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Buyer beware: why good due diligence matters

Posted by MDP Admin on June 18, 2019
| Blog
| 0

Buyer beware: why good due diligence matters
If buying within a master development, ask for the master plan to prepare for upcoming works in the neighbourhood

The underlying principle of a real estate transaction is caveat emptor — let the buyer beware. Under this concept it is the buyer’s responsibility to satisfy themselves as to the quality and suitability of the property before proceeding with the purchase. While the real estate laws in the UAE have sought to provide protections for the buyer and install trust in the regulatory framework, this underlying principle remains. This is not unique in the UAE as this is the position adopted across many countries, not just for real estate but for all types of acquisition.

As a result buyers generally approach a transaction with as much information as they can. Whether it is test-driving a car, researching various different product options online or visiting a store. Real estate transactions should be no different. A prudent buyer will check that the property is in good condition, take advice on the terms of the contract and check that there are no legal issues in respect of the construction of the property. However, in the UAE and the Middle East generally, comparably little due diligence is done by buyers prior to the acquisition of property for a number of reasons.

Historically, it is difficult to get public information about a property and therefore few questions are asked. But it is still possible to do some due diligence and a prudent buyer should consider what steps to take. So how can buyers make sure that they are protected? The key is asking questions. Here some things to consider:

• if buying within a master development ask for a copy of the master plan to know if another property will be constructed blocking your views or if you are likely to have to tolerate construction works neighbouring your property;

• if buying property that has been lived in, ask for the most recent Dewa invoices to understand the likely monthly costs;

• if buying property within an apartment block or a community that contains jointly owned property, check that the appropriate owners’ association has been established and ask to see the budget for the service charge for the current and previous years;

• if buying property that is in the process of being constructed or has recently been constructed, ask to see the sale agreement to understand the developer’s obligations in respects of defects.

Ultimately, approaching the transaction from a transparent perspective will help both parties reach a speedy conclusion. Where the buyer is well informed, well prepared and well advised the transaction will be smoother, quicker and easier for all concerned.

Peter Greatrex is a partner in the Real Estate & Hospitality team at law firm Clyde & Co in Dubai. The views expressed here are his own.

Source: http://bit.ly/2xb3OW1

 

 

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