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Damac has allegedly used investments from cancelled property projects to fund the Park Towers, a twin-tower development located in Dubai International Financial Centre, the DIFC courts heard yesterday.

Lawyers representing a German investor, Dr Lothar Ludwig Hardt, said the developer allegedly used the money from other property projects to construct Park Towers, the only development that appears to be ongoing out of the five that Hardt had signed up in February 2007.

“These close links show the other four properties are connected to Park Towers… which should have been finished two years ago,” Ludmila Yamalova, legal consultant and partner at Al Sayyah Advocates and Legal Consultants, told Emirates Business. She said Hardt has invested $9.7 million on five properties which, in addition to Park Towers include the two cancelled projects – Lotus Residences and Wildflower; Ocean Heights, which was scheduled for completion eight months ago; and Water’s Edge, where construction hasn’t been started yet.

The German investor is thus demanding refund of $9.7m and is seeking damages and lost profits caused by the developers’ breach of contract and other violations of the UAE, Dubai and DIFC Courts. Yamalova estimates that damages, loss of profits plus all the legal fees could go up to $140m.

“As of today, defendants have not delivered any of the properties and have not complied with any of the contractual obligations to claimants,” a claim form seen by Emirates Business said.

“Defendants have committed a series of violations of UAE, Dubai and DIFC Laws in connection with properties such as enticement and unfairness, illegal sale, failure to obtain necessary approvals, failure to commence construction timely, failure to timely register developer and obtain necessary license, mismanagement of escrow funds and violation of trust account regulations, unfair contracts of adhesion, fraud and deception… illegal competition, bribery, trickery, breach of trust, cheating in commercial transactions, money laundering and accomplice liability,” said the claim form.

Damac has not submitted a rebuttal on the substantive grounds and instead questioned the jurisdiction of the DIFC courts to hear the case. It has filed a motion to stop the lawsuit from being heard and has also moved to strike the case entirely on the basis of jurisdiction.

Law firm Simmons & Simmons argued that parties concerned have agreed in the contract that any disputes will be governed by Courts of Dubai and therefore Courts of Dubai has exclusive jurisdiction of the case.

Claimants argue that DIFC Courts is one of the Courts of Dubai but defendants say that Courts of Dubai only refers to the local Dubai Court.

“We argue that DIFC courts has jurisdiction over all these properties because it has jurisdiction over Damac LLC and Damac Property LLC is the entity to whom all the payments to all the other projects were made,” Yamalova said. “They use different names but they all own each other. Damac LLC is owned by Damac Investment and so on and so forth.”

Damac has other cases pending in Dubai Courts but this is the first time that a case against it is lodged in DIFC courts.

“It’s a complicated issue of jurisdiction. It is an untested waters. But I think we have a strong case,” Yamalova said.

She said it is more favourable for the defendants to hear the case in Dubai Courts because of the time delaying factor.

“There it’ll take longer and we’ll have to file five separate cases,” she said. “In this case, we need to file 45 different cases and would have to pay Dh30,000 for each and would have to translate everything into English – so that’s additional expense.”

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Damac accused over selling flats on UN site in Dubai

A UK lawyer has accused Dubai property group Damac of selling off-plan units on a plot which it knew was occupied by the United Nations (UN).

The UN has a considerable presence in Business Bay – and occupies the site where Damac plans to build two residential projects: La Residence and La Residence 2 at the Lotus.

Damac

The projects were launched in late 2006 and early 2007.

Retired lawyer Jeff Kershaw, who lived in Dubai for 11 years but is now based in the UK, is preparing legal action against the private developer over the dispute.

His UK-based client, who is one third of the way into the payment plan – having paid installments worth AED420,000 on the property worth AED1.39m – is demanding a refund, which the developer is so far refusing.

“I want to know whether Damac recklessly forged ahead to sell off-plan units on a site which they knew they couldn’t build on,” Kershaw told Arabian Business.

“My client paid his money in 2007 in good faith but in his case Damac claim they are unable to start building as the United Nations have a tenancy agreement over the land or part of it,” he added.

“They did not in our meeting offer this information immediately and only yielded it under pressure.”

Damac on Thursday was at a loss to explain when the plot would be handed over by the master developer Dubai Properties and when construction would start at Lotus.

In a statement a Damac spokesman said: “Damac Properties is unable to commence works at this time at the Lotus plot. This is due to the relocation of the existing occupant at the site. Until such time as a plot is handed over to Damac, construction cannot commence.

“When timeframes are discussed with customers, all indicated timelines are from the date the plot is handed to Damac for commencement of construction. This project will be completed within 36 months from handover of land,” the spokesman added.

Damac owns the land at the Lotus development site.

La Residence is a planned 58-storey tower, while La Residence 2 will be 64 stories high. In February 2007, Damac said 83 percent of La Residence had been sold.

Damac Properties is part of conglomerate Damac Holdings.

The UN has a number of agencies based in Business Bay such as UNOPS (the United Nations Offers for Projects Services). UNOPS is a member of the International Humanitarian City (IHC), a Dubai free zone.

A spokesman for IHC was unavailable for comment.

Claims of scams, fraud, and embezzlement are hitting the real estate market in Dubai.

The multi-billion dollar construction craze which has attracted investors from all over the world, has seemingly brought in unsavoury types who have been preying on the never-ending appetites of locals and foreigners lining up to invest in the market.

A UK company which claimed to have acquired a 900-apartment plot in the proposed Jumeriah Village project, has reportedly sold off apartments in the plot, with no prospect of them ever being built. The company, Strategic Property Investment, and its associates, William Cowe and Mark Emlick, are being investigated by Dubai and UK authorities.

Dubai authorities are also investigating the mysterious Al Areifi Tower being constructed at Dubai Marina. As we reported several weeks ago, Khalid Saud Al-Areifi & Partner Co., of Riyadh Saudi Arabia, sold several hundred apartments in the project off-the-plan some years ago, taking full payment upfront.

In recent weeks the owners of the apartments have been receiving telephone calls and faxes from Al Areifi representatives in Saudi Arabia advising them construction on the project had stopped and would not be resumed. Investors say they have been offered their original cost, plus interest, back.

We have sighted one of the letters sent which verifies the investors’ claims.

When we visited the site two weeks ago we found construction in full swing. We contacted the builder on site who confirmed there had been no disruption to the construction and it was proceeding at ‘full steam.’

Reports are now circulating that Al Areifi sold the site to the newly-formed, Abu Dhabi-based, Eskan Properties. A report in Gulf News Friday, however quotes a company spokesman as saying, ‘We sold the tower on again a week back.’

Having bought their apartments and paid for them in full, well before construction started, investors are now wondering how ‘their’ apartments could be on-sold, on two separate occasions since.

Several calls to Emaar Properties, the master developer of Dubai Marina, where the project is sited, have not been returned.

Meantime the investigation into the conduct of the former CEO of Dubai’s second largest property developer, Deyaar, has been widened. According to Dubai’s Attorney General, Essam al-Humaidan, a second person, Ganesan Krishna Kumar, 49, has been arrested in connection with the investigation. Kumar, originally from India, was a co-founder, and is managing director, of the Dubai-based advertizing agency, Masterbrand (ME) Ltd.,

Two other men have also been detained and questioned, but have since been released.

Zack Shahin, Deyaar’s ex-CEO is being probed in relation to claims of possible embezzlement. Deyaar has more than 1,600 apartments, as well as retail, and office complexes, under construction in Dubai.

The glitz and glamour of Dubai’s red-hot property market must be feeling the heat of the latest troubles, coming on top of the debacle surrounding the Damac project on the Palm Jebel Ali.

Damac, which claims to be the largest private property developer in the Middle East, sold apartments off-the-plan in what it called the Palm Springs project, a luxury apartments and resort project on the Palm at Jebel Ali.

Four years after launching the project, Damac wrote to investors saying it had been abandoned as the master developer of the Palm had changed the plans and the project could not now fit the site.

Within days the master developer, Nakheel, announced it was unaware of Damac’s claims, and that the changes which Damac referred to had been made ten months earlier, and Damac was happy with them.

A hastily convened meeting by the authorities, involving Damac and Nakheel, resolved the matter, with Damac agreeing to proceed with the project. That action averted a class-action lawsuit against Damac by at least sixty angry investors, most of whom were from the UK.