Article 14 of the Saudi Registered Real Estate Mortgage Law
المادة 14 من نظام الرهن العقاري المسجل
The article sets out the mortgagee's rights when the mortgaged property loses value, is destroyed, becomes defective or is reclaimed, and distinguishes between transgression, negligence or fraud by the holder of the property and other causes.
Official text (Arabic)
This article has not been amended since the law was issued.
1 - إذا نقصت قيمة العقار المرهون، أو طرأ عليه مانع يمنع المرتهن من استيفاء حقه منه لهلاك أو عيب أو استحقاق، وكان ذلك بتعد أو تفريط أو تدليس ممن بيده المرهون (راهنًا كان أم حائزًا)؛ فللمرتهن حينئذٍ مطالبته بزيادة الرهن بقدر ما نقص منه، أو بتقديم مرهون مماثل مكان المرهون الفائت ما لم يحل محله مثله، وإلا ألزم من بيده العقار المرهون بسداد الدين وفقًا لمعايير السداد المبكر المنصوص عليها في نظام مراقبة شركات التمويل.
2 - إذا كان الهلاك أو النقص من غير تعد أو تفريط أو تدليس ممن بيده العقار المرهون، فإن ما بقي من هذا العقار أو ما حل محله يكون مرهونًا مكانه وفقًا لمرتبته.
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 14 explained in plain English
This article deals with what happens if the value of the mortgaged property decreases, or something arises that prevents the mortgagee from recovering its right from the property because of destruction, defect or a third party's superior claim. It distinguishes between two cases:
First case: through transgression, negligence or fraud by the person holding the property, whether the mortgagor or the possessor. Here the mortgagee may demand that person:
- to increase the mortgage by the amount of the reduction, or
- to provide a similar mortgaged asset in place of the lost one, unless something similar replaces it.
If that does not happen, the person holding the property is required to pay the debt in accordance with the early repayment standards set out in the Finance Companies Control Law, standards this article does not itself spell out.
Second case: without transgression, negligence or fraud. Here the person holding the property is not asked for an increase or a substitute; instead, what remains of the property, or what replaces it, is mortgaged in its place according to its rank.
This article is connected to Article 13, which obliges the mortgagor to preserve the property and lets the mortgagee object and take precautionary measures. Whether there was transgression or negligence is a question of facts that varies from case to case, so anyone facing a claim of this kind should consult a lawyer specializing in real estate and real estate finance cases.
Practical example
The owner of a mortgaged warehouse in Dammam neglected to maintain the electrical system despite warnings, and part of the warehouse burned. The financing provider may demand that the owner increase the mortgage by the amount of the loss or provide a similar property; otherwise the owner is required to pay the debt under the early repayment standards. If the fire had been caused by something beyond the owner's control and without negligence, the mortgage would remain on what is left of the warehouse or what replaces it.
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 14 of the Saudi Registered Real Estate Mortgage Law
What happens if the mortgaged property loses value because of the owner's negligence?
The mortgagee may demand an increase of the mortgage by the amount of the reduction or a similar mortgaged asset; otherwise the holder is required to pay the debt under the early repayment standards in the Finance Companies Control Law.
If the property is destroyed without transgression or negligence, what happens to the mortgage?
What remains of the property, or what replaces it, is mortgaged in its place according to its rank.
Does the rule apply to a possessor of the property, not only the mortgagor?
Yes. The article applies to whoever holds the mortgaged property, whether a mortgagor or a possessor.
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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.