Buying a resale when the seller still has a mortgage on it

A large share of the apartments on the Dubai secondary market are mortgaged, and the fact rarely appears in the listing. It surfaces after the offer is accepted, when the sequence of the transaction turns out to be more complicated than the buyer assumed — and more exposed.

The rule underneath it is simple. A bank's charge is registered against the title, and the title cannot be transferred while it is there. So the loan is settled and the charge released as part of the transaction, not afterwards. The question that matters is whose money does the settling, and what stands between that money and a buyer who does not yet own anything.

The ordinary sequence

• The seller obtains a settlement figure from their bank in writing, valid to a stated date. Interest accrues daily, so a number quoted three weeks ago is not the number, and early settlement carries a fee under the central bank's mortgage rules.
• The loan is paid off — frequently out of the buyer's funds, delivered as a manager's cheque made out to the seller's bank rather than to the seller.
• The bank issues a liability letter and releases the charge at the Land Department. This step takes days at best and longer where the lender is slow.
• The developer's NOC is obtained once the title is clear.
• The transfer is registered at a trustee office in the usual way, with the balance of the price paid there.

The exposure, stated plainly

Between paying off a stranger's loan and receiving a title deed there is a gap of days or weeks in which you have parted with a large sum and own nothing. Nothing about the structure is improper — it is how these transactions are done here — but the risk is real and it is yours. The market's answer is to register a block on the property in the buyer's favour so that the seller cannot deal with it while the settlement is in progress. Whether that mechanism is available and appropriate in your specific transaction is a question for a lawyer, not for a broker, and it is the point at which paying one stops being optional.

Two banks instead of one

If the buyer is also borrowing, there are two lenders in the deal and they have to be sequenced: the buyer's bank issues the funds that settle the seller's bank, the old charge is released, the new one is registered, and the title changes hands in the same run. Every additional institution adds its own internal timetable, which is why a mortgaged buyer purchasing from a mortgaged seller should plan in weeks and write a realistic completion date into the MOU rather than a hopeful one. A missed date in that contract has a price attached.

What to establish before you pay a deposit

• Whether there is a charge on the title at all, and with which bank. Ask for a copy of the title deed and read it rather than taking the answer verbally.
• The settlement figure and its validity date, in writing from the lender.
• How the settlement is being funded. If it is being funded by you, establish in writing what protects the money until the transfer registers.
• Who pays the early-settlement fee, which is the seller's cost by any normal reading and is worth confirming before it becomes an argument.
• Whether service-charge arrears exist, since the NOC will not be issued until they are cleared and a seller stretched enough to be selling may be stretched there too.
• A completion date in the MOU that the banks can actually meet.

When to walk

A seller who will not put the lender's settlement figure in writing, or whose bank cannot be named, is not a seller with a paperwork problem — they are a seller whose position you cannot verify. The same applies to pressure to release funds ahead of the agreed sequence, or to a request to pay any part of the settlement to a personal account rather than to the bank. Changed payment instructions arriving by email are the oldest theft in international property and still the most effective: confirm any change by telephone, on a number you already had.

Based on UAE mortgage discharge practice, Dubai Land Department transfer procedure and central bank rules on early settlement. Not legal advice — this is the transaction where you want your own lawyer.