Do questions arise regarding missed payments under construction contracts in Dubai? Can a Dubai developer terminate a real estate purchase agreement and retain the money if the buyer misses a payment? The short answer is no, but the process itself is crucial.
Purchasing property during the construction phase has become one of the most popular ways to acquire ownership in Dubai, allowing investors to buy properties at early project stages and distribute payments according to construction milestones. However, when the buyer delays payments, the law does not grant developers unlimited authority.
Lawyer Ahmed Al Zarouni, founder of Ahmed Al Zarooni Advocates and Legal Consultants, asserts that the buyer's failure to meet financial obligations does not give the developer an absolute right to terminate the contract or withhold already paid amounts.
He explained that legislation subjects the exercise of these powers to specific procedures that directly depend on the object's completion percentage.
The issue is regulated by Article 11 of Law No. 13 of 2008 on the Temporary Real Estate Register in Dubai, which was amended by Law No. 19 of 2017.
In case of non-fulfillment of obligations by the buyer, the developer must first notify the Dubai Land Department (DLD), providing details about both parties, the object, and the breached obligations. Then, the DLD verifies the fact of non-fulfillment and sends an official notification, giving the buyer 30 days to settle the debt or reach an amicable agreement. Any agreed settlement must be formalized as an addendum to the contract, signed by both parties.
If the 30-day period expires without payment or settlement, the DLD issues an official certificate confirming the developer's adherence to proper procedure and specifies the object's completion percentage, which determines the developer's next steps.
If the completion level exceeds 80 percent, the developer has three options: keep the contract and demand the outstanding balance, request a public auction of the object to recover the debt, or unilaterally terminate the contract, retaining no more than 40 percent of the object's value. In this case, the remaining amount must be returned to the buyer within one year after termination or within 60 days after resale to a new buyer, whichever comes first.
If the readiness is between 60 and 80 percent, the developer can unilaterally terminate the contract, retaining up to 40 percent, and return the remainder within the same timeframe.
If construction has started but the readiness is below 60 percent, unilateral termination remains possible, but the maximum retention amount is reduced to 25 percent of the object's value.
If work has not yet started due to reasons beyond the developer's control and without their negligence, the developer may terminate the contract and retain up to 30 percent of the amounts paid by the buyer, provided the remainder is returned within 60 days from the termination date.
If the project is canceled by a justified decision of the Real Estate Regulatory Agency (RERA), the developer is obliged to fully refund all amounts received from buyers in accordance with Law No. 8 of 2007 on Escrow Accounts for Real Estate Development in Dubai.
Al Zarouni emphasized that these procedures carry significant legal weight, noting that the legislation treats them as a matter of public order, rendering any violation invalid. Buyers also retain the right to file lawsuits or arbitration claims if the developer abuses their authority, as confirmed by the explanatory note to Article 11.
Al Zarouni concluded: 'Any type of ownership requires legal awareness commensurate with the investment decision. The developer's right to act against a buyer who defaults on payment is not absolute. It is a power whose limits and procedures are defined by law.'