Question: I own a home in Dubai with an outstanding mortgage. I have recently lost my job and plan to return to my home country. Can I sell the property and have the buyer take over the remaining mortgage? Would I need the bank's approval, and what is the legal process for transferring the property and settling or transferring the outstanding loan?
Response: Pursuant to your query, as the property is situated in Dubai, the provision of the Dubai mortgage law is applicable.
A mortgagor may sell, donate or otherwise dispose of the mortgaged property, or create any real or personal right over it, only with the approval of the mortgagee and provided that the purchaser agrees to assume all obligations of the mortgagor under the mortgage contract. A mortgagee may also specify that the mortgagor and the purchaser shall be jointly liable for such obligations. This is in accordance with the Article 10 of the Dubai Law No. 14 of 2008 Concerning Mortgage in the Emirate of Dubai.
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“A Mortgagor may sell, donate, or dispose, in any other manner, of the mortgaged Real Property Unit or Real Property, or create any Real Right or personal right on the same only with the approval of the Mortgagee and provided that the person to whom the Real Property is disposed of agrees that all obligations of the Mortgagor under the Mortgage contract will be transferred to him. A Mortgagee may stipulate in the Mortgage contract that the Mortgagor and person to whom the Real Property is disposed of will be jointly liable for such obligations.”
You may consider the following options:
Option 1: Sale of the property and settlement of the existing mortgage
You may sell the property and the sale proceeds shall settle the outstanding mortgage. The practical steps are generally as follows:
1. Obtain a liability letter from the bank: Request a letter confirming the outstanding loan amount and the amount required to settle the mortgage, together with any applicable early settlement charges or other fees.
2. Agree on the sale terms: Enter into a sale agreement with the purchaser, taking into account the outstanding mortgage and arrange to settle the mortgage amount
3. Register the transaction with Dubai Land Department (“DLD”): DLD provides a specific service titled “Registering the Sale of a Mortgaged Property”. Under this service, a seller and a purchaser attend at an office of a Real Estate Registration Trustee Centre with the required documents. The transaction is initially registered to safeguard the parties' respective interests while the mortgage is being settled.
4. Settle the outstanding loan: The DLD's procedure provides for manager's cheques, including a cheque in favour of the bank for the outstanding debt and a cheque in favour of the seller for any remaining sale proceeds, where applicable. The bank's mortgage release letter is then obtained.
5. Complete the transfer of ownership: Upon submission of the mortgage release letter, DLD completes the applicable mortgage release and property sale registration procedures. If the purchaser is obtaining a new mortgage, the relevant financing and mortgage registration procedures must also be completed.
This procedure is particularly relevant where the purchaser is paying from his own resources or obtaining separate financing and the seller's existing loan is to be discharged from the sale proceeds. The precise documentation and payment arrangements should be confirmed with the bank and the Real Estate Trustee Center before completion.
Option 2: Transfer of the existing mortgage obligations to the purchaser
Alternatively, you may request the bank's approval for the purchaser to assume the existing mortgage obligations, if the purchaser is willing.
In this case, you should approach the bank with the proposed transaction and request confirmation of whether it will permit the purchaser to assume the existing loan. The bank may assess the purchaser's financial circumstances and require revised or replacement financing documentation. Any transfer of the property and the associated mortgage obligations must be documented and registered in accordance with the bank's approval and applicable DLD requirements.
Based on the aforementioned provisions and procedures, you may consider selling the property before returning to your home country. The most suitable route will depend on whether the bank permits the purchaser to assume the existing mortgage or requires the loan to be settled from the sale proceeds. You should obtain the bank's written confirmation of the proposed arrangement and coordinate with DLD or a Real Estate Registration Trustee Centre to complete the transaction.
For further clarification, you may contact your mortgage lender and the DLD.
Applicable provision:
Dubai Law No. 14 of 2008 Concerning Mortgage in the Emirate of Dubai.
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.
Disclaimer: The information provided above is intended for general guidance and does not constitute legal advice. It is recommended to seek formal legal counsel.