An Overview on Joint Development Agreement in Real Estate in UAE

16 Mar 2022

A Joint Development Agreement (JDA) is a contract between two or more companies to find the terms of the development of any particular project. There are two options to building the transaction:

  • To establish an entity where the landlord and Real Estate developer are shareholders.
  • To enter in a Real Estate Joint Development Agreement.

In the JDA, we can apply the following legislation: Federal Law Number 8 of 1984 (the Companies Law), Federal Law Number 5 of 1985 (the Civil Code), Federal Law Number 11 of 1992 (the Civil Procedure Law), Federal Law Number 18 of 1993 (the Commercial Transactions Law) and Laws issued by the Dubai Land Department (DLD). The responsibilities of the landlord and the Real Estate Developer are as follows:

1. Responsibilities of the landlord in the JDA

  1. The landlord must provide all the property documentation such as the title deed, proprietorship documents, valuation of the land, proof of permitted use, etc.
  2. The landlord should afford the developer all the necessary approval and authority to act on behalf of the landlord to sell the project’s units.
  3. The property owner must not obstruct the developer’s development of the project.

2. Responsibilities of the Real Estate Developer

  1. The developer guarantee that the transaction and development will comply with the legislation in UAE.
  2. The anticipated conclusion date has been set.
  3. The application for the escrow account.
  4. The developer should link with the mandatory regulatory authority such as the DLD, Dubai Municipality, and the General Directorate of Civil Defense.
  5. The developer shall be licensed to develop real estate in the UAE.

In UAE, the requirements for the property development structure comprise the following:

  • the property shall be registered in the name of the property owner,
  • the property may not be mortgaged (if hypothecated for the development of the project, the incomes of the mortgage must be paid into the escrow account recognized for such development project).

Considering the financial and technical commitments, developers need that they share in the general profit of the development project. Developers defend their investment and capital contributions by controlling the last sales, both in terms of the sales prices and the procedures. On the other hand, projects are not funded from third-party money alone. The parties must finance and employ their resources, especially at the beginning of the project. The banks will not fund 100% of the obligatory project budget as the regulations require 20%-25% unleveraged impartiality in a project. In relation to off-plan projects, the funds from the sales and financing are detained in the project escrow account and unrestricted on the progress of the project, which is expected to protect the interests of the buyers.

The parties shall decide that after obtaining the conclusion certificate and registering the units in the land registry, proprietorship of the property and building on it will permit individual buyers of the units, in line with the individual buyer’s unit prerogatives. During its completion, parties should have not the right to terminate the JDA or the project. The Joint Development Agreement will expire when the construction has been accomplished, and the acquired units have been registered in their names in the land registry.

For instance, in a case where a party has constructed a project on the land of another is Case Number 307 of 2010 of Court of Cassation; the Company gave a piece of land to a person for their “use” in an unregistered agreement. The governmental authority started legal action against the defendant to assign a specialized expert to designate the actual rental cost of a house on a plot located in Al Satwa between 8 April 2000 till the date of the expert’s suggestion’s report. The governmental authority also requested for the expert to establish the damages suffered to the property along with a statement of the required maintenance charges to be suffered due to the defendant’s use of the property. The government authority also requests the Court to estimate the compensation due to the above-mentioned compensations of the defendant’s eviction. The defendant opposed that he had a will with the property issued to him. He also submitted a request to the DLD to register the house under his name and conduct an examination to show that his money’s development was built. However, he had started this process while he was still contending the legitimacy of the above-mentioned will in the Court. First, the Court rejected the defendant’s prerogatives and ordered the defendant to pay a sum of AED 945,218 to the litigant or the rental value of the property. Additionally, the Court requested the defendant to pay an amount of AED 129,600 as a yearly rent for 12 February till the abdication date plus AED 100,000 as maintenance costs. However, the defendant filed an appeal requesting the Court to cancel the decision delivered by the Court of the first instance. The appeal court decided to modify the justice dispensed by the Court of First Instance by reducing the amount agreed as rent to AED 700,418 for the period of 2003 to 11 February 2009 and approved the other amounts. After, the parties filed a case at the Court of Cassation under case Number 307/2010 and case number 308/2010. The Court of Cassation rejected the judgment issued by the Court of Appeal and ruled in favor of the judgment issued by the Court of 1st Instance. If you any legal assistance in real estate related issues, you can reach out to the well known real estate lawyers in Dubai