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How to Refund A Deposit for Real Estate Investment?

Investing in properties and real estate has always been favoured by the businessmen and individuals. Investing in commercial properties help people own assets and make more fortune by renting them. But investing in real estate also requires an understanding of property related laws along with finances to invest.

In the UAE, if someone is looking to invest in a real state for commercial benefits or to buy a dream home for themselves, it is good for them to know and understand the related laws. Even though property lawyers in Dubai are always available for their help, yet we have gathered much useful information for those who are looking to invest in the real estate in UAE.

Why Deposit Is Required in The First Place When Renting or Buying A Property.

Understanding deposit is equally important for the buyers when investing in the real estate and for the landlord who is renting out their property to make some money.

Deposit for Buying a Real Estate.

When investing in a real estate project, a certain amount is paid to the developer to reserve a property e.g., Apartment, Villa or Commercial unit. This is to show serious intent and interest from a buyer in the project to proceed with the actual terms of payment. For such a deposit there is usually no contract involved and a receipt is provided to buyer against the deposit amount. One must seek the advice of property dispute lawyers Dubai if not sure about the legality of deposits.

Deposit as a Security When Renting a Property.

Similarly, when renting out property, the landlord holds a certain amount of deposit as security. The purpose of a security deposit is to make sure that tenants return the property in the same conditions and pay all utilities against the property before leaving. A landlord must consult a rental dispute lawyer Dubai to know their rights as a landlord lending a property for rent.

Deposit and Advance Are Not the Same

Many people confuse themselves with these terms if they are the same or different. Deposit is paid as security to ensure either a serious interest in the property when buying it or a security deposit to ensure the return of rented property to a landlord as It was received.

An Advance is a prepaid amount paid as an instalment on completion of a certain stage of real estate project or rent for upcoming months to ensure the tenant wants to hold the rented property further.

Also read this: Legislation for sale & purchase of Property in UAE

Laws About Taking Deposits in the UAE

Legality of a Contract

The property-related laws in the UAE are established to secure the rights of tenants, landlords, buyers, developers, constructors and all other stakeholders. Yet at the time of investing in a property or leasing it, both the parties agree at the terms of contract i.e. between the buyer and seller or tenant and the landlord. When under the agreement the contract decide dispute even when any of the terms contradicts with the law because it was mutually agreed. Therefore, always before getting into such contract, make sure your contract is either drafted by an expert property conveyancing Dubai to secure your rights or being reviewed by a property lawyer in Dubai before you sign it.

Leasing Laws

For a landlord renting their property, it is legally allowed to take and hold some amount as a security deposit from a tenant. The deposit has to be paid back as soon the tenant evacuates the property fulfilling the terms of the lease contract.

When Buying a Real Estate

The security deposit for an under construction or future project, when someone is buying is not legally regulated. It is sometimes defined in the terms of the contract to be agreed by the buyer and how it will be adjusted incomplete payments if everything goes smoothly between both the buyer and seller. But most of the time it is collected with consent and understanding of buyer against a receipt. Since the purpose of the deposit is to secure the deal, the receipt most of the time clearly mentions the amount as Non-refundable.

Accepting such receipt by the buyer in a way shows agreement to it. The amount of deposit in UAE can be as low as 10% of the total amount when the buyer is UAE national and up to 50% if the buyer is living outside the UAE.

Refunding A Deposit.

The refund of the deposit wholly or partially depends on different situations and type of contract.

When A Developer Fails to Deliver

Under the regulations of laws related to real estate in Dubai and UAE, a developer must refund all the payments including initial deposit if they fail to fulfil terms of the property sales agreement. This is applicable when the project is cancelled by RERA (Real Estate Regulatory Authority) for irregularities in construction.

A developer is subjected to refund the amounts, after deducting at most 30% of that, when construction is cancelled due to reason out of control of the developer and without any negligence. The developer, in such case, is also allowed to cancel the agreement making sure to repay as soon as possible or within 60 days of resale of the property.

When Buyer fails to comply with the contract terms

In case the contractual terms are breached by the buyer like missing instalments or not paying as per the agreement, they must discuss their reasons with the developer to convince them to come to the mutually accepted amendment in the contract. If this fails, the developer has the right to report at Dubai Land Department (DLD) who will legally notify the buyer to pay their dues.

Failing to pay even then, the developer has right to cancel the agreement along with claiming up to 40% of the total contract amount and pay the rest to a buyer in one-year time after contract termination. If the developer opts to sell the property, they must make payments within 60 days of sale.

In case, 80% or more of the project is already developed, the developer can sell the property and deduct any amounts balanced by the buyer or can request DLD to auction the property and that deduction includes the cost of the auction as well.

Make sure to seek the advice of a construction litigation attorney to defend your rights in such a conflict. The attorney for a construction dispute will analyze the case properly to help you to resolve the matter. Taking such cases to the court often costs too much and an arbitration process is the most suitable to resolve such conflicts

Find more details: Five Advantages in Having a Property Lawyer with You When Buying a Property in the UAE

When in a lease contract

A tenant must maintain the premise of leased or rented property as it was at the time of handing over. A tenant must inform the landlord 90 days before the end of the contractor as per any mutually agreed terms of the contract to evacuate the premise. The tenant must pay all their last utilities. If all these matters are taken care of, then the landlord must refund the security deposit as soon as the property is evacuated.

Breaching any or all the terms of the contract and causing damages to the property gives the landlord a legal right to charge the tenant from the security deposit.

If you think you have been wrongly charged or are not satisfied by the terms of the for lease you are looking to acquire, do consult with a rental disputer lawyer Dubai before signing any such contract and follow their legal advice.

 Rental Dispute Lawyer Dubai

HHS expert property lawyers can provide you with the best legal advice in UAE. In case of a property dispute, no matter if you are a buyer, a developer, a landlord or a tenant who believes their legal rights have been obscured, must take legal consultation with the highly experienced lawyers in Dubai in our team.

Hassan Humaid Al Suwaidi., LL.B. is a Senior Partner in HHS Lawyers. He has 20 years of experience dealing with high-value and complex cases. Frequently featured in local and international legal directories and commended for his ability to attain favorable outcomes for clients, Hassan has been involved in some of the largest legal settlements. A major part of his work is providing expert legal advice on UAE legislation and acting for individuals and businesses during disputes and litigation.