Article 19 of the Saudi Registered Real Estate Mortgage Law
المادة 19 من نظام الرهن العقاري المسجل
The article invalidates two conditions in a mortgage contract: that the mortgaged property's benefits go to the mortgagee, and that the mortgagee acquires the property if the debt is not paid on time. The mortgage stays valid.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يصح أن يشترط في عقد الرهن ما يأتي:
1 - أن تكون منافع العقار المرهون للمرتهن، وللمرتهن بموافقة الراهن تحصيل غلة العقار المرهون على ألا ينتفع بها.
2 - أن يمتلك المرتهن العقار المرهون مقابل دينه إن لم يؤدّه الراهن في أجله المعيّن.
وفي كلتا الحالتين الرهن صحيح والشرط باطل.
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 19 explained in plain English
This article identifies two conditions that may not validly be included in a mortgage contract:
- That the benefits of the mortgaged property go to the mortgagee: a condition that the mortgagee use the property, for example by living in it or exploiting it for its own account, is not allowed. However, the article permits the mortgagee, with the mortgagor's consent, to collect the yield of the mortgaged property, provided it does not benefit from it.
- That the mortgagee acquires the mortgaged property in return for its debt if the mortgagor does not pay it by the agreed due date: an agreement that ownership of the property passes automatically to the creditor upon default is not valid.
The article ends with an important rule: the mortgage is valid and the condition is void in both cases. The presence of one of these conditions in the contract does not void the whole mortgage; only the condition is canceled and the mortgage remains in force with its provisions.
This is consistent with Article 18, under which the mortgagee's route on non-payment is sale of the property at its request and recovery of its debt from the price according to its rank, not acquisition. Article 20 addresses the enforceability of lease contracts against the mortgagee and the mortgagor's duty to disclose rights in rem.
Anyone offered a mortgage contract containing a condition of this kind, or who wants to verify the validity of the terms of their contract, should consider consulting a lawyer specializing in real estate and real estate finance cases.
Practical example
A man lent a friend some money and the friend mortgaged an apartment in Jeddah to him. They wrote in the contract that the apartment would become the lender's property if the debt was not paid on time, and that he could live in it free of charge. Both conditions are void, but the mortgage itself is valid, and if the debt is not paid the route is the sale of the apartment at the mortgagee's request.
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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Dr. Ali Al-Rubaie Law Office and Ittihad Al-Asr Legal Company
Dr. Saleh Altayyar & Partners Law Firm
Frequently asked questions about Article 19 of the Saudi Registered Real Estate Mortgage Law
Can the contract provide that the mortgagee takes ownership of the property if the debt is not paid?
No. This condition is void, but the mortgage remains valid.
Is the mortgagee entitled to use the mortgaged property?
A condition that the benefits of the property go to the mortgagee is not valid. With the mortgagor's consent, the mortgagee may collect the yield of the property, provided it does not benefit from it.
Does a mortgage contract become void if it contains an invalid condition?
No. The article provides that in both cases the mortgage is valid and the condition is void.
More articles on Rights and Duties of Mortgagor and Mortgagee
- Article 11
The article allows dealing with a mortgaged property that is registered under the Real Estate Registration Law, and prevents the mortgagor from dealing with an unregistered one unless an agreement is documented in its deed and record.
1 - إذا كان العقار مسجلاً وفقًا لأحكام نظام التسجيل العيني للعقار، جاز التصرف فيه. 2 - إذا لم يكن العقار مسجلاً وفقًا لأحكام نظام التسجيل العيني للعقار، فلا يجو
- Article 12
The article gives the yield, upkeep and management of the mortgaged property to its owner without prejudice to the mortgagee. The yield is not mortgaged unless the mortgagee requires it, and the parties may agree to settle due debt from it.
1 - غلّة العقار المرهون لمالكه ونفقته عليه، وإدارته حق له بما لا يخل بحق المرتهن. 2 - لا تكون الغلة رهنًا مع الأصل إلا إن اشترط المرتهن ذلك. 3 - يجوز أن يتفق ال
- Article 13
The article obliges the mortgagor to preserve the mortgaged property until the debt is paid, and lets the mortgagee object to anything that reduces its value, take lawful precautionary measures, and recover the costs from the mortgagor.
يلتزم الراهن بالمحافظة على سلامة العقار المرهون حتى تاريخ وفاء الدين، وللمرتهن الاعتراض على جميع ما من شأنه إنقاص قيمة العقار المرهون، أو تعريضه للهلاك، أو العي
- Article 16
The article lets the mortgagee ask the court to stop works that expose the mortgaged property to destruction or defect or make it insufficient as security, under the rules of urgent judicial proceedings.
إذا وقعت أعمال من شأنها أن تعرض العقار المرهون للهلاك أو العيب، أو تجعله غير كاف للضمان، فللمرتهن أن يطلب من المحكمة وقف هذه الأعمال، واتخاذ الوسائل التي تمنع و
- Article 20
The article states when a lease granted by the mortgagor of a property registered under the Real Estate Registration Law binds the mortgagee, and requires the mortgagor of an unregistered property to disclose rights in rem in the contract.
1 - إذا كان العقار المرهون مسجلاً وفقًا لنظام التسجيل العيني للعقار، فلا ينفذ عقد الإيجار الصادر من الراهن في حق المرتهن إلا إذا كان مسجلاً قبل تسجيل عقد الرهن،
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.