Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

As real estate can be mortgaged only to a company or a financial institution that has been duly licensed and registered by the United Arab Emirates Central Bank (see Article 4 of Dubai Law 14/2008 and Article 32 of Abu Dhabi Law 3/2015), financing is generally limited to these licensed banks and financial institutes.

Financing can still be obtained from sources other than licensed banks, such as real estate investment companies. However, this type of financing is normally based on a good business relationship and trust between the parties, as the lender will not have registered security over real estate owned by the borrower. 

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

A mortgage is the only form of security granted over real estate. A mortgage is perfected through registration with the relevant land department. 

What covenants are typically made in financing agreements?

A mortgage agreement typically covers the following:

  • grant of mortgage;
  • representations and undertakings;
  • negative pledge;
  • enforcement; and
  • jurisdiction.

Enforcement of security

How are security interests enforced in the event of default?

Each emirate has its own rules as to the enforcement of mortgages. In Dubai and Abu Dhabi, to enforce a mortgage the creditor must obtain a court order allowing it to sell the property through public auction (see Article 26 of Dubai Law 14/2008 and Article 53 of Abu Dhabi Law 3/2015). The creditor cannot sell the mortgaged property by any other means.

The registration serial number allocated by the relevant registry determines the rank of a mortgage for liquidation purposes. If more than one mortgage registration application is submitted simultaneously for the same property, all mortgages will be allocated an identical registration number and the creditors rank equally (see Article 1425 of the Civil Code (Federal Law 5/1985), Article 17 of Dubai Law 14/2008 and Article 45 of Abu Dhabi Law 3/2015).

What is the typical timeframe for the enforcement of security?

There is no typical timeframe for the enforcement of security; however, in a simple case, at least two to four months should be allowed to complete the enforcement process in Dubai.