1. Islamic Law
2. Islamic Contract Law
3. Statute Law
4. Investing in Saudi Arabia
5. Other Forms of Doing Business
6. Companies and Partnerships
7. Doing Business with Saudi Arabia
8. Competition Law
9. Electronic Transactions
10. Taxation
11. Banking
12. Capital Markets
13. Mergers and Acquisitions
14. Insurance
15. Real Estate
16. Intellectual Property
17. Employment Law
18. Environmental Laws
19. Dispute Resolution
20. Sovereign Immunity

 

 
 
 

Until the year 2000 the ownership of real estate in Saudi Arabia was reserved to Saudi Arabian citizens, and GCC nationals in limited circumstances to the extent of owning a private residence of not more than 3,000m2. By Royal Decree M/15 of 17th Rabi Thani 1421 Hejra corresponding to 19th July 2000 Gregorian foreign interests were granted the right to own real estate in the Kingdom, with the exception of the holy cities of Makkah and Madinah, in the following circumstances:

  • Foreign interests which are licensed to conduct business in Saudi Arabia may acquire the property required for the business premises and for the accommodation of their employees.
  • If the licence to conduct business in Saudi Arabia includes the right to engage in the real estate business by buying, developing, selling and/or letting property, the value of the land and buildings must not be less than thirty million Saudi Riyals, and land purchased to this end must be developed within at least five years from the date of purchase.
  • Foreign individuals who are resident in the Kingdom may acquire real estate for their own private residence after having obtained the permission from the Ministry of Interior. Furthermore, property may be acquired for private residential purposes with the permission of the head of the Council of Ministers.
  • Lastly, the restriction on foreigners owning property in the holy cities of Makkah and Madinah does not apply to property acquired by way of inheritance, which is subject to special rules.

Having been in the making for more than ten years, the Registered Land Mortgage Regulation was enacted as Royal Decree No. M/49 of 13th Sha'ban 1433 Hejra corresponding to 3rd July 2012 Gregorian. One can now register mortgages over land, which was previously not possible. The Regulation is one of five related statutes which also include regulations governing the licensing and supervision of real estate financing firms, secondary financings and securitisation, lease financing and the enforcement of rights arising in this context. The banking and insurance regulator SAMA supervises real estate financing-related matters.

Under Registered Land Mortgage Regulation a mortgagee acquires a right in rem over specific land and takes precedence over all creditors in satisfying his debt out of the price of that land in the hands of whoever it may be. Mortgages must be registered to be effective, and take effect upon registration. It is possible to register second ranking and successive mortgages. The mortgage follows the debt, and is released upon the satisfaction of the whole documented debt.

Mortgagees have the right to protect by summary judgment the mortgaged property from work that may reduce the property’s value. Ordinarily, orders for injunctive relief are difficult to obtain in the Saudi Arabian courts, and only time will tell how effective these procedures will be. The regulation does not allow the mortgagee to take ownership of the mortgaged land. Instead, the mortgagee's claim must be enforced through a sale via auction, taking from the price the value of the registered debt with any excess going to the owner.

*This Saudi Arabian Law Overview is not intended to be legal advice, and cannot be relied on as a substitute for legal advice. We make no representation that the contents of this Saudi Arabian Law Overview are or will remain accurate or current.
Copyright © Hatem Abbas Ghazzawi & Co.

 

 
 

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      saudilegal 2016