Are you a contractor or developer planning a new construction project in the UAE?

The construction industry in the UAE is booming. In 2023, the construction market was valued at USD 66.27 billion and is expected to grow at a CAGR of 6.06% by 2029.

But, opportunities come with risks of costly claims, which can drain your business’s finances and tarnish your reputation if the project you plan shows any structural defects throughout the decade.

Decennial liability is a strict ten-year liability on contractors, developers, engineers, and architects for any structural defects that threaten the safety and stability of a building or cause its total and partial collapse.

Understanding decennial liability is essential to safeguarding your business and its construction projects in the UAE. This guide covers its legal framework, claims process, risks, and best practices to manage liability effectively.

Legal Framework and Scope Of Decennial Liability In UAE

Decennial liability in UAE imposes a strict, non-negotiable obligation on developers, contractors, and architects to ensure building safety and structural integrity. Article 880 of Federal Law No. (5) of 1985 on Civil Transactions and Article 40 of Law No. (6) of 2019, governing joint ownership of real estate property in Dubai holds these professionals jointly liable for “ten years or a longer agreed period to indemnify the owners” after the handover date.

They share the responsibility of compensating the owners for the following:

• Any total or partial collapse
• Defects that compromise the stability or safety of a building

Under Article 882 of the Civil Code, any attempt to limit or exclude decennial liability in UAE through contractual agreements is void. This means contractors and architects cannot negotiate a waiver or reduction of responsibilities for more favourable terms, even if the parties agree to such provisions beforehand.

Decennial liability in UAE is perceived as a contractual duty to protect employers who engage with contractors and architects. So, even if the building is sold, subsequent owners may still get coverage through the liability. However, the building owners may be considered third parties in the major contractual relationships involving the employer, contractors, and architects. As a result, owners must establish the conditions of wrongful conduct, the losses sustained by the third party, and the source of such damages.

Types of Defects Covered

• Structural defects – that directly compromise the stability, safety, or durability of a building or structure. Flaws in foundations include faulty support beams, poor quality concrete used in walls and columns, or issues with other load-bearing components that weaken the building’s stability over time.
• Collapse of the building – including total or partial collapse, such as roof collapse or certain section collapse. Contractors and supervising architects are liable even if the collapse results from factors such as soil defects.
• Defects threatening safety – that may not have caused immediate collapse but pose a significant risk to the safety of the occupants. These defects could be cracked load-bearing walls or improperly installed structural components that could undermine the structural integrity or create hazardous living or working conditions​.

Liability for Subcontractors

Under Article 880(2) of the UAE Civil Code, the liability in case of structural defects is with the contractor, developer, and architect together. For any defects in subcontractors’ work, this liability will continue, even though a subcontractor was responsible for the particular defect. In agreements with subcontractors, such indemnification clauses can be inserted by the contractors. However, they can never fully shift their legal liability. However, the primary contractor is still liable for the overall structural integrity of the whole structure and it is not possible to exclude liability for a subcontractor’s fault under UAE law.

Liability for Renovations or Extensions

Renovations, modifications, or extensions affecting a building’s core structural components could trigger decennial liability. Although Article 880 primarily covers newly constructed buildings, any subsequent structural work that alters or affects the stability of the original structure may extend decennial liability for an additional ten years, beginning from the completion date of the renovation or extension. Developers and contractors involved in substantial renovations should take this into account when planning and executing projects.

What’s Not Covered

There are certain aspects not included under decennial liability. As highlighted below:

• Non-structural defects such as superficial or aesthetic issues such as cracks in tiles, minor leaks, or finishing defects.
• Deterioration due to the natural aging of materials or usage over time is generally not covered under decennial liability.
• Problems arising from a lack of proper maintenance or misuse by the building owner or occupants are not covered. These could include plumbing malfunctions or electrical failures unrelated to the building’s structure.
• Defects or damages caused by external factors like natural disasters (unless linked to construction flaws), wars, or environmental conditions beyond the scope of typical construction risks are excluded.

Note: These defects may still be subject to other legal claims.

Exemptions for Temporary Structures

Under Article 880 of the UAE Civil Code (Federal Law No. 5 of 1985), decennial liability applies to structural defects that affect the safety and stability of buildings or other permanent constructions. Temporary structures such as scaffolding, site offices, and other short-term installations are excluded from this liability. These temporary setups, while subject to workplace safety regulations, are not covered by the ten-year liability. Contractors must ensure compliance with safety standards during construction, but they will not face decennial liability claims for temporary structures.

No Fault Liability

Decennial liability under UAE law imposes strict liability on contractors and supervising architects for the structural integrity of a building for 10 years following its completion. This means that no proof of negligence is required for holding them accountable. Even if the contractor or architect is not at fault, they remain liable for any structural defects or collapse.

The only exceptions to this liability are:

• Force Majeure: These are unforeseeable events beyond the contractor’s control, such as natural disasters, as outlined in Article 273 of the UAE Civil Code. However, force majeure clauses generally do not exempt a contractor from decennial liability under Article 880 unless the event causes complete destruction of the building.
• External Causes: This refers to situations where defects or collapse are caused by actions of the employer (building owner) or a third party, after the building has been handed over. In such cases, the contractor or developer may not be held liable.

This concept of “no fault” liability is more onerous compared to common law systems, where contractors and architects are typically only liable if they breach a duty of care or fail to meet professional standards.

In contrast, UAE decennial liability provides more protection for building owners by holding contractors and supervising architects accountable for structural defects or collapse, regardless of fault, with the limited exceptions mentioned above.

While Article 273 deals with force majeure events in general contractual obligations, it does not usually apply to exempt contractors from decennial liability under Article 880. Contractors could still be held liable for partial collapses or defects, even if attributed to force majeure, unless the event results in the complete destruction of the project.

It is important for contractors and developers to carefully review force majeure clauses in their contracts, as these events can impact liability under the Civil Code. Legal counsel, such as Economic Law Partners, may provide guidance on how such clauses interact with decennial liability.

Additionally, the building owner’s responsibility for maintenance is distinct from the contractor’s liability for structural defects under Article 880. Owners must maintain the building to prevent deterioration. If a structural issue arises due to the owner’s failure to perform necessary maintenance, the contractor or developer may not be liable under decennial liability. Article 880 applies only when the installation is structurally defective. Regardless of external factors like defective land or the owner’s consent to faulty construction, the contractor remains fully responsible for compensating for structural defects.

Claims Process of Decennial Liability In UAE

For ten years following the building’s completion certificate, the developer must remedy and correct any structural problems in the jointly held property that the owners association or a unit owner notify him of.

Knowing how the claims process works allows contractors and developers to understand financial and legal repercussions. The process includes four steps:

1. Defect discovery: The building owner or developer recognizes the defect that affects the building’s stability or safety.
2. Claim initiation: Article 883 of the UAE Civil Code mandates the right to claim within three years of defect discovery.
3. Expert report: In most cases, the claimant commissions an expert report to assess the nature and extent of the defect, including the estimated cost of repairs and the value of damages.
4. Court proceedings: The Court may appoint its own expert to review the original report, assess the defect, and issue a judgment based on the expert findings, awarding or rejecting compensation to the claimant for the necessary repairs or losses​.

Statutory Limits on Liability

The UAE Civil Code does not impose statutory caps on the financial exposure contractors and developers face under decennial liability. Article 880(2) allows for compensation, in full, for any total or partial collapse or defects threatening a building’s stability or safety, regardless of the defect’s magnitude. Since there are no statutory limits on the amount that can be claimed under decennial liability, the financial risks are significant. Contractors and developers should mitigate these risks by purchasing decennial liability insurance, which helps cover potential high-value claims.

Best Practices to Manage Decennial Liability In UAE

To stay away from the risks and financial exposure associated with decennial liability, contractors and developers must follow the best practices adopted to ensure quality and compliance throughout the construction process:

• Quality control – Ensure thorough inspections, safety protocols, and use of high-quality materials to avoid future defects.
• Conduct audits and proper documentation – Maintaining records of the construction process, including design specifications, inspections, material sourcing, and contractor-subcontractor agreements, will ensure compliance with applicable laws and regulations.
• Vet subcontractor carefully – Contractors are liable for subcontractors’ work, and a careful assessment of subcontractors is a must to ensure they have the skills, resources, and quality standards to do the job. Contracts with subcontractors might include indemnification provisions to share liability.​
• Provide post-construction maintenance – Regular inspections after post-construction and maintenance support may identify minor concerns before they become significant faults. The discovery of such problems early on may also help contractors and developers avoid costly decennial liability lawsuits.
• Get insured – Decennial liability insurance can provide financial protection in the event of a claim, helping cover repair costs or even reconstruction if a significant defect or collapse occurs.

Insurance for Decennial Liability In UAE For Contractors And Developers

Construction professionals may face significant exposure to claims under decennial liability in UAE that could involve:

• Expensive repairs
• Rebuilding
• Compensation for losses
• Reputational damage

Decennial liability claims can be particularly concerning for high-value projects with substantial financial stakes​. To protect against the risks posed by decennial liability in UAE, contractors and developers can opt for decennial liability insurance. This specialised insurance covers the financial exposure from structural defects or building collapses over the ten-year liability period.

Many countries like France require decennial liability insurance; however, it’s not mandatory in the UAE yet. While there have been discussions about making it mandatory, the primary concern that delays its implementation is the increased construction costs due to its high cost.

If decennial liability insurance becomes mandatory, the overall project costs will increase, and the project budget will factor in premiums. The additional costs will most likely be passed on to developers or end-users.

However, despite the additional expense, decennial liability insurance can protect contractors and architects from catastrophic financial losses resulting from major defects.

Note: Decennial liability in UAE typically would not be covered under traditional policies such as Professional Indemnity (PI) and Contractors’ All Risk (CAR). PI covers negligence or error in a project’s design or supervision stage. CAR insurance covers damages during construction stages but excludes post-completion issues such as structural defects or collapse.

Get The Best Real Estate Lawyer in Dubai on Your Side

Contractors and developers must fully understand decennial liability in UAE to understand the significant financial and reputational risks associated with new and existing projects. They must also adopt proactive measures throughout the construction process and even after project completion to avoid structural defects or building collapses.

While decennial liability insurance adds to project costs, it can provide necessary cover against the high financial loss from damage caused by significant defects.

Shoeb Saher, founder of Economic Law Partners, is the best real estate lawyer in Dubai. ELP stands apart from all the law firms in Dubai with its proven track record as one of the most reliable legal consultants in Dubai for helping individuals, businesses, and government agencies in the United Arab Emirates (UAE) navigate real estate matters.

With expertise in construction projects, real estate transactions, property disputes, and regulatory compliance, we can help contractors and developers manage risks with:

• Navigating insurance coverage
• Drafting subcontractor agreements
• Managing compliance with local regulations
• Providing strong representation in dispute resolution

Get real estate legal counsel in Dubai. Visit our law offices in Sharjah today or contact us to join hands with the best lawyers in Dubai.