The Mortgage trends in Dubai and Abu Dhabi

Property mortgages in Dubai and Abu Dhabi are handled very differently in practice. The distinctions stem from the registration requirements in each Emirate, as well as Dubai's unique mortgage law. In addition, one must consider the nature of each Emirate's property laws.

All parts of Dubai are open to UAE and other GCC nationals, as well as enterprises completely owned by them. Freehold ownership, extended lease rights of up to 99 years, and usufruct and musataha rights are all included. Other nationals are allowed to own real estate in Dubai's "designated regions," as established by the Ruler. The new Downtown Burj Khalifa, Palm Jumeirah, and Dubai Marina projects are examples of this type of development.

In Abu Dhabi, there is a property registration framework that requires all dispositions giving rise to real property rights, such as lease contracts with a term of more than 4 years and usufruct and musataha rights, to be registered. Furthermore, a recent resolution reaffirmed this registration framework by requiring the director of the applicable property registration department to register all dealings and issue title certificates relating to ownership (whether of land, apartments, or floors in buildings, as permitted), long lease, musataha, and usufruct rights both within and outside of the investment areas.

However, in practice, practically little registration in the investment regions has transpired to date. Long lease, musataha, and usufruct rights are not commonly registered for UAE citizens outside of investment regions, although property ownership rights are typically registered for UAE residents outside of investment areas. In addition, unlike in Dubai, there is currently no interim property register to record off-plan property sales.

Dubai Mortgages.

The Dubai Mortgage Law (Law No. 14 of 2008) governs the use of mortgages on real estate and unit mortgages as security for debts recorded with the Dubai Land Department. A valid lender must be a bank, firm, or financial organization that has been lawfully licensed and registered with the UAE Central Bank to provide property finance in the UAE, according to the law. The mortgagor must own and be able to sell the mortgaged property.

Only mortgages registered with the Land Department on the real estate register or the interim register will be deemed valid. All mortgages and other interests listed on the interim register will be automatically transferred to and registered on the real estate register at the moment of transfer of title to the real estate register if the title appears on the interim register. The moment of registration determines the mortgage's ranking, with a serial number assigned by the Land Department at registration.

Only registered mortgages are recognized in Dubai, as a result.

In terms of enforcement, the Mortgage Law states that any clause in a mortgage contract stating that if the borrower fails to pay the mortgage debt within the specified period, the lender will have title to the mortgaged property or will be able to sell the mortgaged property without taking the enforcement steps required by law is void.

There is presently no special mortgage law in Abu Dhabi that pertains to mortgages of real estate and real estate units used as debt security. The director of the relevant property registration department is directed to register the mortgage's overall property and property rights within and outside the investment regions, according to the recent resolution reconfirming the Abu Dhabi registration framework (described above). However, because there has been little registration of properties and property rights in the investment areas, as well as very little registration of long lease, musataha, and usufruct rights outside these investment areas, mortgages in Abu Dhabi have generally only been registered against registered freehold titles owned by UAE and GCC nationals outside the investment areas. The registration of additional mortgages will be governed by implementing regulations.

It's no wonder that property mortgages are treated differently in Dubai and Abu Dhabi, given the disparities in how property laws are enforced in the two Emirates, not to mention the fact that Dubai has its particular mortgage law. It is intended that the implementation of implementing regulations, as well as the much-anticipated new property laws in Abu Dhabi, will result in greater consistency in the manner each Emirate registers and enforces mortgages.