Real Estate Mortgage

Ownership of the real estate would pass to the debtor after repayment of the loan. Mortgages legislation has now opened the way for a conventional mortgage system where ownership of the real estate remains with the borrowers and the banks receive a recorded mortgage. Several of the most important characteristics of the Mortgage Act are the following:

As soon as a land charge is entered, the collateralised liability arising from the disposal of the real estate can be prioritised to other lenders; the land charge should be established in relation to a particular liability or a prospective or contingency liability, provided that the amount of the collateralised liability or the ceiling of the liability is specified in the mortgage contract; the real estate proprietor (mortgage debtor) will continue to obtain the rents and other income derived from the real estate;

In the mortgage contract, the mortgage holder and the mortgage holder can stipulate that the claims from the mortgage object will be used to repay the indebtedness in accordance with the repayment plan and to serve all other duties, taxes and gains; a real estate may have more than one mortgage holder, which allows for the establishment of a number of mortgage types (e.g.

the first mortgage, the second mortgage, and so on). SAMA published a May 2017 newsletter requesting banking and financial institutions to: respect the authentication of real estate mortgage and stop the transfer of ownership procedure instead of pledging the real estate; notify SAMA of cases where the civil law attorney fails to register a mortgage.

Instead, it demands that each mortgage be recorded as a mortgage under the Mortgage Act. It is important to note that, following the publishing of SAMA's newsletter, the civil law auditors adopted directives which the information bases must submit for the registration of mortgage loans.

In particular, the bank is obliged to submit a document in which it confirms that the mortgage backed liability refers to a Sharia-compliant operation (either a Trawarruq or Murabaha). Another innovation is SAMA's publication of standards format versions of SAMA' s documents on Iraqi and Murabaha's real estate financing.

Combined with government-sponsored residential construction programs, these legislative and regulatorial trends are signs of further real estate and residential reforms in Saudi Arabia.