Loans can be a blessing in many ways. Not only do they allow people to acquire properties or commodities but they also help people set up businesses. However, with all the ease loans provide, it is essential to pay them on time or face the consequences. In such scenarios, loan providers are forced to take measures as per the contract and this may include the involvement of law enforcement agencies in some cases. Let’s find out what happens if you don’t pay off your property debt in the UAE.
Mortgage Options in the UAE
The UAE has multiple options for its citizens, investors and visitors alike to enable them to purchase properties in the country. For instance, you can find different types of mortgages in Dubai, Abu Dhabi and other cities of the country.
That said, all such loans and mortgages come with added conditions. Failure to pay them on time can result in fines, property seizure, or imprisonment as per the contractual terms. However, in case of any legitimate reason, there are options to renegotiate the terms with the provider. All in all, it is necessary to abide by the terms and conditions to avoid any conflicts.
What Happens if You Don’t Pay Off Your Property Debt in the UAE?
Buying a property in the UAE isn’t limited to citizens. For foreigners as well, there are specific options and rules for buying property in UAE for foreigners. In either case, if a person opts for a mortgage and fails to repay it on time, the consequences are all the same. Let’s now go through a detailed overview of what happens if you don’t pay off your property debt in the UAE.
DEBT COLLECTION AGENCIES TRY TO CONTACT YOU
If you fail to pay off your property debt or loan on time, the debt collection agencies will use all means to contact you and ask for the payments to be cleared. They may contact your residence or office and their tone can vary depending on how you respond. It is advised to avoid any conflict and table the discussion to come to a viable solution.
THE LOAN PROVIDER UTILISES DEPOSIT CHEQUE
Financial institutions or loan providers take a deposit cheque at the time of loan issuance as protection against the lent amount. For property loans, the property itself is the bank’s guarantee. As per UAE law, failure to pay the loan instalments for three or six months can render you a default. The article 4(4) of the Personal Loan Agreement format states:
“The loan elapses and all the instalments, interests and any other fees and expenses become due and payable immediately without having to give any notification or any court ruling and without prejudice to any other rights of the bank according to this agreement or in accordance with the law – in the event that the borrower failed to pay three consecutive instalments or six non-consecutive instalments of the monthly instalments without approval of the bank.”
In this scenario, the lender opts to cash the deposit cheque to recover the amount. If the cheque is dishonoured due to insufficient funds, a criminal case will be charged – resulting in a fine or detention. Dishonour of a cheque is considered foul play as per the UAE law and the consequences can be severe, regardless if you are in the UAE or have fled the country.
For a property loan, the bank may be forced to sell or rent your property with rental earnings paying off the instalments. For an Islamic mortgage, you are not allowed to sell the property as it belongs to the bank until the loan is paid off.
A PENALTY MAY BE IMPOSED
If you opt for any type of home financing in the UAE but fail to repay the loan on time, you will have to pay some penalties. The lending institution may file a case against you. If you are leaving a debt behind in the UAE and moving to another country, you may be detained once you reenter the Emirates.
However, if the deposit cheque amount is less than AED 200,000, a fine ranging from AED 2,000 and AED 10,000 may be imposed depending on the amount. If a travel ban has already been imposed, it will be cleared once you pay the dues.
For a property mortgage as well, the interest rate and penalties will continue to line up and you may be forced to sell off the property to pay the loan amount.
A POLICE CASE MAY BE FILED
For an unpaid debt, banks or financial institutions will try to recover the money with a deposit cheque. In case of a bounced cheque, a police case may be filed against the borrower. The police keep a check on the activities of the defaulter party if they decide to leave the country.
A TRAVEL BAN MAY BE IMPOSED
A travel ban is another threat looming over your head for not paying your property debt in the UAE. Failure to adhere to the loan agreement, the bank may file a case against you preventing you from exiting the country until the debts are settled.
CREDIT SCORE IS AFFECTED
If you are wondering what happens if you don’t pay off your property debt in the UAE, you should also take the effect on your credit score into consideration. Failure to pay the mortgage on any of the types of properties in the UAE could hurt your credit score.
A negative credit score can prompt financial institutions to deny your loan applications. Additionally, you may be prohibited from applying for further loans from any bank or financial institution. Here’s how to check credit score in Dubai.
BANK COMMENCES ITS RIGHTS TO PROCEED AGAINST MORTGAGED PROPERTY
Not paying your property debt in the UAE can also prompt the lending institution to file a case against the mortgaged property. The mortgaged property serves as a security for the bank in case the borrower fails to pay the loan amount.
Additionally, as part of the law, it is the responsibility of the owner to keep the property in good shape. This rule applies until the entire debt is paid to the lender.
The UAE has strict rules set for scenarios such as these. For instance, article 25 of the Mortgage law number 14 of the Emirates of Dubai states:
“The Mortgagee and its universal and private successors may commence procedures to expropriate and sell the Mortgaged property in case the debt is not settled on date, or if a condition that the due date shall fall prior to the elapse of this period accrues, provided that the debtor or the possessor of the Mortgaged property/unit is served a notarial notice within a period not exceeding thirty (30) days.”
Unless there’s a settlement between the concerned parties, the loan provider may go ahead and sell the property to recover the charges. It is advised to get legal help and avoid any unwanted outcomes.
FAQS
WHAT HAPPENS IF YOU LEAVE THE UAE WITHOUT PAYING OFF DEBT?
The bank may file a case against you which can result in detention once you reenter the country. For property loans, the case may go to the court and property be sold to repay the bank amount. Moreover, you get a negative credit score which prevents you from gaining any more loans.
WHAT IS THE PUNISHMENT FOR NOT PAYING A LOAN IN THE UAE?
Failure to pay a loan in the UAE can result in penalties and a possible flying ban if a police case is filed. In addition to the negative credit score, the bank takes control of your property and sells it to recover the charges. Additionally, if a cheque is bounced, it counts as a criminal offence and depending on the amount, may lead to imprisonment.
Can property seizure lead to immediate eviction in the UAE?
Yes, property seizure due to legal or financial issues can lead to immediate eviction in the UAE following a court order.
Will unpaid property debts impact my future visa or residency status in the UAE?
Yes, unpaid property (or other) debts in the UAE can lead to travel bans, visa renewal refusal, or cancellation until the debt is settled or legally resolved
If you were wondering what happens if you don’t pay off your property debt in the UAE, these were all the answers. The UAE has ample opportunities to provide feasible housing opportunities to its citizens like the Sheikh Zayed Housing Programme among many others. Additionally, several mortgage options enable people with limited earnings to have property in the UAE.
In case of unpaid debts, it is advised to seek legal advice and negotiate the terms with the loan providers. Depending on the agreement terms, you may get relief and avoid property seizure. Moreover, you can check out the comparison between buying a house on a mortgage or cash in the UAE to decide the right option for you.
That said, the UAE remains an ideal market for property investment. Check out the following if you are looking for any types of properties:
Stay tuned to UAE’s top property blog for information about property mortgages and more.
