Buyers call for clarity on shell and core units

Sales contract for a shell and core unit should be comprehensive, said Commercial property buyers and analysts.

They said contracts sometimes do not clearly define what a shell and core space is, resulting in dissatisfaction among customers.

"New office buildings are being completed to a shell and core finish, in accordance with international standards," said Michael Grant, Commercial Property Manager at LLJ Property. "However this necessitates more complicated lease terms."

Axel Jacob, a legal consultant at Fichte & Company, said: "Generally there appears to be no accepted standard definition of shell and core. In such a case it would be advisable to define it further in the sales contract."

He said there were no specific regulations covering this matter in UAE law.

"Since there is no standard definition available, it is difficult for anyone to make note of omissions when a shell and core unit is handed over," he added. "Determining whether or not a specific omission violates the shell and core standard will also depend on the circumstances of the individual case.

"If the parties fail to agree, the aggrieved party would have no choice but to go to court. The court would possibly look into the general practices in the country in order to determine what exactly shell and core means."

Grant called for long-term leases for the office sector, especially in the case of shell and core units.

"Usually with a shell and core unit the tenant has to fit it out as per their own corporate guidelines and the cost needs to be spread over a number of years, resulting in tenants looking for five to 10 years lease terms. It is customary in the UAE for leases to last for only one year but commercially-aware landlords are now increasingly offering them for a longer term," he said.

Jacob said: "It all boils down to what is specified in the sale and purchase agreement. If the agreement specifies several units then it would seem highly questionable whether the omission of walls demarcating the units can be regarded as sanctioned as shell and core.

"It would appear necessary for these walls to be erected in order to deliver the units. If, however, the building is to be delivered shell and core, then it may be that only the structural walls are required, leaving room for an individual design of units. The investor can always complain to the developer but if the dispute is not settled he would only have recourse to the courts."

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