Article 20 of the Saudi Commercial Pledge Law
المادة 20 من نظام الرهن التجاري · الفصل السادس: التصرف في المال المرهون وانتقاله
The article provides that a pledged asset passing by inheritance or bequest passes burdened by the pledge, so the pledge does not lapse upon its transfer.
Official text (Arabic)
This article has not been amended since the law was issued.
ينتقل المال المرهون بالإرث أو الوصية محملاً بالرهن.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 20 explained in plain English
This article answers a common question: what happens to the pledge if the pledgor dies and the pledged asset passes to its heirs, or if it bequeaths it to another person?
The article provides that the pledged asset passes by inheritance or bequest burdened by the pledge. This means:
- The pledge does not end merely because the asset passes to the heir or the legatee.
- Whoever receives the asset takes it with the pledgee's right over it as before.
This rule is consistent with Article 19, which provides that the pledgee's right of pursuit over the pledged asset gives it the right to enforce against it in the hands of whoever acquired its ownership, even if unaware of the pledge.
Article 21 also benefits the person to whom ownership of the pledged asset passed, as it permits that person to clear the asset of the pledge by paying the secured debt and the costs and expenses the pledgee incurred. The same article regulates its later recourse against the pledgor for no more than the total the pledgor would have paid the pledgee, unless otherwise agreed.
The article speaks of the pledged asset passing burdened by the pledge, and does not address the heirs' personal liability for the debt itself. To learn the effect of this on a particular estate, it is advisable to consult a lawyer specialized in commercial and finance matters, or a personal status lawyer as regards the division of the estate.
Practical example
The owner of an establishment in Medina died after pledging the establishment's equipment to a bank to secure financing. The equipment passed to his heirs, but it passed burdened by the pledge, so the bank keeps its right over it. The heirs may clear the equipment of the pledge by paying the secured debt and the costs and expenses the bank incurred.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 20 of the Saudi Commercial Pledge Law
Does the pledge end when the pledgor dies?
No. Article 20 provides that the pledged asset passes by inheritance or bequest burdened by the pledge.
I inherited a pledged asset. How do I get rid of the pledge?
Article 21 permits the person to whom ownership of the pledged asset passed to clear it by paying the secured debt and the costs and expenses the pledgee incurred.
Is a bequest treated differently from inheritance under this rule?
No. The article treats them alike: the pledged asset passes by inheritance or bequest burdened by the pledge.
More articles on Disposing of the Pledged Asset
- Article 19
The article lets a pledgee with a right of pursuit enforce against the pledged asset in the hands of whoever acquired its ownership even if unaware of the pledge, and gives that person recourse against the pledgor or seller.
يترتب على ثبوت حق المرتهن في تتبع المال المرهون حقه في التنفيذ عليه في يد من انتقلت إليه ملكيته وإن لم يعلم بوجود الرهن، ويحق لمن انتقلت إليه ملكية المال المرهو
- Article 21
The article lets whoever acquired ownership of the pledged asset clear it by paying the debt, costs and expenses, and then have recourse against the pledgor within the limit of what the pledgor would have paid.
يجوز لمن انتقلت إليه ملكية المال المرهون تطهيره بأداء الدين المضمون والنفقات والمصروفات التي تكبدها المرتهن، ويحق له في هذه الحال الرجوع على الراهن بما لا يتجاو
- Article 41
The article allows the pledgee under an effective pledge contract to transfer to others its right to recover the secured debt together with the pledge securing it.
للمرتهن -في عقد الرهن النافذ- أن ينقل إلى الغير حقه في استيفاء الدين المضمون مع الرهن الضامن له.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.