UAE: If I fail to make mortgage payments, do I risk losing property and instalments already paid?

Question: I bought a home in Dubai five years ago. What happens if I am unable to make the mortgage payments? Do I risk losing my house? If so, what happens to the instalments I have paid already?

Answer: Pursuant to your query, it is assumed that you are an expatriate owning a property in Dubai. Therefore, the provisions of Law No. 14 of 2008 Concerning Mortgage in the Emirate of Dubai and the provisions of Federal Law No. (5) of 1985 On the Civil Transactions Law of the UAE are applicable.

If a mortgagor (borrower) defaults in repaying a mortgage loan to a mortgagee (lender), the lender may commence the sale of a mortgaged property upon serving a 30-day notice through a Notary Public to a mortgagor. This is in accordance with Article 25 of the Dubai Mortgage Law, which states, “In the event of default in the payment of a debt or upon fulfilment of a condition under which early repayment of debt is required the creditor-Mortgagee or his universal or particular successor may commence foreclosure and forced sale procedures against the mortgaged real property provided that the debtor or the person who has possession of the mortgaged real property or real property unit is served at least a thirty-day notice through a Notary Public.”

Thereafter, upon service of notice through a Notary Public by a mortgagee (lender) to a mortgagor (borrower), a mortgagee may file an execution case based on a mortgage deed and agreements signed between a mortgagor (borrower) and a mortgagee (lender) in a court which has jurisdiction in the emirate of Dubai. Based on an execution case filed by a mortgagee (lender) against a mortgagor (borrower), an execution judge may issue an attachment order against the mortgaged property to be sold in a public auction. This is in accordance with Article 26 of the Dubai Mortgage Law, which states, “If a debtor-mortgagor, his universal or particular successor or a real surety fails to pay the debt within the period stipulated in the preceding Article (Article 25 of Dubai Mortgage Law), the enforcement judge shall, upon request of the creditor-mortgagee, issue an attachment order against the mortgaged real property in order to sell it by public auction in accordance with the applicable procedures of the Dubai Land Department.”

However, an enforcement judge on a request of a mortgagor (borrower) may postpone the auction of property for a period of 60 days if the judge is satisfied that a mortgagor (borrower) can repay the balance mortgage loan within the said 60 days or if the auction of the property may cause substantial damage to a mortgagor (borrower). This is in accordance with Article 27 of the Dubai Mortgage Law.

Further, in the event a mortgagor (borrower) does not repay the balance mortgage loan to a mortgagee (lender), then based on the judgement issued by an execution judge, the mortgaged property will be sold in an auction conducted by the concerned auctioning authority within the grace period. This is under Article 28 of the Dubai Mortgage Law.

It should be noted that all the aforementioned provisions of Dubai Mortgage Law are read with Article 1430 of the UAE Civil Transactions Law, which states “A mortgagee may, upon maturity of the debt, take proceedings for the expropriation of the mortgaged property and the sale thereof, in case the debt is not paid on its due date, after notification of the debtor and the possessor of the property in accordance with the procedures set forth in the Law on procedures to be followed before the civil courts 2 and the special laws.”

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