The Dubai Land Department (DLD) has decided to act tough on real estate developer Schon Properties which has been accused of duping investors, it was announced on Thursday.
The DLD will seize the properties and plots of land registered in the name of Schon Properties and its funds deposited in an escrow account, an official statement from Dubai Media Office said.
The decision was taken to safeguard the rights of investors and stakeholders, it said.
The move, meanwhile, is expected to boost investor confidence, according to analysts.
The DLD will seize the properties and plots of land registered in the name of Schon Properties and its funds deposited in an escrow account, the statement said. “The step is aimed at protecting the rights of investors in light of Schon Properties’ actions of exploiting investors by refraining from depositing their money in escrow (guarantee) account,” it added.
The seizure will be in place “until the Public Prosecution and Dubai Courts complete legal procedures for recovery of all investor rights and securing the rights of other parties”, the statement added.
Schon Properties, launched in Dubai in 2007, managed to exceed Dh2 billion in sales in just six months, achieving eye-catching success in Dubai’s real estate industry.
Schon Properties’ Dh4-billion Dubai Lagoon project, a residential complex with 4,000 flats located in Dubai Investment Park, has been in the eye of a storm over delays since its launch in 2005.
It was suspended well before completion due to lack of funds, causing angry reactions from investors who had bought off-plan and paid millions to the developer. The number of projects or the number of people who invested were not immediately known.
Schon Properties vice-president Danial Schon was quoted in a Gulf News report in October 2012 as saying: “Schon has been engaged in comprehensive meetings with contractors, customers, Rera and financial advisers over the last three months with a view to infuse the project with new capital and deliver on our promise. Please be assured we are 100 per cent committed to this project and delivering to the customers who have been patient and supportive and more than accommodating under unprecedented market circumstances.
“Although we cannot comment on specific cases, we can say that all the stakeholders understand what is needed to get the project complete and we are creating options for all those customers to realise their investment,” he said reacting to complaints from investors then.
In January 2017, Schon Properties was selling hotel apartments for Dh199,000 near the Expo 2020 site with a “guaranteed income and high investment returns” of 12 per cent per annum, according to an advertisement posted on Facebook. The company had a joint venture with Al Hamad Group to build the Dh3.2-billion iSuites project in Dubai Investment Park.
Meanwhile, Thursday’s action by the DLD should help investors, an analyst told Gulf News. “One of the attractions of the Dubai market relative to others in the region is the level of regulation from government agencies such as Rera (Real Estate Regulatory Agency) and the DLD. Dubai is the most transparent and best regulated market in the Middle East region. The willingness of the DLD to take action against developers should aid investor confidence,” Craig Plumb, Head of Research — Mena at JLL, told Gulf News.
Normally, investors deposit their money in escrow accounts and transfer payments to developers as per the percentage of completion in the projects.
“The DLD stresses that this is the only way investors can preserve their money and ensure their rights are protected. Buyers are not advised to make payments to developers outside escrow accounts,” the statement from Dubai Media Office said.
According to the DLD, the move is taken as part of its efforts to ensure a “well-regulated and transparent investment environment that provides necessary protection for all parties and safeguard their rights”.
What is escrow account?
An escrow is a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties, or an account established by a broker for holding funds on behalf of the broker’s principal or some other person until the consummation or termination of a transaction.
Projects Schon is developing
According to the website, the property developer is developing 5 properties namely Schon Business Park, Laguna Serviced Residences, iSuites Smart Residences, Lotus Residences and Ava Designer Residences.
What next for investors?
The Dubai Land Department, which has seized plots and properties belonging to Schon Properties, will refer the case to the Public Prosecution and Dubai Courts, which will complete legal procedures for the recovery of all investor rights and securing the rights of other parties.
Source: Gulf News