United Arab Emirates: UAE Law Proceedings On Latent Defects

Last Updated: 18 September 2019
Article by Saif Al Shamsi

When discovering an undisclosed defect on a property, after the sales contract has been signed, it is crucial to determine whether the defect is patent or latent.

A patent defect is an apparent flaw within the property, it can be disclosed easily by any prospective buyer such as a hole in a wall or damp walls. The prospective buyer can then bargain with the seller to repair the flaws or, alternatively reduce the property's price.

However, as defined by Article 544 of the UAE Civil Code: '' (4) A latent defect is one which cannot be observed by an external inspection of the goods, or which would not be apparent to the ordinary man, or which could not be discovered by any person other than an expert or which would only be apparent upon testing''.

By virtue of the construction contract, the contractor is potentially liable to the developer for latent defects, and by virtue of the property sale contract, a developer is liable to a purchaser for the same latent defects.

In 2013, a property was bought directly from a seller, after the sales contract has been signed, the buyer discovered a latent defect in the form of water leakage in several spaces of the property. The serious defect resulted in damaging the walls and floor, thus, preventing the buyer from using his property neither from housing, renting, nor selling. The buyer informed the property management requesting, several times, the repair of the latent defect, but in vain.

Article 247 of The Federal Law No. (5) of 1985 On the Civil Transactions stipulates that: '' In bilateral contracts, where the reciprocal obligations are due, each of the contracting parties shall have the right to abstain from executing his obligations in case the other party does not honor his obligations''. Despite the negative response of the property management to restore the water leakage, the buyer has, constantly and in good faith, remained to pay for the maintenance services of the property.

The property management has the obligation to repair any defect that affects the use and enjoyment of a sold property. If it fails to do so, the buyer shall have the right to apply for an order to effect the repair and recover the fair cost thereof as Article 282 of the UAE Civil Code specifies that: '' The author of any tort, even if not discerning, shall be bound to repair the prejudice".

According to the law, the buyer filed a lawsuit against the developer and its property management, demanding from the defendant to repair the damages and deliver the property free of defects, while providing him with a certificate of guarantee of such work. Moreover, requesting from the defendant to compensate him with a considerable amount as indemnification for the non-use of his property between 2013 and 2018, because the defect was serious and important enough to render the property unfit for its intended use. Furthermore, requesting from the defendant to compensate him for the profit loss upon the sale of the property, additionally to redress the total amount of the maintenance services to repair the latent defect. As stated by Article 293 of the UAE Civil Code ''(1) The right to have damage made good shall include moral damage, and any infringement of the liberty, dignity, honor, reputation, social standing or financial condition of another shall be regarded as being moral damage''; the plaintiff has also asked for the indemnification for moral damages, along with charging the defendant with redressing the attorney's fees.

The developer's defense upheld that the latter is exempted from any obligations towards the plaintiff based on tortious liability. Article 298 of the UAE Civil Code states that: ''(1) No claim for compensation arising out of a harmful act shall be heard after the expiration of three years from the day on which the victim became aware of the occurrence of the harm and of the identity of the person responsible for it. (2) Provided that if such claim arises out of a crime and the criminal proceedings are still current after the expiry of the time limit referred to in the foregoing paragraph, the claim for compensation shall not be barred''. For tort-based liability to be established, there must be three conditions: a breach of an obligation by the law, a loss sustained by a party, and causation between the breach and the loss.

As reported by the defendant, under the UAE Law a claim needs to be raised within three years from the date of cause of action is accrued which is the time the damage is suffered. Particularly, under the latent damage act, a claim under tort must be made within three years from the date of damage.

However, the plaintiff's defense asserted that the liability between the two parties is contractual, not tortious, since the plaintiff bought the property from the previous owner through a sales contract, with a title deed issued by Dubai Land Department, therefore, Article 298 of the UAE Civil Code shall not be applicable. For contractual liability to apply, three conditions must apply a breach of contract by one of the parties, a loss sustained by the other party, and a causal link between the breach and the loss. If one of these three conditions is not respected, the victim shall demand compensation. Moreover, under the Latent defect, a claim under contractual liability must be made within 15 years from the date of damage, and no claim for compensation shall be heard in any case upon the expiration of fifteen years from the day on which the harmful act took place. Thereby, the Court acknowledged the existence of a contractual liability between the two parties and obliged the defendant to pay AED 350.000, plus interest, as compensatory damages, along with obliging the defendant to redress the plaintiff's attorney's fees. Nevertheless, the plaintiff lodged an appeal, with the aim of obtaining a much more important compensation, worthy to repair the pecuniary and moral damage suffered from the latent defect for five years.

How can The Legal Group help when discovering a latent defect?

Alike the above-mentioned case, The Legal Group has won numerous real estate disputes, by dint of the extensive experience of its lawyers, defending the rights of its clients. TLG can assist you to protect and enforce your rights to serve your best interests.

Discovering latent defects is an unpleasant event because it occurs after the sales contract has been signed. The buyer who has disclosed a latent defect in his property shall claim damages, or reduction in the purchase price which will be calculated by the loss of value of the property from the latent defect, or from the cost of repairing it, the buyer can also ask for the cancellation of the deed of sale and nullification of the contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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