Security mortgage in Abu Dhabi

The security mortgage in Abu Dhabi is considered a tangible insurance type regulated by the Federal Law of Civil Transactions No. (5) of 1985, as well as Law No. (3) of 2015 on regulating the real estate sector in Abu Dhabi.

What is Security mortgage?

The Security mortgage is defined in Article 1399 of the Federal Civil Transactions Law as “a contract that grants the creditor a real right that takes precedence over ordinary creditors and subsequent creditors in the order of priority, in order to recover his right from the price of that property, in whichever hands it may be.”

Article 34 of Law No. 3 of 2015 concerning the regulation of the real estate sector in the Emirate of Abu Dhabi explained that the security mortgage includes the annexes of the mortgaged property such as buildings, crops, and dedicated properties, as well as any constructions that are established on it after signing the contract unless otherwise agreed upon.

Terms of Security mortgage in Abu Dhabi

According to the Federal Civil Transactions Law and the Real Estate Regulatory Law in Abu Dhabi, the mortgage by way of security is based on the following conditions:

• If the creditor is a bank, company, or financing institution, they must be licensed and registered with the Central Bank of UAE to conduct real estate financing activities in the country.
• The mortgage by way of security is only valid if registered, and the mortgager is responsible for the contract fees, unless otherwise agreed.
• The mortgager can also be the debtor or a guarantor who provides a mortgage for the benefit of the debtor.
• The property of a third party cannot be mortgaged unless the real owner approves it with a documented instrument.
• The mortgager must be the owner of the mortgaged property and entitled to dispose of it.
• The mortgaged property must be an existing security mortgage at the time of the mortgage.
• The mortgage by way of security must be in exchange for a fixed debt, a specified date at the time of the mortgage, or a specified property that is secured.
• The mortgage by way of security cannot be placed on property that cannot be transacted or sold at a public auction, or on a personal right to property.
• The mortgage by way of security cannot be divided, and every part of the property is a guarantee for the entire debt, and every part of the debt is secured by the mortgaged property.
• The mortgage by way of security must be registered in the primary real estate register or the real estate register, after being signed by the mortgager and the mortgagee or the guarantor.

The effects of the Security mortgage in Abu Dhabi between the contracting parties

Firstly – The Impact of the Security Mortgage on the Mortgagee

• The mortgagee is prohibited from disposing of the pledged money by sale or gift without the consent of the secured creditor unless otherwise agreed upon.
• The mortgagee has the right to manage their mortgaged property and obtain its value until the date of forced transfer of ownership in case of default, and the value is attached to the mortgaged property from the date of transfer of ownership.
• If the mortgagee delays in paying their debt to the secured creditor, the court may seize the revenue from the property from the date of the lawsuit.
• The mortgagee is responsible for the mortgaged property until the debt is fully paid, and the secured creditor has the right to object to any deficiency in it, by taking legal action in this regard.
• If the mortgaged property is destroyed or damaged due to the fault of the mortgagee, the secured creditor can demand immediate repayment of the debt or provide sufficient guarantee for the debt. If the mortgagee is not responsible for this destruction, they must provide a sufficient guarantee for the debt or repay it before the due date.
• If actions occur that may lead to the destruction or damage of the mortgaged property, or make it insufficient for the guarantee, the secured creditor has the right to request that the court stop these actions and take necessary measures to prevent damage.
• The security mortgage transfers to the funds that replace the destroyed or damaged property, such as compensation, insurance amount, or the value of expropriation for the public interest, and the secured creditor has the right to collect their due from these funds.
• If the mortgagee is a personal guarantor, they are not allowed to pay the debt from other than the mortgaged property, nor can they demand reimbursement from the debtor’s funds before executing the mortgage.

Secondly, the impact of the security mortgage on the Mortgagor:

• The mortgagee has the right to transfer his right to another person as a security mortgage, provided that the mortgagor agrees and the transfer is registered in the real estate register.
• The mortgagee has the right to track the pledged money with the holder until his debt is paid off when it becomes due.
• The mortgagee may recover his debt from the mortgaged property when the debt falls due, after taking legal action before the civil courts. If the property does not cover the debt, the mortgagee has the right to claim the remainder of his debt from the debtor as a regular creditor.
• If the mortgage document stipulates that the mortgaged property be transferred to the mortgagee as payment for the debt if the mortgagor fails to pay it at the agreed time, or if it is sold without legal restrictions, the mortgage is valid, and the condition is void even if it is agreed upon later.
• The lease contract issued by the mortgagee is not enforceable against the mortgagor except if it is dated before the mortgage. As for the deferred lease contract that begins after the completion of the executed lease contract, it is not enforceable against the mortgagor unless it is registered in the mortgage contract.