United Arab Emirates: Mortgage Of Movable Assets In Dubai And The UAE

Last Updated: 17 November 2017
Article by M Kaul
Most Read Contributor in United Arab Emirates, September 2018

Mortgage of Movable Assets

The enactment of UAE Federal Law Number 20 of 2016 Concerning Mortgaging of Movable Properties as Security for Debts (the New Law) is a milestone towards the UAE government's initiative to bring positive changes in UAE's mortgage law. In parallel to the recent laws on commercial companies and on bankruptcy, the New Law endeavors to provide for a more certain and conducive financial regime in the UAE. The New Law bridges the gap and may result in providing business opportunity to avail of financing and lenders to safeguard their interest by a secured form of security.

The pivotal change that the New Law contributes to is the ability to create a pledge over moveable assets without the need to transfer the possession to the mortgagee or an alternate third party. The law preceding this one required mortgagors to transfer the possession of assets in favor of the mortgagee. The restricted the mortgagor from gaining beneficial interest from the property, consequently restricting the owner or obligor from repaying the amount of the loan. The New Law, therefore, rids of this hindrance and allows for mortgages to be created over movable property without the need to transfer possession from the mortgagor to the mortgagee.

What constitutes assets?

Article 3 of the New Law specifies movable assets that can be mortgaged (pledged) to include deposits in banks, raw goods and products, tools and equipment, and more. Article 2 more particularly provides that the New Law shall apply to any civil and commercial transactions that create a right of to pledge over movable assets by the provisions of the New Law.

Security Register

Article 10 of the New Law has laid down the conditions of registering a mortgage. A security interest by way of mortgage may only be created and affected by movable property in favor of third parties if it has been registered in the Register. Currently, the process of registration is unclear and more details on the matter is pending until the release of a Cabinet Resolution establishing the Security Registry. Further, Article 10(2) clarifies that once a mortgage right has been created on a mortgaged property and was declared according to the provisions of the New Law, no subsequent mortgage right may be created on the same mortgaged property unless through declaration thereof. This provision, along with Article 17, permits registration of ranking charges on the Security Registry. This priority in the ranking shall be determined by the date and time of registration of the pledge in the Security Registry.

Another reason where the New Law benefits over the old regime is on account of the New Law allowing for future property to also be secured by creating mortgage over it. This move is applauded by lenders who have added comfort at the time of extending security to the obligors.


The process of registration is also a required precedent for the enforcement of the mortgage right. The provisions of the New Law have stated that the legality and application of the right specifically towards third parties must follow the Register's receipt of the registration. Following the enforcement of the rights, the mortgagee is allowed to surpass other creditors in obtaining the rights to the property.

Process of Sale

  1. There are conditions to the sale procedures of the mortgaged property that specifically Article 33 of the New Law clarifies. The provisions state that:
  2. The Court may authorize the mortgagee to sell the mortgaged property after fulfilling the following conditions: (i) he obtains the issuance of the order permitting him to seize and execute against the mortgaged property and (ii) he acts with sufficient care for the sale thereof at a price not lower than the market price without following any of the sale procedures set forth in the Civil Procedure Law.
  3. The Court may, if it finds it necessary to preserve the value of the mortgaged property, specify in the order permitting the mortgagee to seize and execute against the mortgaged property, the conditions of the sale method or may decide the sale method and determine a minimum limit of the sale price to be specified according to the market price.
  4. The Court may rule to allow the mortgagor to sell the mortgaged property if it was proved that he could sell it at a higher price, within the period specified by the Court and under the guidance of the mortgagee or the Court.
  5. If the Court allows the mortgagee to sell the mortgaged property, he shall declare the Court's decision in the Register five working days before the date specified for sale. Otherwise, it shall be considered void, provided that the declaration includes the following: -
  • Name and address of the mortgagee;
  • Names and addresses of the mortgagor and principal debtor;
  • Description of the mortgaged property to be sold;
  • Sale method;
  • Date, time and place of sale.

Given this, the Article ends on the note that the mortgagee may be granted the permission to immediately sell a mortgaged property that has been exposed to destruction, damage or depreciation or if the mortgagor fails to provide a substitute for the great expenses that may incur.


The financial regime of a nation is vital for its growth and its economic development. The new mortgage law passed by the UAE lawmakers not only rids of the hindrance imposed on the mortgagors to deliver the possession but also places the present and future property on an equal footing. In the wake of this new development, all the parties involved in the process of lending should be aware of the legalities surrounding mortgage and pledge of movable assets to ensure their compliance with the New Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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