Jun 09 – Post Dated Cheques – Observations by a commenter

This was one of the comments on the Zawya website – commenting on the flight of Mr. Ford / BlueBannana – and Post Dated Cheques.

By the way, I am told that when you get a credit card issued by the bank in the UAE, they ask the card holder to make out a blank Post Dated Cheque – which the Bank holds as security. You guessed it – if they think the revolving amount will become a bad debt, the bank presents the cheque. If it bounces, that turns it into a criminal incident.

Same for a car loan etc…. the bank holds a blank Post Dated Cheque as ultimate security.

Partial reposting -
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Post Dated Cheques / PDC by John smith – 13 hours ago
The Post Dated Cheque Laws are in the UAE are antiquated, and each passing day that these laws are not addressed, means the cancer keeps spreading through the system. This goes beyond businessmen. Getting caught up in the mess in the UAE can be very Kafkaesque.

Here’s my experience:

1) Once you issue a Post Dated cheque – there is no system for the account holder / issuer to put a stop on the cheque. Closing the account is illegal, even if it is because you are being defrauded. Draining the funds out of the accounts, to let the cheque bounce is illegal. The only way to get the bank to put a stop is to get a court/police order. That court case can cost Tens of Thousands of Dirhams.

The bank permits cheque stops in the event – get this – cheques that have not been issued.. if one has lost their cheque book. Big deal.

2) Very common practise for developers to advertise projects with payments seemingly linked to construction milestones which should occur by certain dates. The Developer then pushes people to write post dated cheques, which they cash with regularity while construction does not start or is on terminal hold. In this scenario, there is no truth in advertising laws, so the developer hasn’t violated anything. If you let the cheques bounce, you are guilty.

3) Developers who have abandoned projects, or are near certain to abscond – are cashing cheques. Even in this scenario, it is the developer that has the upper hand. If the buyer lets the cheque bounce, he commits the first illegality.

4) Developers present cheques to non-escrow accounts. While that is illegal – if you let the cheque bounce, the developer – by walking into the local police station – can get you put on an immigration watch list. You think the police, who detain you at the airport, understand anything about escrow accounts…?

… fortunately, they’re now swamped by the sheer volumes. Over 500K in the 1st 4 months of 2009 or 6% of the total issued.

A few things that can be done – just as an observer

5) Bouncing a cheque is a criminal act in the UAE. The law should be changed to make it a civil / commercial act, or at least introduce a threshold or cutoff amount. Or even start by segregating between business & personal accounts.

6) Since the laws don’t get published openly, people keep writing cheques not knowing the consequences or limitations. Banks should give every cheque book owner a one pager on the consequences of cheque bounces in the UAE. Lots of people from the West automatically think that a cheque can be stopped, like in their home countries.

Welcome any banker or lawyer to correct my understanding… or even present the alternate side – the positives of the current system. I can’t think of anyone but a small minority that benefits from the status quo.

I am stuck with a developer there – who advertised 50% payment until completion, 25% on handover, and 25% in installments after handover. Construction start was delayed for 12+ months, while, the developer helped himself to 40%, in some cases 60% of total payments by mid 2009. Having approached a law firm for help, their advise was to give us a lecture on the PDC system in the UAE, and the dire consequences of letting the cheques bounce………

Jun 09 – The grass is no greener in Qatar

Here’s the story of another guy caught up in Qatar. Rather depressing if you follow his tweets etc so brace yourself.

This post digresses from anything to do with Ajman Uptown, but in general probably a good rule of thumb to really consider if it is worth all the headache that comes with investing in that part of the world. No place is perfect, but good rule of thumb to stick with what you know, and where the rule of law is transparent, applied to all etc.

Another question: Is the risk worth the reward? Good time for some introspection…

Beligian jailed for three years after company fails in Qatar- from the National

Link to his blog
The sad part, his sponsor/tormentor is a Qatari (of South Asian Descent) who himself just got citizenship ~3 years ago. How soon we forget.

It is good that the Belgian individual can use the internet – get some press – otherwise, it’d have been another forgotten story. Also, good that the Belgian ambassador is putting him up. My ambassador definitely wouldn’t !

June 09 – Success Story ends in Flight

The attached story – Success story ends in Flight – will give some of you an idea of why all the ranting about Post Dated Cheques.  Take an outfit like Sweethomes, who is holding post dated cheques and you get an idea of the mess that they can create for buyers who issued them. Expect more of these stories unless the laws are changed.

Full story at:
http://www.zawya.com/story.cfm/sidZAWYA20090625045831/Blue%20Banana%20Slips

Zawya.com – 25th June ’09

Here is a portion of the article / some excerpts:

Simon Ford rode into Dubai in 2004 with little to his name but an entrepreneurial spirit and a couple of suitcases. Within three years, he had met his wife, started a family and founded a “gift experience” business, Blue Banana, that grew with the emirate’s booming economy. He was named one of the country’s “Hot 100” entrepreneurs by the socialite magazine Ahlan! in 2007.

But this week, with debts mounting in the wake of the global financial crisis, he fled back to the UK with his pregnant wife and three children to escape potential criminal charges and alleged threats on his life by creditors.

Mr Ford’s situation is a high-profile example of the dozens, if not hundreds, of cases in which businessmen face criminal charges for bouncing cheques or having difficulty making payments as a result of the downturn, lawyers say. In an emotional “letter to the Dubai public” circulated yesterday, he sought to explain the “desperation” that had led him to leave and pledged to “repay every last dirham to everyone who is owed money from bluebanana.com”.

Mr Ford, 34, said he had been forced to leave because bankruptcy laws were not developed enough to handle his situation without considering him a criminal.

“I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions,” he wrote.

“The real core of the issue is that fraud, which is criminal in all countries, is linked here to bounced cheques,” said Sameer Huda, a partner at the law firm Hadef & Partners.

“But fraud requires criminal intent, effectively deception to secure an unfair or unlawful gain. If a business suffers a downturn because of the macroeconomic climate or failure of its own business model, then this shouldn’t be linked to fraud if there was no intent to deceive on a payment obligation.”

This issue is prevalent in the UAE because businessmen and other borrowers tend to use postdated cheques as a form of security of future payments.

June 09 – Ajman Uptown / Sweethomes – Oman

Have a look at the attached blog -

I think this blog captures the crap we’ve been subjected to – specifically (see pdf file or link at bottom):
Muscat Confidential_ Omani papers continue to print any PR crap they are sent

” Basic story: Sweet Homes apparently advertise a deal based on a 10% deposit, regular payments until 50% paid, followed by 25% on completion and a further 25% after that. It seems Sweet Homes asks for post-dated cheques from ‘investors’ who purchase, and then proceed to cash them, because the contract is in reality based on a pre-defined project time schedule and is not related to actual physical construction milestones, simply against a promise to finalise contruction.”

http://muscatconfidential.blogspot.com/2008/12/omani-papers-continue-to-print-any-pr.html

Jun 09 – Post Dated Cheques – PDC – UAE Central Bank

Here’s the link to the UAE Central Bank. I’d urge those whose PDC’s (Post Dated Cheques) are being mis-used by developers &/or cashed at will, without progress, unauthorized endorsements etc. – to write to the bank.

Don’t know if it will work – but they seem to have a well laid out process see;

http://www.centralbank.ae/complaints/complaints.php

Here is the page with specific email addresses:

http://www.centralbank.ae/contact_us.php

Or – Complaints and Suggestions Section

Direct telephone:	02- 6915290 / 02- 6915453
Fax No.:	02-6916004
E-mail:	complaint@cbuae.gov.ae

Jun 09 – Sweethomes Business Practices

As you’ll see below, I rcvd a fax from Sweethomes, on the 21st of June – giving me 3 days to sign and return the cancellation agreement.

Not long after this letter was sent, they tried to cash another 2 cheques – just plain incompetence. These kind of practices, very much summarize my experience with Sweethomes. The more I interact with them, the less trust there is.

There were 7 pages in all – I am just posting the 1st page of the letter. The other 6 were some pictures, notice of setting up the Escrow account etc. All written to suit them.

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From:
Subject: Re: – Termination of Agreement – 4th request – Real Estate Purchase gone bad in Ajman/Sweethomes
Date: 21 June 2009 9:56:02 PM GMT+07:00

to: husain@sweethomesuae.com, ivy@sweethomesuae.com, saher@sweethomesuae.com, shalin@sweethomesuae.com, rafail@sweethomesuae.com, tabis@sweethomesuae.com, ahmed2@sweethomesuae.com, resine@sweethomesuae.com, mukhtar@sweethomesuae.com, fahad@sweethomesuae.com, commme@emirates.net.ae, amal.h@Arra.ae, latifa.n@Arra.ae, omar.b@arra.ae, info@rholding.com, ialyassi@ajmanrulerscourt.gov.ae, msuwaidi@ajmanrulerscourt.gov.ae, rana.mubarak, husain@sweethomesuae.com, bhope@thenational.ae, ngillet@thenational.ae, lmorris@thenational.ae, content@zawya.com, agiuffrida@thenational.ae, info@rholding.ae, readers@gulfnews.com, richard.spencer@telegraph.co.uk, chip.cummins@wsj.com, stefania.bianchi@dowjones.com, editor@mediaguardian.co.uk, simon.jenkins@guardian.co.uk, joanna.hartley@itp.com, alex.morgan@itp.com, anil.bhoyrul@itp.com, andrew.white@itp.com, desert_blogger@hotmail.com, sean.odriscoll@7days.ae, cranecountry@thenational.ae, abdulbasit@khaleejtimes.com, aneela@khaleejtimes.com, nouf.k@arra.ae, parag.deulgaonkar@awraqpublishing.com, uharnischfeger@thenational.ae, tpantin@thenational.ae.

Dear:

I rcvd a fax from you, date stamped on the 21st of June – faxed earlier today – giving me 3 days from 18th June to sign and return. If it was sent directly to me, it expired before arrival.

If the letter was sent to the law firm – you sent it on Thursday night, to take advantage of the weekend – knowing full well that no one could respond.

I think you, and your company’s ways speak for themselves in ways that I cannot express any better.

Your firm, and other developers in Ajman are taking advantage of the fact that there are more rules governing post dated cheques – than there are around construction start, construction quality and delivery.

Regards
Unit B- Ajman Uptown
SH Letter-June 21st

June 09 – Ajman Facts – “It is about trust……….one commodity in short supply”

Have a look at the article from The National below. Printed on May 4th, 09. Scary.
- Thousands of property buyers invested in more than 900 other towers but most of them are just dusty plots or marks on a map.
- “More than 90 per cent of clients have stopped paying in Ajman,” says Mohammed al Zarah, the vice president of Great Properties, a broker selling Ajman real estate.
- “I believe that not less than 30 per cent of the projects will be cancelled in Emirates Road and I am sure that more than 60 per cent will be put on hold.” (If 30% are cancelled, and a further 60% on hold – or likely terminal hold… that means only 10% stands a chance of getting built).
- “In Ajman there is no big developer, only master developers,” Mr al Zarah says. “They are often individual investors who own one or two towers. They only had a few millions in cash to pay up front and were dependent on investors’ money to finance the projects.”
- Other less scrupulous developers have used buyers’ money for other deals and have no money left to build. Some have been imprisoned for allegedly bounced cheques as they were unable to pay for their land plots, while others have fled the country.
- “I am in the market. I know some of the developers who received money but don’t know if they are going to stay in this country or not,” Mr al Zarah says. “What they have got in their accounts, many have already spent it.”
- Omar Bissar, the legal adviser of dozens of developers in the Northern Emirates, confirms that some have left the country. “I know personally four developers who have taken the money and fled,” he says.
- Serious developers say they are suffering from a bad image caused by a few rotten apples. (This statement should be flipped – a few serious developers have been give a bad image by a lot of rotten apples).
- It is not about prices now, it is about trust.”…… along the Emirates Road, that is one commodity in short supply.

Ironically, the developer/project I am having trouble with is ranked 2nd farthest along……
URL – http://www.thenational.ae/article/20090504/BUSINESS/705049942/1005

Or see PDF file;
Coming to terms with a downturn – The National Newspaper

Jun 09-Trying to retrieve PDC (Post Dated Cheques) Response from Dubai Islamic Bank

If you saw the previous post, I decided to approach the Bank (Dubai Islamic Bank) where Sweethomes would endorse & deposit the cheques.

Here’s what I got back from DIB. At least a prompt response – even if USELESS.
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From: Service.Quality@dib.ae
Subject: RE: Ajman Uptown Escrow Account – #E00697881310B###
Date: 26 April 2009 7:08:44 PM GMT+07:00
To: [buyer], Contactus@dib.ae

Dear Mr. ,

Thanks for contacting DIB Service Quality, please note that regarding your email dated on 25/04/2009 with same above subject, you need to follow the same with developer in order to finalize your request.

Thanking you once again for contacting us.

Best Regards

Service Quality Department

Jun 09 – Trying to retrieve PDC (Post Dated Cheques) – Letter to Dubai Islamic Bank

Having hit a wall with Sweethomes….trying to climb, tunnel under it, or go around.

1) Although Sweethomes cancelled, they don’t want to return uncashed Post Dated Cheques.
2) The new escrow accounts are with Dubai Islamic Bank, so I decided to write to them…. both email & fax.

See below:
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From:
Sent: Saturday, April 25, 2009 5:06 PM
To: Contactus (DIB-UAE); Service Quality
Subject: Ajman Uptown Escrow Account – #E00697881310B###

Dear Sir / Madam:

I faxed this request earlier today.

This is a request that DIB not accept any endorsements on my cheques that were made payable to M/s Sweethomes Real Estate – for deposit into the above account.

Mashreq bank, on whom the cheques are drawn – claim that there is no system for the cheques to be endorsed. Having said that – Sweethomes claims to be working on a system with Dubai Islamic Bank whereby the cheques are re-routed or endorsed for deposit into the above escrow account. A total of 9 cheques – worth AED 667,000.

I have written to Sweethomes, to cancel my purchase of this property. They have received my request for cancellation and I am having the law firm draft a mutually acceptable agreement.

If this is beyond your bank’s control, please let me know and I will make other arrangements. If you require any further information to action the above request, please let me know.

Best Regards

Jun 09 – Retrieving Post Dated Cheques (Letter of Undertaking from Sweethomes)

At one point, Sweethomes asked me to sign the attached letter, in order for me to get my PDC’s back.

1) I was ready to sign, but would do so only if they did a simultaneous exchange.
2) As it is, I didn’t trust the crooks one bit, they would have taken this signed letter, not returned my PDC’s and used this letter to solidify their side.
3) If any of you is presented with this Letter of Undertaking – note that in exchange, no where does it commit Sweethomes to give you the PDC’s back by any date.
4) Matter of fact, on the day we were supposed to go in and present the form – I decided to double check and asked Sweethomes if the Post Dated Cheques would be on hand…. their response, come in with the form, and have a discussion….. (this is documented in one of the earlier posts).

(The Usual BS).

If any of you out there is asked to sign the letter (click below for PDF) to get your PDCs back, make sure they actually have it ready for exchange.

New Undertaking Disclaimer

PS – The original was sent by Sweethomes as a word document, I’ve posted a PDF Version