· Shega · Munir Shemsu
As Ethiopia Tightens Real Estate Rules, Developers Embrace Arbitration
Topics:DevelopersLaw and policy
Summary of the Shega report
Ethiopia's real estate developers' association has signed an agreement with the Addis Ababa Chamber of Commerce to settle disputes with homebuyers through arbitration. The Chamber handled 96 real estate disputes in five years. The deal comes as the sector waits for regulations under a law that requires escrow accounts and 80 percent completion before transfer.
Key points
- The Ethiopian Real Estate Developers Association signed an arbitration agreement with the Addis Ababa Chamber of Commerce and Sectoral Associations.
- The association was founded by 29 firms and now has about 100 members.
- The Chamber says it handled 96 real estate disputes that affected more than 550 parties in five years.
- The real estate law brings escrow accounts, an 80 percent completion rule before transfer and a minimum of 50 completed units for a licence.
Real.et analysis
Shega reports that the Ethiopian Real Estate Developers Association (EREDA) signed an agreement with the Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) to use the Chamber's arbitration service for disputes with homebuyers. EREDA is nine months old. Twenty-nine firms founded it, and it now has about 100 members. Its president, Alemayehu Ketema, said a formal arbitration route could reduce the load on buyers, who now spend years in court.
The Chamber says it handled 96 real estate disputes that affected more than 550 parties in the last five years. Its arbitration director said standard contracts for the sector are one aim of the agreement.
The agreement comes before the real estate law that parliament ratified last year takes full effect. The regulations are still pending. The law brings escrow accounts, a rule that a project must be 80 percent complete before transfer, and a minimum of 50 completed units for a licence. The report says the country needs nearly half a million homes a year, while public and private builders together deliver no more than 50,000 urban units.
What this means for buyers
Arbitration is private and usually faster than a court case. The decision is binding. It applies only if your contract says so. Points to check before you sign with a developer:
- The dispute clause. Does the contract send disputes to arbitration or to court? Who pays the fees?
- The arbitrator. Which body appoints the arbitrator? A neutral institution is safer than a person the developer selects.
- Your money. Ask if your payments go into an escrow account, as the new law requires.
- The licence. Ask for the developer's licence and for the completion record of earlier projects.
Background
The Chamber official said the proclamation also creates an administrative body for disputes, and that the pending regulations will set the standards for its members. The law does not forbid other routes, so agreements like this one stay valid.
Our guide to real estate developers in Ethiopia lists what to check about a developer. Read about the mandatory escrow account system and about buyers who went to court in the Noah flats case.