Article 25 of the Saudi Registered Real Estate Mortgage Law
المادة 25 من نظام الرهن العقاري المسجل
The article lets a mortgagee waive the rank of its mortgage, to the extent of its debt, in favor of another mortgagee on the same property, under the rules on assignment of rights.
Official text (Arabic)
This article has not been amended since the law was issued.
يجوز للدائن المرتهن أن يتنازل عن مرتبة رهنه بمقدار دينه لدائن مرتهن آخر على العقار المرهون وفقًا للأحكام المقررة في حوالة الحق.
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 25 explained in plain English
When a property has more than one mortgagee, each has a rank that determines its priority in recovery. This article allows the mortgagee to waive the rank of its mortgage in favor of another mortgagee on the same mortgaged property.
This waiver is subject to two qualifications:
- To the extent of its debt: that is, the waiver is within the amount of the waiving party's debt.
- In accordance with the rules on assignment of rights: the waiver is subject to the rules on assignment of rights, which the article does not spell out.
The article also confines the waiver to being in favor of another mortgagee on the mortgaged property, that is, someone who has an existing mortgage on the same property.
This article is connected to Article 24, which permits the mortgage of a registered property to several mortgagees in succession, fixes rank by registration number and date, and makes the payment of rights from the price of the property or what replaced it according to each one's rank. Article 26 establishes the mortgagee's right to follow the property into the hands of any possessor to recover its right when payment falls due, according to its rank.
Because a waiver of rank changes the order of recovery among creditors, anyone requesting or being asked for a waiver should consult a lawyer specializing in real estate and real estate finance cases.
Practical example
A factory in Jubail has two mortgages: the first in favor of a financing provider and the second in favor of another bank. The first provider agreed with the second bank to waive its rank in its favor, to the extent of its debt, so the second bank moves ahead in recovery by that amount. The agreement is subject to the rules on assignment of rights.
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 25 of the Saudi Registered Real Estate Mortgage Law
Can the first mortgagee waive its priority to another mortgagee?
Yes. A mortgagee may waive the rank of its mortgage, to the extent of its debt, in favor of another mortgagee on the mortgaged property.
What rules govern a waiver of mortgage rank?
The waiver is made in accordance with the rules on assignment of rights.
More articles on Mortgage Rank and Multiple Mortgagees
- Article 21
The article provides that the effect of a registered mortgage applies against third parties from the date of its registration, unless the third party acquired a right in rem on the property before the mortgage was registered.
يسري أثر الرهن المسجل في مواجهة الغير من تاريخ تسجيله، ما لم يكن هذا الغير قد اكتسب حقًا عينيًّا على العقار المرهون قبل تسجيل الرهن.
- Article 23
The article provides that transferring a debt secured by a registered mortgage, or waiving its rank, can be invoked against non-parties only after being recorded in the original mortgage document and the property record.
لا يحتج في مواجهة غير المتعاقدين بنقل الدين المضمون بالرهن المسجل، أو التنازل عن مرتبته إلا بعد قيد ذلك في وثيقة الرهن الأصلي وسجل العقار.
- Article 24
The article permits a registered property to be mortgaged to several mortgagees in succession, fixes rank by registration number and date until its extinction is recorded, and pays their rights from the price according to rank.
يجوز رهن العقار المسجل لعدد من المرتهنين بالتتابع، وتحدد مرتبة الرهن برقم قيده وتاريخ تسجيله، ويحتفظ بمرتبته حتى يقيد ما يدل على انقضائه في الجهة المختصة نظامًا
- Article 39
A registered mortgage is extinguished by a compulsory sale of the mortgaged property under the law and payment of the price to the mortgagee creditors according to their ranks, or its deposit in a bank account of the court.
ينقضي الرهن المسجل ببيع العـقار المرهون بيعًا جبريًا وفقًا للنظام، ودفع ثمنه إلى الدائنين المرتهنين وفقًا لمرتبة كل منهم، أو إيداعه في حساب بنكي للمحكمة.
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.