UAE Property: ‘Will my money in escrow be refunded for a stalled project?’

Question: I invested in a property in Dubai in 2008. The project did not take off. We were promised that the project would be liquidated and the money returned to investors but this has yet to happen. I had taken a mortgage to pay for this unit, so I have had to pay back a loan with interest. I was told that my money was put into an escrow account , can it not be released? When a fellow investor who had bought a unit in the same project went to the site recently, they found construction on another development progressing. I live overseas. Who can I approach for this matter to be resolved? MN, Belgium Answer: Developers in the past were able to sell units from projects that didn’t have escrow accounts in place. Thankfully many changes to the real estate laws have now taken place in Dubai, which protect any investors entering into transactions with developers. The only way any money that is now sitting in an escrow account can be withdrawn or distributed is with a court order. I’m sure you have entered into discussions with the developer, but if you have not received any satisfaction due to the long delays, you will be able to find a solution only by filing a case at the Dubai courts. They will have the power to instruct the developers to compensate any investor or to get any of the money invested back, especially if the project has been officially cancelled by the Real Estate Regulatory Authority. My advice would also be to appoint a law firm to fight your case and if you live abroad, it would also be useful if you appointed a power of attorney to help you so you will not need to travel. Q: I recently invested in a studio in Dubai. I purchased the ready unit at a competitive price and am confident that it will appreciate in price in the next few years. I’d like to earn rental income from it. Is it more lucrative to rent it out short term as a holiday home or opt for the traditional one-year lease? If I opt for the former, can I handle it myself or is it recommended to go through a property management company? Do they charge exorbitant fees, which will erode my returns? Are there any disadvantages for short-term rentals? Will my unit get damaged quicker because many customers will be using it? How do I decide if I should live in the unit myself or rent it out? I am confused. JJ, Dubai A: Buying a property as an investment, especially long-term, will give you a great rate of return but deciding whether to rent out your studio either long-term or short term is a personal preference. I would urge you to do your research to ascertain what would work better for you as there are pros and cons when deciding, so I’ll list a few here so you can choose yourself. Firstly, not knowing exactly where the studio is will blind me in my advice to you, but if it is in a popular location, renting short-term could financially be more rewarding, especially during high season. You can rent it short-term yourself, but you would need a licence from the Department of Tourism and Commerce Marketing. If you do not have this, I suggest it would be better if you employ the services of many short-term rental companies that operate legally via their own licence granted by the same authority. The fees vary and I would urge you to do your research and due diligence before deciding what’s best for you. When renting short-term, there are a few disadvantages,. One would be the constant wear and tear of your unit with many different people staying and living differently to others, so the upkeep and obligatory requirement of cleaning and ensuring all is 100 per cent satisfactory could take its toll. There is also the threat of noise, as some guests may hold parties or could be a nuisance to your neighbours, so this is definitely something to think about. The rent amount can be constantly evaluated as the unit will always be available to others when vacant. Renting long-term gives you potentially less income but more peace of mind as you will be able to have a business relationship with your tenant and lay down more concrete rules or regulations of how things get done, etc. Remember that both options will still give you any appreciation on the unit provided the market continues to increase over the years. The rent at renewal is subject to the Dubai Land Department rent calculator, which is regulated, so the rent will always be at the mercy of this and not calculated by market conditions. Whether you live in or rent the property can be decided only by you. If you need a place to live and the location of your studio suits you, I suggest you live there. However, if you decide that the income from either short or long-term renting of the studio is greater than any rent you will have to pay should you decide to live elsewhere, you ought to consider renting the studio and find alternative accommodation for yourself. Mario Volpi is head of brokerage at Novvi Properties and has worked in the property sector for 40 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario@novviproperties.com