The reader notes the fall in property prices in the emirate and wants to know the legal repercussions of walking away from a home loan
Homefront: What happens to absconders that flee mortgaged Dubai properties in negative equity?
Given the fall in property prices in Dubai, I know several people that have fallen into negative equity and are considering walking away from their mortgages and returning to their home country. Can you explain any potential legal repercussions in this scenario for the owner? NC, Dubai
The first thing I would like to say is don't walk away from any financial commitment, especially a mortgage. Even if the property is in negative equity, there are always better options available.
Contrary to popular belief, banks are more reasonable than they are portrayed and the key is always communication.
I do not have your detailed information to comment specifically but suffice to say that if a property is worth less than its mortgage, a surprising number of banks would rather accept a small loss (difference in selling price to mortgage value), than have to deal with the fallout of an absconded mortgagor. Selling a property, even for less than the mortgage value, can still be a viable option as long as the bank is involved and has agreed to the sale.
Absconding does not really offer any kind of solution because, if carried out, it will leave the absconder very vulnerable.
The debt does not disappear and depending on the bank, it could also employ individuals to find the missing person to recoup the outstanding amount plus additional costs.
If the absconder ever finds himself having to land back in Dubai (for whatever reason), the authorities will arrest him/her at the airport and that’s when the real problems start.
The reality is that the UAE repossession process is not as robust as say, in Europe or the US for example and the whole process can take several months. If individuals are finding it hard to keep up with repayments, it is important not to panic; one must take stock of the situation, definitely involve the bank and try to come up with a workable solution/strategy for all.
Read more from Mario Volpi:
I have a small issue regarding my current tenancy and would like to know if a landlord can:
1. Sell a property while a tenant is living in it?
2. Do apartment viewings for potential buyers (if this is not in the contract)?
3. Request an agent takes pictures of the property while the tenant's belongings are there? ZF, Dubai
A landlord is perfectly entitled to sell his or her property even if there is a tenant in situ, having said that, it is important that the landlord respects the fact that while the property does not belong to the tenant, it is his or her home, therefore careful consideration has to be given in terms of privacy and the tenant's time especially when it comes to showing the property.
As the tenant, you obviously have a right of privacy, so for the taking of photographs, you can request the agent states on any future advertising that the furniture is not for sale and is only there to give a representation. With reference to the viewings, even if there is nothing mentioned in the rental contract, the agent must attend all viewings at a time that is convenient to you. If you do not wish for any of this to happen, you can just say no, however not working with the landlord while he is trying to sell can be deemed as being obstructive on your part and will not endear you to his good side, so bear this in mind.
If the landlord wants to evict you for reason of the sale, he has to give you 12 months written notice sent via notary public or registered mail. It is also worth noting that if the buyer is wishing to move in himself, he has to send another 12 months' notice himself.
Mario Volpi is the chief sales officer for Kensington Exclusive Properties and has worked in the property industry for over 30 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to email@example.com