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

The owner may not lose the house immediately even if they cannot pay

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.”

Based on the aforementioned provisions of Dubai Mortgage Law and UAE Civil Transactions Law, if you as a mortgagor (borrower) fail to repay the mortgage loan to the mortgagee (lender), then the mortgagee (lender) may file an execution case before an execution judge in the Dubai Court to sell your mortgaged property through a public auction conducted by any auctioning authority. The bidder, who wins the bid to buy your mortgaged property, needs to deposit the sale proceeds (auction amount) to the Dubai Court’s bank account within stipulated days. However, it is assumed that you have availed long term mortgage loan from the mortgagee (lender) and as you have only completed five years of owning your mortgaged property in Dubai. It is further assumed that you may have not repaid a substantial part of the mortgage loan. Therefore, in such a scenario if your mortgaged property is sold in a public auction, the bank may only be entitled to the outstanding amount of the mortgage loan, penalties whatsoever as agreed in the mortgage deed or agreement with you, court fees, auction fees, interests, and any other fees/costs if any. Thereafter, Dubai Court upon settling your bank’s (mortgagee) outstanding amount as per the execution order, may transfer to your bank account if any residual amount is remaining from the sale proceeds of the auction of your mortgaged property.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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