Negotiable Instruments and Bankruptcy - Secured loan in Saudi Arabia Essay

Negotiable Instruments and Bankruptcy - Secured loan in Saudi Arabia - Essay Example Saudi Arabia appreciates suretyship from individuals or companies to reduce the liability of the debt. Most importantly, according to the law guiding commercial mortgages a pledge to have a movable asset as a security for a debt related to a mortgage is regarded as a commercial relationship with the debtor (ARTICLE 1). This implies that a movable asset and all the parties, whose rights and commitments are attached to it can be used to act as a surety against a mortgage. It is imperative note that, a mortgage asset is that one that is saleable and outlined into detail in a current of future mortgage contract. On equal measure, all the properties that have not been acquired cannot be assumed to be mortgaged (ARTICLE 2). This is because there no substantial certainty that the intended plans of acquiring will materialize and in the event that, the properties are not acquired the mortgage contract becomes obsolete. This study finds out that, a mortgage becomes a debt if the amount of the secured debt is established in the mortgage contract. Lien as an option in a mortgage contract A lien is a right offered to another by the owner of a property to secure a debt. Notably, a lien can be the creation of the law for specific creditors. The lien is an option in Saudi Arabia and the mortgaged property can be used as collateral. ... This situation requires the real owner or mortgagee creditor to assert is authority to a substitute mortgage. In inapplicable cases, the mortgagee creditor may annul the contract. For reliability and functionality of this concept, the mortgage and the secured debt must remain indissoluble or enjoined. This is because; the concept of the validity and satisfaction of the mortgage will be only relevant if and only if, the secured loan is valid and satisfactory (ARTICLE 5). For example, if the mortgagor is a different entity other than the debtor, then he shall be entitled to assert the defenses that relates to the debt and he is required to sustain this right even after the relinquishment of the debtor. Sustenance of this right is fundamental in reclaiming the property because e is the real owner. The procedure of enforcement The enforcement procedure depends on the possession rights. For instance, the mortgage shall not be imposed against third party unless the possession rights of the mortgage asset are transferred to the mortgage debtor. This is to ensure that the third party continues to enjoy benefits as he continues to repay the loan. On the other hand, in case of the absence of the mortgage creditor an escrow, who is an individual designated by the mortgage creditor to be in possession of the mortgaged assets and the interest is accruing to him on behalf of the mortgage creditor. The overall essence in this scenario is to allow the mortgage debtor to possess the property until the mortgage is satisfied. On equal measure, the escrow or the mortgage creditor designated by two contracting parties shall assume the ownership rights of the mortgaged asset if the property is put at his disposal through the provision of deeds indicating transfer