We often require loans from banks and other financial institutions. However, lenders routinely demand security for providing monetary assistance to ensure that their loans can later be recovered. A common practice to secure loans is through a mortgage agreement.

A mortgage agreement places a charge against the borrower’s (mortgagor) asset in exchange for an amount of money (a loan) that the lender (mortgagee) provides. The mortgaged asset may be movable, such as a car, or immovable, such as a house. At all times, the mortgage agreement must be registered with the relevant governmental department.

The Law No 14. Of 2008, Concerning Mortgages in the Emirate of Dubai, discusses various obligations placed on mortgagors. Two of the most important obligations are:


  • Paying instalments as they become due; and
  • Maintaining the value of the mortgaged asset.  

    If a mortgagor fails to satisfy the due debt, the mortgagee may recover the outstanding amount of the mortgage by selling the mortgaged asset. This must be done through the court. As such, any provision within the mortgage agreement purporting to allow the mortgaged asset to be sold immediately after the mortgagor’s default will be void. However, prior to initiating legal proceedings for sale of the mortgaged assed, the mortgagee must provide notice of the same to the mortgagor. Upon receipt of this notice, the mortgagor will have 30 days to satisfy the due debt. If the mortgagor fails to discharge the debt within this period, the mortgagee may apply to the court for an order for sale of the mortgaged property.

    Mortgaged assets are usually sold at a public auction. In the UAE, all auctions are centrally held with the Emirates auction. Such a sale protects the mortgagee from liability if the asset is sold at a price lower than its market value. Where the sale does not discharge the whole debt, the mortgagee may initiate standard civil proceedings in order to recover the remaining amount. The court may also be requested to issue an arrest warrant or to attach other assets of the mortgagor. Thus, the mortgagor’s liability will not be limited to the asset charged by the mortgage agreement.