Broker’s activities are regulated by the Real Estate Brokers Register in Dubai under bylaw No. 85, and under this law is a broker’s defined as “any person who undertakes real estate brokerage business in accordance with this bylaw”.But the economic bounty that property has brought to the country has a fraught history, with the rapid pace of development leading to a burst property bubble during the recession years. Big lessons were learned as a result of this and new bylaws introduced. However, laws were already in place governing the responsibility played by the property brokers who act as intermediaries in negotiating property deals.
If, as is happened commonly during the recession, property developers fold, file for bankruptcy or flee the country, the duties of the broker to the buyer will come under close inspection.
The broker, who has provided information on the property and helped match the buyer with the developer, must have acted according to the code of ethics encapsulated under bylaw No. 85.
That means the broker must have acted in a transparent manner in his role as broker, he must have provided all necessary, accurate details about the property to the buyer and have put the buyer no duress or pressure to purchase the property.
This requirement does not relieve the buyer from their duties of due diligence when considering a purchase and some level of sales tactics on the part of the broker will be deemed permissible. Because the terms of a sales and purchase agreement will by-and-large exist only between the purchaser and developer, the buyer should take all precautions in properly investigating both the property developer and the property broker before embarking on a negotiation.
Questions a potential purchaser would be well advised to ask include checking whether the broker is licensed to operate in Dubai; whether the project is licensed with the Dubai Land Department (DLD) and whether an escrow or trust account exists to hold purchaser’s funds in until handover; whether the relationship between the broker and developer is registered with the DLD; and whether the broker is a competent figure and able to answer all questions ask of them.
If all these duties are adhered to, the broker is unlikely to be held liable for any situation where the developer becomes insolvent or the project fails to materialise. This is enshrined in law by Article 267 of The Commercial Code, which states: “The broker is not required to guarantee the solvency of the two parties to the transaction in which he intermediates. He shall bear no liability of the goods related thereto, unless it is established that he committed an act of fraud or fault and he is held for guarantee under the agreement or the law”.
As always, if you are considering acting as any party to such a transaction and would like more clarity related to the laws governing such commercial activities please don’t hesitate to seek legal counsel.
The waiver of a right to refer a dispute to arbitration could be express or implied. However such a waiver has to be clear and unambiguous so as to avoid doubts about the intent of the party to wave the right.
The claimant in this case was a Real Estate company in Dubai. The claimant filed a case in the court against the Respondent who is also a real estate company to direct the respondent to provide account statements of all collections made from the sale and re-sale process of real estate units. The statements were to also indicate the commissions which were due to the claimant including what amounts had been paid and how much was pending.Facts of the case
It was submitted by the claimant that the contract between the parties provided for disputes to be settled through arbitration under the rules of Dubai International Arbitration Center (DIAC). It was further submitted that although the claimant had designated its arbitrator and notified the other party to appoint its arbitrator within the notice period, the other party failed/refused to do so. It was alleged by the claimant that such inaction from the other party shall be considered as a waiver of its right to arbitrate.
The other party, the respondent, attended the first hearing of the case and requested that the case be dismissed citing lack of jurisdiction as the contract contained an arbitration clause requiring the parties to refer all disputes to DIAC.
The Court of First Instance accepted the respondents request and dismissed the case due to lack of jurisdiction.
The Court of Appeal agreed with the Court of First Instance and upheld its judgment to dismiss the case due to lack of jurisdiction.
The claimant appealed the judgment at the Court of Cassation. The Claimant argued that it had provided the respondent the opportunity to refer the dispute to arbitration through a notice requesting for the appointment of an arbitrator. However, despite the notice clearly stating that failure or refusal of the respondent to appoint its arbitrator within five days of receiving the notice shall be construed as a waiver of its right to arbitrate, the respondent failed/refused to respond or appoint its arbitrator.
The claimant also submitted that as per Article 2 of the Dubai International Arbitration Center Rules, the court shall not dismiss a case because of lack of jurisdiction unless a request or application was submitted to DIAC requesting for arbitration or conciliation. The Claimant argued that no such request or application was made to DIAC and therefore the lower courts erred in their judgment by dismissing the case due to lack of jurisdiction.
The Court held that the claimant’s argument shall be rejected since Article 203 of the Civil Procedure Law of UAE expressly states that a party to a contract shall not unilaterally resort to the court if the contract contains a mutually agreed valid arbitration clause.
The court observed that although a party shall have the right to waive adherence to arbitration clause such waiver, whether expressly or impliedly conveyed, shall need to be through an act or procedure which clearly reveals the party’s intent to wave the right to arbitrate. Such waiver shouldn’t be ambiguous and should be clearly showing the intention to waive the right.
The Court of Cassation therefore confirmed point of view of the court of Appeal and rejected the appeal.
If the dispute occurred and the litigants did not agree on the arbitrators, or one or more of the agreed upon arbitrators refrained from work, removed it, being removed from it, adjudged as disqualified, or there is obstacle hindering exercising thereof, and there is no agreement between the litigants in this respect; the court concerned originally by consideration of the dispute shall appoint the required arbitrators on the request of a litigant, by the normal procedures of filing the claim.
Consistent with Article 204, the Court also observed that the right of the court to appoint arbitrator is only valid in case arbitration clause doesn’t show the authority or process or mechanism for arbitration. The court further elaborated that even if the clause indicates a provision to define the method of appointment of arbitrators a party to the contract is not entitled to later unilaterally approach the court for the appointment of arbitrators unless mutually agreed.
Since the contract provided that the arbitrators shall be appointed in accordance with the rules DIAC the Court held that Article 27 of DIAC rules shall apply which provides the mechanism for appointment of arbitrators. As per Article 27 of the DIAC rules the executive committee of DIAC has the right to appoint an arbitrator and to appoint the chief of the tribunal in case parties did not.