With an increasing number of real estate firms being taken to court, this verdict is a milestone moment.
Addis Ababa, Ethiopia -A judge at the Federal High Court ruled in favour of six plaintiffs who sued Country Club Developers (CCD) PLC for breach of contract. The verdict, handed down two weeks ago, stated that the real estate developer should deliver luxury villas, including punitive damages to the plaintiffs, after they took CCD management to court.
The presiding judge, Shemsu Sirgaga, ruled that CCD has no right to unilaterally cancel contracts, and thus had an obligation to handover houses bought by clients at the originally agreed prices. He also subjected CCD to compensation to each client of 4,000 Br for each month that has passed since CCD terminated the contracts.
This is a landmark ruling that sets the bar high for real estate firms in the country, which are increasingly locked in disputes with their homebuyers, due largely to failures in timely delivery. Although it is standard practice for many firms to sign contracts with clients to deliver homes in up to 24 months, rarely does a real estate firm fulfil such obligations.
The average delivery time for a home purchased from a real estate developer is five years, whereby the cost of building houses with the originally agreed upon price escalates to the disadvantage of developers.
The story of CCD PLC, established in 2002 with a registered capital of 20 million Br equally contributed to by; Messele Haile (PhD), a German trained architect, and Alemayehu Ketema, an architect who owns a construction firm bearing his name, is hardly any different.
The company leased a 70 ha plot in Legatafo town, in the Oromia Regional State Special Zone, 11Km from Addis Abeba, for a 99-year term, at 70 cents a square metre. CCD, a work in progress, aspires to building a community of 1,000 homeowners, each house being built on an average plot of 1,000sqm.
Getachew Tezera, Sherif Mohammed, Zewdeneh Getachew, Almaze Alemu and Epherem Senbeta (PhD), all residents in the United States at the time, and Dejene Tezera, a resident in the Netherlands, were among the clients who signed contracts with CCD in 2007 and 2008. They bought houses worth three million Br, 2.6 million Br, 3.1 million Br, 1.7 million Br, 2.4 million Br and 2.5 million Br, respectively. CCD had agreed to deliver these luxury villas within 18 months.
Three and a half years later, and two years after the signing of the initial contracts, CCD called a gathering of its homebuyers. At the meeting managers of the real estate developer pledged, yet again, to complete the houses it should have delivered two and a half years ago; with a few conditions, however. Read more