The Off-Plan Buyer Who Wants Out
In 2022 Layla signed an off-plan sale contract for an apartment in a Dubai project for AED 1,800,000, paying 40% (AED 720,000) in instalments tied to construction milestones. The developer is now 18 months behind the promised handover date. The project is registered with the real estate regulator and the developer holds the required escrow account, but Layla discovers that AED 200,000 of her payments were not deposited into the escrow account. She wants to cancel, recover everything she paid, and claim damages. The developer says the delay is due to 'market conditions' and offers a 5% discount on the balance. The contract contains a clause stating that 'the developer may extend the handover date by up to 12 months without liability.'
1. Can Layla cancel and recover her payments? Analyse the grounds.
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Layla has two independent grounds, and they should be pleaded separately.
1. Delay / non-performance. An 18-month delay beyond a contractual extension is substantial. The 12-month extension clause covers only 12 months; the remaining six months are unexcused. 'Market conditions' is generally not a force-majeure excuse for a developer's own construction delay, and the burden is on the developer to prove an event beyond its control. This supports termination and restitution of payments.
2. Escrow breach. Payments must be deposited into the project escrow account. AED 200,000 was diverted. This is a regulatory violation and a serious breach going to the heart of the off-plan regime, which is designed to protect buyers. It strengthens cancellation and may support a complaint to the regulator.
Recovery: On cancellation Layla can seek restitution of the AED 720,000 paid, plus damages for delay. The escrow breach supports a claim that the developer acted unlawfully, weakening any retention-of-payments defence.
2. How should the 12-month extension clause and the developer's 5% offer be treated?
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Extension clause: It is valid only to the extent it is clear and does not defeat the buyer's essential purpose. A 12-month extension is potentially enforceable, but:
- it does not cover the full 18-month delay;
- it does not excuse the escrow breach;
- if it operates as a blanket exclusion of all liability for delay, it may be challenged as an unfair term or as contrary to the protective purpose of the off-plan regime.
Layla should accept the clause's validity for 12 months but argue that the remaining six months are a breach entitling her to terminate.
5% offer: This is a settlement proposal, not a legal defence. Accepting it may be treated as a waiver or compromise if documented carelessly. Layla should reject it in writing, expressly reserving all rights, and not sign anything that characterises the discount as full satisfaction.
Practical step: file a complaint with the real estate regulator regarding the escrow shortfall, and preserve all payment receipts and the escrow deposit records.