Dubai Property Owners Risk Losing Their Homes If They Default on Mortgage Payments
Dubai, UAE – With many expatriates buying homes in Dubai, it’s important to understand the consequences of defaulting on mortgage payments. Under the provisions of Law No. 14 of 2008 Concerning Mortgage in the Emirate of Dubai and Federal Law No. (5) of 1985 On the Civil Transactions Law of the UAE, if a mortgagor (borrower) fails to make mortgage payments, the lender may begin foreclosure and forced sale procedures against the mortgaged property.
According to Article 25 of the Dubai Mortgage Law, a lender can serve a 30-day notice through a Notary Public to the borrower, giving them time to repay the debt or fulfil any conditions for early repayment. If the borrower fails to do so, the lender can commence foreclosure and forced sale procedures against the mortgaged property.
Once the notice has been served, the lender can file an execution case based on the mortgage deed and agreements signed between the borrower and lender in a court that has jurisdiction in the emirate of Dubai. An execution judge may then issue an attachment order against the mortgaged property to be sold in a public auction, as per Article 26 of the Dubai Mortgage Law.
However, if the borrower can repay the balance mortgage loan within 60 days or if the auction of the property may cause substantial damage to the borrower, an enforcement judge on a request of the borrower may postpone the auction of the property for a period of 60 days, as per Article 27 of the Dubai Mortgage Law.
If the borrower fails to repay the balance mortgage loan to the lender, the mortgaged property will be sold in an auction conducted by the concerned auctioning authority within the grace period, as per Article 28 of the Dubai Mortgage Law. As per Article 1430 of the UAE Civil Transactions Law, the 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.
It is important for borrowers to understand that if their property is sold in a public auction, the bank may only be entitled to the outstanding amount of the mortgage loan, penalties as agreed in the mortgage deed or agreement, court fees, auction fees, interests, and any other fees/costs. Any residual amount from the sale proceeds of the auction of the mortgaged property may be transferred to the borrower’s bank account by the Dubai Court upon settling the bank’s outstanding amount as per the execution order.
It’s vital for homeowners to make their mortgage payments on time to avoid the risk of losing their homes. Those who are facing difficulties in making mortgage payments should contact their lenders to discuss available options to avoid defaulting on the loan.
