By Lisa Dale & Steven Hunt
Since the advent of Dubai’s construction boom circa 2002, fuelled by the relaxation of restrictions on property ownership by foreign nationals, thousands of new residential property units have been completed by developers and handed over to their new owners for occupation. This relatively recent phenomenon of home ownership on any significant scale has heightened the need for both contractors and developers to understand their potential legal exposure to home owners when defects begin to appear in the properties that they have either constructed or sold to them.

Property defects can range from major structural defects that threaten the stability of a building, and in some cases cause its partial or total collapse, through to more minor non-structural defects such as a leaky roof or loose floor tiling. In this article, we explore the principles of decennial liability and latent defects under the laws of the United Arab Emirates (“UAE”) and Dubai, and address the issue of contractors’ and developers’ liability in respect of each. This article does not seek to address either contractual liability or tortious liability, both of which also require consideration as circumstances dictate.

Decennial liability
Decennial liability is a form of strict liability arising from the French Civil Code. It has been widely adopted in Middle East civil code jurisdictions, including the United Arab Emirates, Kingdom of Saudi Arabia, Kuwait and Qatar.

The UAE Federal Civil Code: Supervising architects and contractors liable to Developers

The source of decennial liability in Dubai is to be found in the UAE Federal Civil Code¹ (“Civil Code”), in Articles 880-883. In summary, these Articles provide that the contractor and the supervising architect (which, where the context permits, can mean the supervising engineer) are jointly liable to the employer for a period of ten years from the date of delivery of the work if:
The building constructed or installation erected suffers total or partial collapse; or
There is a defect which threatens the stability or safety of the building.

The available remedy to the employer is compensation, and the obligation to compensate arises notwithstanding that the collapse or defect arises out of a defect in the land or that the employer consented to the construction of the defective buildings or installations. This all applies unless the contracting parties intended that the installations should remain in place for less than ten years.

It is not possible for the supervising architect or contractor to “contract out” of decennial liability or to limit his liability. However, it should be emphasised that where the role of the architect is simply to prepare plans and not to supervise their execution, he is liable only for defects in the plans.

The “no fault” concept of decennial liability contained in the Civil Code is somewhat onerous for supervising architects and contractors when compared with many common law jurisdictions, where liability will generally only attach to architects and contractors if they have failed to perform their professional obligations in accordance with the requisite standards of professional skill and care.

It is clear from the foregoing that the supervising architect and contractor is liable only to the developer, as the employer, under the decennial liability provisions contained in the Civil Code. Subject to what we say below regarding a contractual extension of liability under Article 254 of the Civil Code, the architect and contractor are not liable to the home owner under the principles of decennial liability as there is no direct contractual relationship between them.

Dubai’s “Strata Law”: Developers liable to home owners?
Whilst the Civil Code provisions relating to decennial liability described above impose potential strict liability only on supervising architects and contractors, there are provisions in Law No (27) of 2007 on Ownership of Jointly Owned Properties in the Emirate of Dubai (the so-called “Strata Law”) which, in the context of strata developments, apparently extend the concept of decennial liability to developers towards home owners and Owners’ Associations. Article 26(1) of the Strata Law states (in translation):

“In compliance with the construction contract provisions in [the Civil Code] the Developer remains liable for 10 years from the date of completion certificate of the building to repair and cure any defects in the structural elements of the Jointly Owned Property notified to him by the Owners’ Association or a Unit Owner.”

Articles 880-883 of the Civil Code, which contain the decennial liability provisions described above, are the only Articles in the Civil Code that specifically refer to a 10-year liability period for structural defects in relation to construction contracts (hence the term “decennial”). The implication is, therefore, that although the statutory remedies differ, the effect of Article 26(1) of the Strata Law is to extend the application of decennial liability to developers vis-à-vis the owners of their properties in strata schemes and their Associations (the latter with regard to the common areas in such schemes). We are not aware that this has yet been tested before the Courts or any arbitration tribunal. At the very least, however, the effect of Article 26(1) is to extend a developer’s liability for latent defects in the structure of the property beyond the original contracting purchaser of his property to all persons who own that property within the first 10 years of its completion. Latent defects generally are discussed further below.

Latent Defects
The examples referred to earlier of loose tiles and leaky roofs fall within the realm of latent defects. Simply put, latent defects are defects which are neither discovered nor capable of being discovered at the time of issuance of the certificate of practical completion for the building. They may be of a structural or non-structural nature.

The UAE Federal Civil Code: Contractors liable to developers; developers liable to purchasers
There are no provisions in the Civil Code that specifically deal with latent defects in relation to muqawala (construction contracts). However, the Civil Code does recognise the principle of latent defects elsewhere, for example in Article 544. This relates to sale of goods, but the principle has broad application, including arguably in respect of construction related issues.

Article 544 of the Civil Code deals with “old” (pre-existing) defects in goods sold and defines such defects as follows:
“(4) for a defect to be regarded as old it must have been latent, and a latent defect is one which cannot be observed by an external inspection of the goods, or which would not be apparent to the ordinary man, or which could not be discovered by any person other than an expert or which would only be apparent upon testing.”

Thus, by virtue of the construction contract, a contractor is potentially liable to the developer for latent defects appearing in the property that he constructs; and by virtue of the property sale contract, a developer is liable to a purchaser for the same latent defects. One mechanism that a developer might employ in order to make the contractor directly liable to the purchaser is founded upon the provisions of Article 254(1) of the Civil Code which states (in translation):

“It shall be permissible for a person to contract in his own name imposing a condition that rights are to enure to the benefit of a third party if he has a personal interest, whether material or moral, in the performance thereof.”

In other words, a construction contract may contain an express provision that, depending upon its precise drafting, effectively enables a purchaser (as an interested third party) to directly enforce remedies for defective property against the contractor. This would not, however, necessarily relieve the developer from his own liability to the purchaser.

Conclusion
In this article we have sought to explain the remedies that are available as a matter of general law under the UAE Federal Civil Code when property defects occur after the property has been handed over by the developer to the home owner. We have looked at both decennial liability and liability for latent defects, in the context of both a contractor’s and developer’s exposure for the same.

Of course, a construction contract or property sale contract will usually contain express warranties regarding defects, which often provide wider rights to the purchasing party than those afforded under the Civil Code. A review of the contract is therefore also important, alongside the provisions of the Civil Code.

Finally, in this article we have not explored the remedies available when property defects occur, the role of insurance or the applicable limitation periods within which claims need to be brought. Each of these factors are also of relevance and must be considered when a party, be it the contractor, developer or home owner, is involved with a claim for defective property.


© Al Tamimi & Company 2009

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