The decree comes amid a surge in cases of bounced cheques since late last year when property prices started to slide and left developers and investors in financial distress.

The decree stipulates the committee to be the sole and exclusive authority to give rulings on complaints of dud cheques, whether issued by a buyer to a developer or by tenants. The committee’s verdicts and decisions will be deemed final and not subject to appeal and will be implemented through the execution department of Dubai Courts.

Property developers and legal experts welcomed the move which they said can eliminate prevailing uncertainty in the real estate sector, and help stakeholders to recover clogged up payments and investments.

Andrew Thomson, a real estate specialist at law firm Trowers & Hamlins LLP, said the committee would be welcomed by all parties interested in sustainable development of the UAE. “The current system carries an automatic criminal charge which drives abroad, and out of employment, individuals who may have temporary financial difficulties, so they become full-blown defaulters. That leads to developers suffering from a higher number of vacant properties as individuals are not willing to approach them to discuss their issues at an early stage when there may be some form of mutually agreeable solution”, he said.

The new system, Thomson hoped, will encourage all parties to work out settlements to help both developers and buyers in financial difficulty, to build on the progress that Dubai has already made to aid investors and developers during the current crisis.

Eric Milne, a senior partner at Dubai-based  law firm Simmons-Simmons, said that the move will help clarify the legal position of entities that may have issued cheques without sufficient funds. “Given the state of the global market, the current laws may be catching entities that the laws were not intended to catch,” he said, adding the committee will ensure that matters involving cheques in dispute will be handled equitably for all involved.

According to the decree the committee will consist of a chairman, who will be selected  from among the judges of the Appeal Court. It will have two members; a judge from the First Instance Court and a representative of Dubai Land Department. The decree grants the committee a set of powers to enable it to carry out its responsibilities properly.

The committee can cancel a cheque issued to a real estate developer, if it was found that the developer had no right to the amount, and can oblige the issuer to write a new cheque to replace the one that bounced.

The committee can refer a case to a competent judicial authority for necessary action against the issuer of a dud cheque, if the developer was eligible for the amount.                

The committee, if it deems fit, may seek assistance from suitable experts and specialists.

Article 5 of the decree requires judicial authorities, including police, to refer all complaints over cheques covered by this decree to the committee. The article also prohibits public prosecutors and courts from investigating dud cheques covered by this decree or issuing any ruling in this regard before the case is considered by the committee.

The committee will exercise its powers under laws applicable in the Emirate of Dubai, and the provisions of Islamic laws and customs, unless they conflict with public order and ethics. The decree comes into effect from the date of issuance and will be published in the official gazette.

“The dud cheque issue is hampering the real estate sector, at a time when property prices have plunged to a level where investors are not interested in making payments of their instalments, said Mohammed Ahmed Shaikhani, Managing Director of Memon Investments LLC.