Q2. I own a leasehold property, which was bought on mortgage loan. What are the precautions I need to take if I am cancelling my visa and exiting the country? I might be away for two to three years, but will be continuing my monthly instalments to the bank. Will there be any legal issue if I do this? Are banks allowed to charge a different interest rate in such cases?
Pursuant to your queries, we assume that the mortgage property is residential property located in the emirate of Dubai. You should approach the bank from where you availed the mortgage loan and inform them that you are re-locating out of the UAE and will be back to UAE after two or three years. However, you should continue to fulfil all your obligations towards the bank on time and without a default.
Each bank has its own policy and normally the mortgage agreements have a clause to the effect that the bank can call back the loan amount at any time. In any event you need to maintain the mortgage property in good condition. This is in accordance with Article 19 of the Law No. 14 of 2008 Concerning Mortgages in the Emirate of Dubai (the ‘Dubai Rental Law’), which states: “The mortgagor will guarantee the mortgaged property and keep it in good condition until the debt is repaid. The mortgagee (lender) may protest any deficiency in the guarantee and take whatever legal action is necessary to protect his rights and recover the costs from the mortgagor.”
Further, Article 1414 of the Federal Law No. 5 of 1985 related to Civil Transactions of the UAE states that the mortgagor shall be responsible for the safe keeping of the mortgaged property until payment of the debt.
Since the mortgaged property is a security to the bank it may be satisfied having a charge on the property. In the event you default in paying instalments the bank it has the right to commence execution proceedings against mortgaged property. This is in accordance with Article 25 of the Dubai Rental Law, which states: “Upon default in payment of the debt when due or upon fulfillment of a condition granting early repayment status, the Mortgagee/creditor or his universal or singular successor must provide the debtor or person in possession of the mortgaged property or property unit 30 days’ notice through the Notary Public before commencing execution proceedings.”
Further, variation in interest rates depends on the terms of the mortgage deed signed between you (mortgagor) and the bank (mortgagee). If the mortgage deed states about variable interest rate then the bank may apply variable interest rates as mentioned in the mortgage deed.
Know the law
The mortgagor will guarantee the mortgaged property and keep it in good condition until the debt is repaid.