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Developer Ordered to Compensate for the Shortfall

12/3/2020

Plaintiff, our client, has entered into a sale purchase agreement (SPA) with a semi-government developer in Dubai for the purchase of a residential apartment on 1859 sq ft. Plaintiff filed a case requesting compensation after delivery showed major discrepancies in size.

Facts

Our client (Plaintiff) has entered into a sale purchase agreement (SPA) with one of the renowned semi-government developer in Dubai for the purchase of a residential apartment in the amount of AED3.596.888/-. The SPA stated that the area of the apartment is 1859 sqft in addition to a garden of 1769 sqft and a terrace of 162 sqft.

On delivery of the apartment, Plaintiff noticed that the size of the apartment is less by 8.4%, the garden by 33.25% and the terrace by 32% of the agreed areas in the SPA.

Following unsuccessful attempts to resolve the matter amicably with developer, Plaintiff filed a case before the Dubai Court requesting the Court to order developer to compensate him for the shortfall in the size of the apartment, the garden and the terrace.

Parties’ Arguments

The developer argued that the SPA has only mentioned the apartment not the garden or the terrace (the garden and the terrace were mentioned as supplements to the apartment in a schedule to the SPA). The paid price is only for the purchase of the apartment and buyer has no grounds to claim compensation for the shortage in the size of both the garden and the terrace. Further, developer stated that the price of the sqft of the apartment differs from the price of the sqft of the garden and terrace, thus, the buyer doesn’t have the right to seek compensation for the shortfall in such additional areas at same price of the apartment.

Plaintiff argued that, according to the UAE Civil Code, developer (Seller) is obliged to handover the sold thing in the same condition as agreed between the parties at the time of contracting. Further, the delivery must include all supplemented things to the sold thing and all other things which are considered, according to custom, to be part of the sold thing, despite the fact whether or not it is stipulated in the contract of sale. Therefore, the areas of the garden and the terrace are supplements to the sold apartment even if they were not added to the area of the apartment at the time of the sale.

That being said, pursuant to the provisions of law no. 13 of 2008 (regulating the initial property register), the developer is responsible for compensating the buyer for the shortfall in the size of the apartment. Furthermore, in the event the SPA didn’t stipulate a specific price for the sqft in the garden and the terrace, the price of the same must be calculated at the same price of the apartment.

Ruling

The Court found for the buyer and ordered the developer to pay the buyer the amount of AED706,890.79/- plus 9% interest as of the date of filling the case until full payment of said compensation. In such ruling, the Dubai Court has established that: 1) It is the developer’s obligation to handover the property according to the conditions and specifications agreed upon in the sale contract; 2) The property must be handed over along all supplemented areas to include common facilities (swimming pools, gyms, playing grounds, etc.) and all other things which must be provided for the effective use of the property, according to custom; and 3. The developer is responsible to compensate the buyer for the shortfall in the size of the property or its supplemented areas.

The Plaintiff has collected from the developer the amount of AED 852,418.79/-.

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