What Happen When Property Buyers Unable to Pay Installments


Steps to take when property buyers are unable to pay installments on time.

In the beginning of the pandemic, the developers were willing to make improvements to the payment plan rather than to lose all of their customers. Those developers in particular, who had villas for sale in Dubai projects in 2018–19 but merely got the down payment.

In an installment agreement, the seller of a real estate is required to accept payments from the buyer over a period of time in the form of installments. The buyer is given immediate possession of the property, but the seller retains legal title as security until the full amount is received.

In Dubai, some developers provide rent-to-own property programs, allowing buyers to pay the initial down payment and then installments for a few years, similar to rent, on a monthly, quarterly, or other agreed upon  schedule. The buyer should pay the developer the remaining sum after the rent-to-own program is complete.

The Buyer – Seller Installment Agreement

When a buyer and seller sign an installment contract, the buyer acquires legal possession of the property (which could be land, an access easement or a conservation easement). This indicates that throughout the duration of the installment agreement, the buyer may exercise all of his or her ownership, use, and enjoyment rights in the property.

But the seller still holds the property’s legal title, also known as owning bare legal title. This provides financial security to the seller in the case if the purchaser defaults on the terms of the installment agreement.  In such a situation, one may be able to retake control of the property quickly and cheaply than if a mortgage was to be foreclosed.

For some sellers, an installment payment financing plan is preferable thantaking back financing options as it is safe to keep the ownership of their property until the complete purchasing price is paid off.

What happens when the Buyer is unable to Pay all the Installment?

Common questions that have been observed:

Are rent-to-own programmers permitted in Dubai when purchasing apartments?

Could you please explain the regulations governing the purchase of apartments? For instance, if I sign a contract and only have the money to pay for half of it? Do I lose my payment?

The provisions set forth in Law No. 19 of 2017 (also known as the “Amended Provisional Real Estate Registry Act 2017”), which amends Law No. 13 of 2008, govern the Provisional Real Estate Registry in the Emirate of Dubai. The Dubai Real Property Registration Law No. 7 of 2006, also known as the “Dubai Real Property Registration Law No. 7 of 2006,” and the Dubai Mortgage Law No. 14 of 2008, commonly known as the “Dubai Mortgage Law,” also apply to questions.

The Dubai Property Registration Act No. 7 of 2006, Section 4, states: “Nationals of the United Arab Emirates have the right to own real estate in the UAE.” individuals who are citizens of the Gulf Cooperation Council or whose enterprises are wholly owned by them. Additionally, public joint-stock businesses Subject to the Sovereign’s approval, non-Emirati nationals may be granted the constitutional right on pertinent subjects determined by the Sovereign:

Real estate ownership without a time constraint Usufruct or leasehold rights for a maximum of 99 years.

A buyer in Dubai may also take advantage of the provisions of the Dubai Mortgage Law, whereby he or she may obtain a mortgage on the property they intend to buy or have already bought.

Additionally, depending on the percentage of completion of the property, the buyer may or may not be entitled to receive a portion of the money paid to the developer if they are unable to pay all of the installments on the property. The obligations of the buyer and the developer in the event of contractual obligations are outlined in Article 11 of the 2017 Amended Interim Real Property Register Law.

The developer must first inform the Dubai Land Department (DLD) when a buyer fails to uphold their end of the bargain. The purchaser is then notified by the DLD and given 30 days to complete all contractual responsibilities outlined in the sale and purchase agreement. The DLD may permit the developer to take the necessary steps to transfer the property into its name if the buyer fails to pay the commitments within that time frame. If any money is owed, the developer may refund a portion of the purchase price to the buyer.

Legal Implications

Legal sources claim that the impacted investors can get in touch with the Dubai Land Department to come to an agreement that will prevent them from losing the property for which they have made installment.

However, this is a lengthy procedure. In addition, it’s unlikely that the developer will be able to recover the initial value of their villas for sale in Dubai, if one of the alternatives is to find another buyer, given the state of the market.

It’s absolutely not a favorable situation for the initial property investor to be in.

Developers’ Right to Compensation in the Event of a Buyer Default


The developer has the following rights in the event that the buyer is unable to make payments of their villas for sale in Dubai.

  1. If 80% of the construction has been completed, the developer has two options: either keep all the money received from the buyer and sell the unit at a public auction to recoup the units, or deduct no more than 40% of the purchase price and void the contract.
  2. The developer may deduct 40% of the purchase price and cancel the contract if at least 60% of the construction has been completed.
  3. The developer is allowed to deduct 25% of the purchase price and cancel the contract if building starts but has not yet reached 60%.
  4. The developer has the right to keep 30% of the money paid by the buyer and cancel the contract if events beyond the developer’s control (including the government) prevent construction from starting.

The consequences of the failure to pay installments on time vary depending on the terms of the contract. If a buyer fails to make an installment payment, the seller can take legal action against them. In some cases, this can result in a court order that forces the buyer to sell their property back to the seller at a discounted price.

In other cases, if an installment payment is missed, there will be an increase in interest rates and penalties for future payments. The buyer could also be required to pay for any outstanding taxes or fees before taking possession of their property. Finding out each information related to the property can be a daunting task, Next Level Real Estate can assist you in gathering all the relevant information regarding property installments and any other property related query.

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