

Property lawyers in Dubai 

It’s advised to consult with property lawyers in Dubai for all legal matters related to real estate development in the emirate. Form planning to the completion or liquidation of a cancelled construction project, property lawyers in Dubai from HHS Lawyers represent the best interests of investors, architects, contracts, suppliers, and subcontractors. Our property lawyers in Dubai work proactively in assisting clients, most especially with submitting claims, fulfilling regulatory deadlines, and terminations. Call us today to know more!

Hazim Darwish

Hazim Darwish, is a Senior Partner of HHS Lawyers in UAE. Practicing law for almost a decade, he has in-depth knowledge on UAE legislation with particular expertise on legal drafting, contract drafting, labor disputes, family law, and regulatory compliance for business organizations. Hazim Darwish also provides counsel on legal rights and obligations in the UAE to clients, including individuals and businesses subject to investigation or prosecution under Criminal Law by major regulators.