Shifting Sands - Can a developer call it an Act of God if your property is built on the 'wrong sand'?

If you have a potential problem with a property that is being built off plan abroad and hasn’t been completed on time and would like some FREE advice about your options, you can speak to one of our overseas legal property experts by filling in the enquiry form here.  Meantime, read on…

Let’s back up a little. You may have come across this term before if you are used to looking at insurance contracts, but if not, the Force Majeure Clause literally translates as a ‘Superior Force’ although it is more commonly known as an ‘Act of God’. It is usually included within a contract to insure against natural climatic events such as flooding, lightning strikes or hurricanes and can also be used in the event of a terrorist attack or an act of war – basically anything that is completely out of your control. Developers have been using this clause in contracts to cover themselves if they fail to meet the terms of the contract – and it seems they are stretching the term rather beyond its legal meaning.

The common practice of buying property ‘off-plan’ often means you get a better price than a re-sale unit and can afford a more luxurious or larger home. The downside of these purchases is that you are usually committed to paying money on a property you haven’t actually seen and before it is even built. The contract for the property should include such things as a deadline for completion of the property and a resulting penalty if the deadline is not met. What the market has seen increase over the last few years is developers leaning heavily on the Force Majeure clause to excuse them from going past the completion deadline – with some apparently claiming the wrong type of foundation as being ‘beyond their control’,

We asked AIPP members and property law specialist, Judicare, to explain:

“We have seen over recent years  some foreign property developers try and claim that the failure to obtain planning permission for their project constitutes a Force Majeure event. It does not. The failure to obtain planning permission in virtually all cases is entirely down to the developer as they should not start to build, market or sell any given project unless it is expressly stated the planning permissions are subject to future approvals, and that the purchasers as a consequence will have the right to terminate the contract and recover any invested amounts paid to that date should those permissions ultimately be withheld.

“In the United Arab Emirates and in Cape Verde, we have seen extreme examples of developers claiming that certain building plots are made up of  the “wrong type of sand” for building upon and therefore, they cannot meet their contracted construction deadlines. Again, this would not constitute the Force Majeure clause being invoked or any legal justification or argument for a delay to the delivery of the unit and we have successfully challenged these arguments in the courts.”

Property built on sand is actually a very common occurrence. Approximately 45% of the worlds population live along a coastline and well over half of the worlds biggest cities are situated next to a sea or ocean.

In recent years however there has been widespread coastal development in the UAE at a pace and scale rarely seen. Dubai reclaimed land using 385 million tonnes of sand for its iconic Jumeriah Palm Island project. These type of projects require massive amounts of resources and though they make huge economic contributions to the area it is the marine ecosystems that have come under threat from this major environmental disruption.

Although developers are required by regulators to conduct environmental studies and risk assessments, the true scale of the impact from such huge urbanisation projects are sometimes not realised until too late.

Developments in and around the natural island of Saadiyat in Abu Dhabi have come under stringent restrictions due to its unique sand dunes which provide shelter from storms and a nesting habitat to many animals including hawksbill turtles.

Initially the area was simply fenced off, but when larger hotel units started to rise, the ability to protect the area became far more challenging. Residents and guests are now banned from motorised water sports on the beaches or using the beach at all after sunset. They are also required to turn off all outside lights at sunset along with drawing curtains and  dimming internal lights so as not to disturb the sea turtles.

Undeveloped or ‘raw’ land can also throw up surprises when bought for building projects. There was a case in Rochester near New York of a gentleman who bought a ‘hill’ overlooking a golf course to build his dream home. He assumed the hill had been there hundreds of years, however it turned out that his part of the ridge had actually been bulldozed-in, and was man-made, unsuitable for his foundations.

He ended up paying thousands to have the hill excavated to find solid ground, locked in a major dispute with the previous owner of the land, and with a property that no longer had the view he had paid so handsomely for in the first place.

If you have a potential problem with a property that is being built off plan abroad and hasn’t been completed on time and would like some FREE advice about your options, you can speak to one of our overseas legal property experts by filling in the enquiry form here

Our thanks to Judicare for their help with this article – their details can be found on the AIPP member directory here.

Disclaimer – this information is meant as a guide and is not a substitute for independent legal advice. Please refer to our policy page which outlines the terms and conditions of use of this website.