Under what circumstances is a default on a mortgage defined?
In Dubai, a default on a mortgage is defined by specific legal criteria under the Dubai Mortgage Law (Law No. 14 of 2008). A mortgage default occurs when a borrower (mortgagor) fails to make the agreed-upon mortgage payments or otherwise breaches the terms of the mortgage contract. The lender (mortgagee) has the right to initiate legal proceedings if the borrower does not meet their payment obligations.
Key Points Regarding Mortgage Default:
Notice of Default: If you miss mortgage payments, the lender must provide you with a 30-day notice through a Notary Public. This notice is a formal warning, giving you an opportunity to settle the overdue amounts.
Legal Proceedings: If you do not remedy the default within the 30-day notice period, the lender can file an execution case in the Dubai Courts. The court may then issue an order to sell the property at a public auction to recover the outstanding debt.
Public Auction: The mortgaged property may be sold through a public auction organized by the Dubai Land Department (DLD). The proceeds from the auction are used to pay off the outstanding mortgage balance, with any excess funds returned to the borrower.
Grace Period: Under certain circumstances, a judge may grant a 60-day extension before the property is auctioned if the borrower can demonstrate an ability to settle the debt within this extended period.
This process is designed to ensure that lenders can recover their funds while giving borrowers clear opportunities to avoid foreclosure. It's crucial for borrowers in Dubai to be aware of these legal provisions to manage their mortgages effectively and avoid the severe consequences of defaulting.
These guidelines help protect both lenders and borrowers, ensuring that the mortgage process is conducted fairly and transparently
