Background & Facts
On 19 July 2024, our client entered into a Unified Sales Contract (Form F) for the purchase of a villa in Dubai for AED 2,295,000, with a contractual expiry date of 30 August 2024.
Pursuant to the Contract, our client issued a 10% security deposit cheque in the amount of AED 255,000.
The Contract expressly provided that the party in breach would be liable to pay 10% of the contract value as compensation.
Our client was purchasing the property through bank financing. The mortgage process was completed, and final bank approval was obtained. However, issuance of the manager’s cheques was subject to the developer’s NOC – a procedural requirement linked to the seller’s cooperation.
During the contractual period, market prices increased. The seller began delaying performance and ultimately allowed the Contract to expire, subsequently selling the property to another buyer at a higher price. The seller later alleged that he had not been aware that the purchase would be mortgage-financed.
Pre-Litigation Steps
We attempted to complete the transaction amicably. Two formal legal notices were served upon the seller and the broker, outlining the legal consequences of non-performance.
Despite the Contract’s expiry, we expressly indicated our client’s willingness to grant a reasonable extension to facilitate completion. All attempts to reach a settlement were unsuccessful.
Legal Proceedings
We initiated proceedings seeking:
- Return of the AED 255,000 deposit;
- Payment of an equivalent amount (10% contractual penalty);
- 5% legal interest from the date of filing until full payment; and
- Court fees and costs
The seller filed a counterclaim, asserting that:
- Our client lacked sufficient funds;
- The purchase was not disclosed as mortgage-based; and
- Manager’s cheques were not available prior to Contract expiry.
The Court of First Instance referred the matter to an accounting expert. Despite detailed submissions on our client’s compliance, the expert concluded that both parties were at fault.
Court of First Instance Judgment
The Court dismissed both the main claim and the counterclaim, holding that there was mutual fault, and each party bore its own costs.
Court of Appeal – Successful Challenge
We appealed the judgment, highlighting the legal and factual errors in the expert’s findings. We specifically requested exclusion of the portions of the expert report incorrectly attributing breach to our client.
The seller also appealed dismissal of his counterclaim. The appeals were consolidated.
After reviewing our submissions, the Court of Appeal held:
- The expert had erred in finding that our client breached the Contract.
- The bank’s inability to issue manager’s cheques was directly linked to the seller’s failure to cooperate and complete his obligations.
- The seller’s withdrawal from the transaction constituted a clear contractual breach.
The Court of Appeal overturned the lower court’s decision and ordered the seller to:
- Return the 10% deposit in the amount of AED 255,000;
- Pay contractual compensation of AED 255,000 (10% of the sale price);
- 5% legal interest from the date of filling the case until full settlement; and
- Bear all court fees and costs.
The seller’s appeal was dismissed in full.
Enforcement & Recovery
The judgment was submitted for execution. Through court enforcement measures – including attachment of the seller’s bank accounts – we successfully recovered: AED 594,461 representing the awarded amount, interest, and court costs.
A Landmark Win in Real Estate Litigation
This case is a strong reminder that contractual rights under the Unified Sales Contract (Form F) are enforceable, and that opportunistic breaches driven by market fluctuations will not be tolerated by the Dubai Courts.
The evidence clearly demonstrated that the seller attempted to withdraw from the Contract to capitalize on rising market values. The Court of Appeal recognized that:
- The buyer had fulfilled his financing obligations;
- The delay was attributable to the seller;
- The seller’s conduct constituted breach; and
- The contractual 10% penalty clause was enforceable.
The ruling restored fairness by ensuring that the seller did not unjustly profit from non-performance, while compensating our client for losses resulting from the aborted transaction, particularly in a rising market environment.
How can we help?
Real estate transactions in Dubai can give rise to a variety of disputes between buyers and sellers, including delays in transfer, refusal to complete the transaction, breach of the Unified Sales Contract (F), disputes relating to deposits, mortgage-related delays, misrepresentation, or failure to obtain required developer approvals.
If you are involved in a real estate transaction and encounter such issues, obtaining early legal advice can be critical to protecting your position. You may contact Motei & Associates for a confidential discussion to assess your legal rights and the practical options available to resolve the matter.