Hidden Defects After Construction Project Handover: UAE Law Extends Statutory Claim Period to One Year

The revised Civil Transactions Law gives parties more time to pursue claims over qualifying latent defects.

The handover of a completed project is traditionally regarded as a significant stage in the construction process. It marks the point at which the employer takes possession of the works and the contractor begins closing out its contractual responsibilities. However, the transfer of possession does not necessarily bring an end to the contractor’s exposure to claims, particularly where defects were concealed and could not reasonably have been identified during the initial inspection.

The UAE’s new Civil Transactions Law, Federal Decree by Law No. 25 of 2025 Promulgating the Civil Transactions Law, introduces an important change to the statutory treatment of latent defects. It extends the period for bringing claims from six months to one year from delivery, unless the parties have agreed to a longer warranty period. Effective from June 1, 2026, the revised legislation provides additional protection to parties affected by defective goods or performance and brings greater clarity to the legal position following delivery.

Understanding the Change in the Law

Under the former Civil Transactions Law, Federal Law No. 5 of 1985, Article 555 stipulated that claims relating to latent defects would not be admissible after six months from delivery, unless the seller had provided a longer warranty. However, the seller could not invoke this time restriction where the defect had been fraudulently concealed.

The new legislation changes this position through Article 510, which extends the relevant period to one year from the day following delivery of the subject matter of the sale. Where a seller has undertaken to provide a longer warranty, the agreed period may continue to apply. The exception relating to defects concealed through fraud has also been retained.

The revised law provides further guidance on what qualifies as a latent defect. Under Article 494, a defect is generally considered latent if it existed before delivery but could not have been detected through an ordinary inspection, or could only have been identified through expert examination or testing. A defect that becomes visible after delivery may also qualify if it can be established that the underlying cause was already present at the time of delivery. The distinction matters because the fact that a defect appears after handover does not, by itself, establish that it falls within the statutory warranty framework.

The additional time is particularly relevant where the nature of a defect makes it difficult to identify during an initial examination. Certain problems only become evident after the goods or completed works have been put to their intended use, exposed to normal operating conditions or subjected to prolonged use.

For construction projects, however, Article 510 must be read alongside the provisions governing contracts for work under Articles 812 to 839 of the new Civil Transactions Law, as well as the relevant contractual warranty arrangements. Although the one-year period establishes a revised statutory position for qualifying latent-defect warranty claims, its application to an individual construction agreement will depend on the nature of the contractual relationship and the obligations undertaken by the parties. It must also be distinguished from the separate regime of decennial liability under Articles 821 to 824, which addresses structural collapse and defects that threaten the stability or safety of buildings and fixed structures.

Implications for Construction Projects

For employers, the extended period may offer a longer opportunity to identify qualifying defects and pursue available contractual or statutory remedies, subject to the applicability of Article 510 and any longer warranty agreed between the parties. Problems involving waterproofing, concealed electrical installations, plumbing networks, mechanical components and building materials may remain undetected during the initial handover inspection. In some instances, they only become apparent after prolonged occupation, exposure to changing weather conditions or the regular operation of installed systems.

Contractors, meanwhile, will need to pay closer attention to their responsibilities after practical completion. A handover certificate may establish that possession has passed to the employer and that the works have reached the agreed stage of completion. It does not, however, automatically release the contractor from responsibility for defects covered by an applicable statutory or contractual warranty.

The distinction between an ordinary defect and a latent defect will remain central to any assessment of liability. An issue that could reasonably have been identified through a proper inspection may be treated differently from a problem that remained concealed despite ordinary examination. The circumstances in which the defect developed, when it could reasonably have been discovered and the precise nature of the contractual obligations may all influence the outcome of a claim.

The Importance of Proper Documentation and Notification

With a longer period available for certain claims, the quality of project records and inspection procedures becomes even more important. Before accepting completed works, employers should arrange appropriate technical inspections, test installed systems and prepare detailed snagging lists. Any shortcomings identified should be recorded and communicated to the contractor in writing, supported where necessary by photographs, technical assessments and inspection reports.

Where a defect emerges after handover, employers should notify the contractor without undue delay and in accordance with the contractual requirements and applicable law. Waiting until the end of the relevant warranty period may complicate the process of establishing when the problem arose and how it developed. A notification should clearly describe the defect, identify the affected area and specify the corrective action being sought. Correspondence, inspection findings and other supporting material should be preserved in case the matter later becomes the subject of a dispute.

Contractors have equally important reasons to maintain an organised post-handover process. Project files, approved drawings, material specifications, testing certificates, site instructions, variation records and handover documents should be retained for an appropriate period following completion. Such material may prove critical when determining whether an alleged defect resulted from poor workmanship, unsuitable materials, subsequent alterations, inadequate maintenance or circumstances outside the contractor’s control.

Complaints received after handover should also be investigated systematically, with findings and responses properly documented. Where responsibility is disputed, a technical inspection followed by a reasoned written response can help establish the facts and reduce the likelihood of an otherwise manageable disagreement developing into formal proceedings.

Reviewing Contractual Defect Provisions

The legislative amendment also gives employers and contractors an opportunity to reassess the way defects and warranties are addressed in their construction agreements. Defects liability clauses, warranty provisions, notification procedures and rectification obligations should be reviewed to ensure they remain consistent with the revised legal framework.

One issue requiring particular attention is the difference between a contractual defects liability period and the statutory period for bringing a claim. The two may operate differently and should not be assumed to be interchangeable. Construction agreements should clearly establish the duration of warranties, the procedure for notifying defects, the contractor’s rectification responsibilities and the treatment of concealed defects, recurring failures and remedial works. Where rectification triggers an extended warranty, the agreement should also specify when that additional period begins and what it covers.

The transitional provisions of the new legislation also deserve consideration. Article 6 provides for the application of the new rules on limitation periods from June 1, 2026, to periods that have not yet expired. Employers and contractors should consequently examine ongoing projects and outstanding defect claims to establish whether the revised provisions affect their position. Contracts concluded before the new law came into force should not automatically be treated as falling outside its scope.

Conclusion

The extension of the statutory period for latent-defect warranty claims from six months to one year marks a significant change in the UAE’s civil law framework. It gives affected parties additional time to identify qualifying defects and pursue available remedies, while placing greater importance on the management of contractual responsibilities after handover.

For employers, effective inspection, timely notification and reliable record-keeping will be essential. Contractors, on the other hand, should maintain comprehensive project documentation, establish clear procedures for handling post-completion complaints and ensure that their contractual warranty arrangements reflect the revised legislation.

The completion and handover of a project should not be mistaken for the automatic termination of every potential liability. Properly managing the period that follows, with clear contractual provisions and a documented approach to defects, remains an important safeguard against avoidable construction disputes.