Dubai courts void ijara agreement for property that was not completed on schedule

A Dubai court voided an ijara agreement on the basis that it represented not a lease, but a sale contract and the asset being sold was not completed when the developer started collecting payments.  Prior to the Dubai real estate crash, many investors signed agreements that forced them to pay rent upon the anticipated completion date of their property.  However, when the debt crisis hit and projects were mothballed, developers charged rent for uncompleted units.  The court’s ruling—although it does not create precedent—follows criticism by Dubai’s Grand Mufti in 2011 and should lead to changes in ijara contracts used in sales of new residential units.  

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