UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper LLP
If the real estate is insufficient to satisfy the debt, the mortgagee may have recourse against the mortgagor’s other assets as an ordinary creditor. The mortgagee must follow the statutory procedure, and provisions in the mortgage document attempting to circumvent this procedure would be held to be void. 3.7 Subordinating Existing Debt to Newly Created Debt If a security interest is required to be registered, the date of registration determines its ranking. If it is not registrable, it will rank in order of the date of creation (it should be noted, however, that the laws relating to priority are largely untested in the UAE). If two or more applications to register a mortgage against the same property are made at the same time, the mortgages are registered together and rank equally in the distri - bution of auction proceeds. A lender may assign the ranking of its mortgage to another creditor that has a security interest in the same property. 3.8 Lenders’ Liability Under Environmental Laws Environmental laws in the UAE are not particularly detailed, but the relevant authorities are likely to pur - sue the party responsible for causing the environmen - tal harm, which may or may not be the mortgagor. If there are any remedial costs associated with rectify - ing the damage, the law provides that the lender may “take whatever legal action is necessary to protect its rights and recover the costs from the mortgagor”. In addition, the mortgage will typically contain indemni - ties in favour of the lender in the case of pollution or other acts caused by the mortgagor that are harmful to the environment. 3.9 Effects of a Borrower Becoming Insolvent On 31 October 2023, the UAE published Federal Decree-Law No (51) of 2023 concerning Financial Restructuring and Bankruptcy (the “New UAE Bank - ruptcy Law”), which became effective from 1 May 2024. The New UAE Bankruptcy Law repeals the pre - vious bankruptcy law of 2016. There is a degree of uncertainty as to the correct application of the New UAE Bankruptcy Law. A dec -
laration of insolvency will not result in the dissolution of contracts that are binding on both parties unless the services are “personal” in nature. If a borrower declares insolvency, the lender’s security interests will not be extinguished to the extent that such security is not challengeable on an antecedent transaction. The obligations of a UAE company are subject to limitations arising from bankruptcy, liqui - dation, composition, and all other laws and general principles affecting the rights of creditors generally. 3.10 Taxes on Loans No federal taxes are directly applicable. If the recipient of a loan is a taxpayer for CIT purposes, interest expenditure derived from such loan will be deductible (as long as it is related to the person’s busi - ness activity). Deductibility of net interest expenditure (excess of interest expenditure over interest income) is limited in a tax period to (i) 30% of the taxpayer’s EBITDA or (ii) AED12 million, whichever is the higher. Land use and development in Abu Dhabi are prin - cipally regulated by the Department of Municipali - ties and Transport (DMT), which holds core planning powers. Major developments must follow a structured four‑stage planning review process aligned with the Emirate’s long-term urban strategies. This includes: (i) an initial information meeting to review applicable plans and policies; (ii) submission and joint evalua - tion of preliminary development options; (iii) prepara - tion and approval of a concept plan assessed against Abu Dhabi’s wider urban plans; and (iv) submission of detailed plans confirming compliance and satisfaction of any conditions. Following successful completion of these stages, developers may apply for building permits. Regulation of design, appearance and construction is further governed by the International Codes adopted by the DMT (including the International Building, Fire, and Plumbing Codes) and the Abu Dhabi Environmen - 4. Planning and Zoning 4.1 Planning and Zoning Framework Abu Dhabi
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