- In order for The Property Mortgage to cover a property value, the debtor must provide a security for the repayment of the mortgage to the creditor.
- The judicial procedure to be followed by the creditor is to be sufficiently found in Federal Law No. 42/2022 on the Civil Procedures Law.
- In Dubai (except for Dubai International Financial Center – DIFC), the judicial procedure is found in Law No. 14/2008 On Mortgage Insurance in the Emirate of Dubai.
- Unfortunately, if the sale of the property is the last choice for the court to recover the creditor’s loan, then the sale of the property through the execution court will be the end, and such a sale is conducted by the Public Auction.
- If the unit price at this sale covered the loan amount and still there is a remaining balance of the sale, this balance will be transferred to the debtor’s bank account.
- If the unit price at this sale fails to cover the loan amount, then the execution will include his other assets and again, selling them through the auction until the loan is fully covered.
- Mortgage is a type of contract between two or more parties, whereby a creditor acquires to obtain tangible security over property funding and for the purpose of ensuring the repayment of their debt.
- Mortgagor is the owner of the property.
- Mortgagee is a creditor who facilitates money to the mortgagor towards the security payment of a property.
- Property could be real property, registered by DLD in the UAE.
Governing Code. Practical Guidance
The Civil Procedure Code
The process begins with a submission to the judge of the Court of Execution an application to seizure the debtor’s real estate.
This application only comes after winning a final judgment from the court stating the right of a creditor to recover the loan amount.
The judgment shall be final as per the law.
The court will allow the debtor for a short time to sell the property on his own, to secure the amounts, and in common cases, the court orders the Public Auction to take over the selling matter.
Mortgage foreclosure under Dubai Law No. 14/2008
Execution is carried out through the Execution Department of Dubai courts.
Upon failure of payment of the debt for any reason the creditor must serve a notarized legal notice to the debtor, and within 30 days of this default.
If the debtor fails to pay within the period specified in the notice, the execution judge most probably will order to freeze the property and order the public auction in accordance with the applicable procedures to sell the property.
This urgent request does not require obtaining a judgment for payment first. This application is considered by the judge of the urgent matters, and it is considered a different way of claiming unpaid amounts such as loans.
The urgent matters judge will check if the formalities for a properly registered mortgage were complied with and if the application formalities have been met.
This process can take up to six months, which is why it is always recommended to go through a dispute resolution and register a Lawsuit directly to save your time.
The urgent matters judge may postpone the sale by public auction for up to 60 days if they find the following:
- The mortgagor will be able to repay their debt if given this period; or
- The sale of the property will cause the debtor substantial damage.
Failure to pay the debt within the stipulated period will cause the property to be sold within 30 days by public auction.
The debtor may repay the secured debt before the deadline for the payment is passed.
If the claim/s of the creditors are higher than the property value, the debtor must pay out the rest of the loan of his other assets – in order of priority – even if the mortgages had all been registered simultaneously, if the total assets are less than the loan, the creditors still have the right to claim the shortfall from the debtor as explained above.
DIFC Law No. 10/2018 – DIFC Real Property Law, stipulates the following important term in regard to creditor’s rights;
If the mortgagor is in default of their obligations under the mortgage after having given the debtor 60 days written notice to rectify the default:
- Selling whole or part of the real estate property or any interest that belongs to the real estate property by whatever means including tenders, public auction, or throughout a private contract;
- Selling of the fixtures apart from the balance of the real estate property;
- Transferring the rights and the privilege of any kind over or in relation to the real estate property;
- Possessing the property and receiving the rental profits associated with it.
The creditor has the right to seek a Court Order restraining the debtor from selling the property if reasonable circumstances justify such a request.
- Federal Law No. 42/2022 Promulgating the Civil Procedure Law
- Dubai Law No. 14/2008 on Mortgage Insurance in the Emirate of Dubai
- DIFC Law No. 10/2018 DIFC Real Property Law
Partner/Legal Director, Elnaggar & Partners
Legal Advisor – General Law, Elnaggar & Partners