What about Mortgage Law in UAE

Jul 3, 2020

What are the Mortgage Law in UAE?

Based on a proposal of the Minister of Finance, the President has issued a Federal Mortgage Law which provides the framework for a new form of non-possessory registered mortgage over movable assets in the United Arab Emirates (the UAE). UAE Federal Law No. (20) of 2016 on the Mortgage of Movable Property to Secure Debt (the Mortgage Law) was published on 15 December 2016 in the UAE official gazette (Issue 609) and will enter into force on 15 March 2017 (https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2017/02/new-mortgage-law-in-uae-briefing-on-key-issues.pdf).

The Mortgage Law contemplates that a mortgage can be created over certain asset classes of “movable” property and will be perfected against third parties upon registration in a centralised and publicly searchable register. It is hoped that this will be a milestone for parties seeking to create effective security packages with more certainty on enforcement procedures over movable assets in the UAE.

However, the efficacy of the Mortgage Law ultimately be dependent on the mechanisms put in place to implement its provisions in practice. A further decision of the UAE Council of Ministers, establishing the register and determining the competent registration authority, is still awaited. Implementing regulations setting out details as to how the register will be administered, the procedures for registration, the basic information to be included on the register and the relevant fees, are due to be issued within six months from the date of the law entering into force (the Implementing Regulations).

As such, there are many outstanding questions to be answered, and practical steps which need to be taken, before a definitive overview of the impact of the Mortgage Law can be provided.

About mortgaged properties rules we can say that all of them in the emirate should be registered with the Land Department of Dubai. As you are paying the share of mortgage loan that has to be paid by your partner – who has left the UAE – you may file a claim and demand your partner to pay his share. 

This is in accordance with Article 335 of the Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE. It states: “If a mortgagor settles the debt of somebody else, to liberate his mortgaged property in security for such debt, he is entitled to revert on the debtor for what the amount settled by him”. 

This means you may file a civil case in court against your partner to recover the mortgage loan amount you paid on his behalf (https://www.khaleejtimes.com/legalview/my-flats-co-owner-left-the-uae-without-paying-mortgage-what-should-i-do). 

Alternatively, you may consider selling the units to yourself or to a third party, subject to the consent of the mortgagee and provided that the power of attorney you are holding permits you to do so. 

If the power of attorney that your partner has given you does not allow you to transfer or sell his share of the mortgaged flats, then you may request him to issue another power of attorney. 

Further, if your partner’s power of attorney does not give you the right to sell or transfer his share or if he is not responding to you to pay the mortgage loan amount or to transfer the property to you or to any third party, you may continue to pay the entire EMIs to the mortgagee. Upon the completion of the payment of the entire mortgage loan, you may file a civil case in court against your partner to recover the mortgage loan amount you paid on his behalf.  

You may place your claim against your partner in accordance with Article 335 and Article 320 of the Civil Transactions Law of the UAE.

Under Article 320,  “whoever gives something, being under the belief that he is under duty to do so, but it was later revealed that it is not due by him, he is entitled to recover it from the one who received it, if existing, or a similar thing in replacement thereof or its value, if not existing.” 

You may also request the court for a judgement in your favour to transfer your partner’s share to your name as you have paid the entire mortgage loan amount to the mortgagee. For further clarifications, you may consult me as a legal practitioner in Dubai.

Alessandra Quarta Conte