Can a bona fide purchaser lose their property due to a complex legal dispute between a master developer and a sub-developer over a nullified corporate gift?
Recently, M&CO Legal successfully represented the owners of two different villas in highly complex, parallel legal battles against a leading master developer in Dubai. The exceptional nature of these disputes makes the resulting final judgments a landmark victory, ensuring justice and fairness in the Dubai real estate sector and its legislative environment.
Background of the Dispute
The master developer had previously obtained an arbitration award against a sub-developer. Seeking to execute this award, the master developer secured a court judgment to invalidate a prior transfer of multiple plots of land – made by way of gift – to a third-party company, ordering their return to the general guarantee for execution.
Subsequently, the master developer initiated execution proceedings to sell the lands at public auction to recover its debts. However, our clients had already legally purchased their completed residential villas from that third-party company, paid the full purchase price, and registered their properties in the real estate register – long before these execution procedures and attachments were ever placed.
The Complex Procedural Trajectory
The complexity of these cases lay in navigating the intersection of the execution of arbitral awards, actions for non-enforceability of dispositions (Paulian actions), and the strict application of Article 302 of the UAE Civil Procedures Law regarding third-party claims for the release and entitlement of attached property.
The M&CO litigation team, led by Partner Dr. Salman Al Tuweel and Senior Associate Ahmed Elmahdy, meticulously proved our clients’ status as bona fide purchasers. We successfully argued that the absolute nullity of a previous contract should not extend to harm a good-faith third party who contracted with legitimate trust and without negligence. Relying on the fundamental principle that anyone who acquires a real estate right in good faith based on the official records of the Real Estate Register cannot have this right stripped away, we demonstrated that our clients lacked any knowledge of the defect in the seller’s title at the time of purchase. Furthermore, we established that they fully observed the requirements of good faith, honesty, and integrity, completely devoid of any fraud or collusion to harm the executing creditor. Consequently, the prior judgment nullifying the gift could not prejudice their established property rights.
Conclusion
This landmark victory reinforces the stability of the Dubai real estate market and solidifies the legislative protection afforded to good-faith investors who rely on the sanctity of the Real Estate Register. It affirms that public interest and the security of real estate transactions take precedence, ensuring that innocent purchasers are not unjustly penalized for historical title defects they had no part in.
