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New property law favors consumers, says law firm official

Last updated: Monday, March 25, 2013 9:34 AM

Mohammed Alshoaiby
Saudi Gazette


RIYADH — New property law taking effect soon lean to ward the end-consumer rather than banks, Dr. Eyad Reda, Country Managing Partner of DLA Piper KSA, an international law firm, said at a press conference here Sunday.

The law is part of the ongoing judicial reforms and hope to alleviate the current housing crisis and population influx.

“The new Saudi property law regulates the relationship between the end-consumer and the banks,” said Reda.

“It (the legislation) has been years in the making and will be implemented in its final stage within two weeks.”

Many Saudis currently do not own homes, while rural areas in the Kingdom remain underdeveloped and the population is soaring in major cities such as Riyadh, Jeddah and Al-Khobar.

To tackle the population spike, many development firms have began urban planning and implementation with new projects coming up in Madinah, Hail and the Kingdom’s other premier metropolises.

According to Reda, the real estate industry’s three pillars — financiers, developers and consumers — often do business without much regulation and without being bound to anything more than arbitrary contracts.

“The new law regulates the requirements of those three factors contractually and in accordance with Shariah,” he said.

“The new law dictates the contractual obligations of each party, regulates the process of buying and selling land and estates, and lay down rules to solve problems in delays and crises.

“This helps create a regulated, modern market,” he said.

Reda also indicated that the new law will regulate the prices of products on the property market, from undeveloped lands to completed estates.

A major issue in recent years has been the practice of selling residences on maps, without the existence of a tangible product. This has reportedly caused great financial damages to investors. The new law regulates this common practice, said Reda, by dictating the position of the developer as the owner of the land where the project is due for construction.

Furthermore, the seller will remain accountable for any shortcomings in the project, such as delays, as well as having the flow of finances allocated and regulated toward the completion of the project.

“Lawmaking is a fairly new concept in the Kingdom,” said Reda. “However, we — the lawyers — can feel the effect of the new judicial reforms in commercial law, litigation and the Ministry of Justice’s new electronic platforms.

“The judicature has changed. We are sensing development,” he said.
Abdulrahman Al-Ayoni, a legal consultant at DLA Piper, said judicial discretion is a cornerstone of Shariah law.

“But there are fixed situations that present themselves frequently, such as theft, banditry and so on.

“These cases need a consistent legislative process, such as setting parameters to sentencing.”

Recent reforms have reportedly included court-ordered compensation for emotional damages, an unprecedented practice in the Kingdom, along with social service and alternate sentences.

DLA Piper is an international law firm with 77 branches worldwide, with a branch in Riyadh and another in Jeddah. Their current workforce is made up of 90-percent Saudis with seven women as lawyers and two women as trainees, a feat, according to Reda, that is an example of judicial reform both in the public and private sectors.

The Kingdom is witnessing reforms in all its sectors but it is the culture, Reda said, that needs to better its comprehension of the law and the legal process if reforms are to be successful.

“The problem is not with legislation, it’s with executing practices and comprehension.”

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