Rights and Duties under Saudi Commercial Mortgage Law
Last week our article was about the basics of Saudi commercial mortgage regulation.
Before going any further, it would be better to define again what a commercial mortgage is for the uninitiated. A commercial mortgage is a loan secured on commercial property and used to acquire, refinance or develop commercial property.
In this article, we’ll highlight the latest changes to the Kingdom’s commercial mortgage law, including a mortgage transfer.
Keep in mind that if the business establishment were a business, its mortgage contract would only include its movable property (tangible and intangible), rights and business situation.
The mortgagor must be the owner of the mortgaged money when the contract is concluded and is entitled to dispose of it. If it turns out to be the opposite after signing the contract, the mortgagee may, in good faith, adhere to his right to mortgage a substitute for the money mortgaged by a new contract, or on the debt deadline. warranty and the requirement to fulfill. it immediately.
The money pledged must be something that can be sold or whose value can be estimated. It is not permitted to mortgage funds or rights arising from bequests which are not the property of the mortgagor, except in the case of an agreement to provide future money in the complete mortgage, to provided that the existence of future funds is expected from both parties and that the mortgagor owns them before the deadline of the secured debt.
The mortgagee also has the right to trace the mortgage asset into the hands of third parties and to survive the death of the mortgagor.
Another point to keep in mind is that in the event of a transfer or sale, the party who obtains the money or the mortgaged asset has the right to enforce all rights related to the mortgage even if they do not. was not aware of it at the time of the transfer. However, the new party can seek redress from the mortgagor or waive their rights in writing.
In addition, a mortgaged debt can be inherited or transferred by will. Here the question arises: is it permissible for an individual, who has inherited the debt, to service it by paying the debt and the expenses and charges incurred by the mortgagee?
The answer is yes.
Finally, the pledge will expire in such cases as the expiration of the debt secured in its entirety by performance or discharge or otherwise by which the debt is discharged and the mortgaged money perishes. Unless the mortgagor and the mortgagee agree to replace it with another.
The pledge does not expire by rescheduling or renewal of the secured debt.
Upon termination, the property returns to the lessor unless the contract provides otherwise. The lessor may include provisions giving him the right to terminate the contract and recover the leased property if the lessee defaults on certain payments in accordance with the principles to be established by regulation in order to ensure justice between the contracting parties.
The contract ends in the event of destruction, or partial destruction where the lessor does not restore (with or reduction of the rents payable during the repair period) and of government intervention preventing the use.
The regulation involves determining the amounts payable in such circumstances in a manner that does justice between the parties, taking into account the principles of Sharia law and the insurance benefits received.
• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at Majed Garoub law firm and member of the International Association of Lawyers. Twitter: @dimah_alsharif
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