• Mortgages are created by way of registration in Oman. There are two types of mortgages relating to real estate: legal and commercial.
  • The underlying land right determines the type of mortgage, whether the property is situated in the mainland or in the free zone, and the financing facility agreements. There may be some practical aspects to keep in mind with regard to creating the mortgage before the relevant authorities in Oman.
  • In this Practice Note, we will discuss key terms of the mortgage broadly covering the creation, assignment and enforcement of mortgages. This sub-theme “Mortgage and Repossession” has two other Practice Notes that will address the registration and foreclosure process in more detail (see PN:"Real Estate Mortgage Loans - Restrictions and Registration Process"-Oman and PN:"Mortgages - What happens in the Case of Default and Foreclosure"-Oman).


  • Encumbrance : A mortgage or other claim or lien on a real property. A definite tenancy or a usufruct is an encumbrance.
  • Foreclosure : The act of retrieving a mortgaged property upon failure to pay.
  • Freehold rights : This is defined under article 799 of Oman Sultani Decree No. 29/2013 Omani Civil Transactions Law as “a right on a property whereby the owner shall own everything of its elements to the extent it can't be separated therefrom without damage, destruction or change, what is over and under it to the extent beneficial for enjoyment thereof in height and depth.”
  • Mortgagor : The borrower whose properties are taken as security against the loan.
  • Mortgagee : The lender in whose favour the properties are secured.
  • Legal mortgage : A mortgage that is perfected by registration against a legal interest such as, a freehold right.
  • Lien : This is when the lender or any other interested party has a right of claim against the property until the debtor clears his debts.
  • Usufruct right : It is provided under Oman Sultani Decree No. 5/1981 Organizing Usufruct Over the Sultanate's Land as a freehold right for a finite period of 50 years with an option for a further extension of 50 years.

Practical Guidance

  • Under Oman Sultani Decree No. 29/201, various land rights such as freehold, usufruct and short-term leasehold interests are recognized.
  • A usufruct is same as freehold except that the term of land right is definite, and is for an initial period of 50 years with an extension option of further 50 years.
  • A leasehold right is usually with restricted rights and is not treated at par with freehold or usufruct rights when it comes to being eligible as a security. A lease that is shorter than seven years is treated as short-term and registered with the Municipality of the respective governorate. A lease that is longer than seven years is long-term and is registered with the Oman Ministry of Housing (MOH).
  • The mortgagors create security by perfecting the registration of mortgage over freehold and usufruct interests in the land with the relevant authority. A legal mortgage is registered with the MOH whereas a commercial mortgage is registered with the Oman Ministry of Commerce and Industry (MOCI).
  • A leasehold interest cannot be subject to a legal mortgage whereas if it forms part of a commercial concern, then a charge cannot be created on the company as a whole, by way of a commercial mortgage.
  • A standard legal mortgage is signed by both the mortgagor and the mortgagee before the attestor of the MOH. The contract must be in Arabic, but it can be made bilingually in English and in Arabic for the benefit of the parties, if so required.
  • The process may require a power of attorney, if the actual mortgagor or the mortgagee cannot attend in person. If the mortgagor or the mortgagee is not registered in Oman, then the power of attorney must be notarised and legalised by the Oman Embassy in the relevant jurisdiction or alternatively apostilled. There can be an addendum to the standard legal mortgage, if parties need additional terms.
  • A fee of 0.5% for residential and 1% for commercial and other properties (with an upper cap of OMR 300,000) of the facility amount is payable at the time of registration to MOH, usually by the mortgagor unless agreed otherwise by the parties. Also, before providing the facility, the mortgagee can conduct a search in the registry of MOH to check if there is any pre-existing encumbrance.
  • If the property is within the freezone, then the relevant freezone authority will facilitate the registration. Most of the property within the freezone is granted by way of a usufruct and the freezones have special laws allowing creation of mortgage against the usufruct land, the landlord being the government. Although land right is registered, the authorities do not allow public access to these registers where the legal mortgage is created. Hence, the mortgagee must formally ask the freezone to give a decision if there is any pre-encumbrance existing on the property or not. The freezones only give a copy of commercial mortgage deed created on the freezone company itself.
  • A mortgage, legal or commercial can be released by way of letter of release and discharge of loan issued by the mortgagee. The fee for release is OMR 15.
  • A registered mortgage is capable of being amended. If the drawdown was increased or additional facility was extended, then the mortgagee can make amendments to the existing mortgage with the consent of the mortgagor. The additional mortgage registration fee must be paid, however.
  • In unforeseen circumstances such as default in repayment of the loan, the mortgagee can force sale of the security through a court process. The foreclosure can be done only through a court process even if the parties entered into an agreement that gave right to the mortgagee to sell the property without having to go through the court procedure. Also, the mortgagee does not require mortgagor's consent to begin the process.
  • In seeking enforcement, the court will consider if the sale of the property causes the company to go bankrupt. The tax liability and the outstanding salary of the employees must be met from the sale proceeds before repayment of the loan.
  • The enforcement of a commercial mortgage can either be through court procedure, or creditors bringing about a liquidation procedure against the company. When the company is put into liquidation, the second ranking creditor will give way to the first ranking creditor. The sale of assets in this case will be completed gradually.
  • The sale of legal mortgage security will be by way of a public auction. The court will appoint an expert to value the assets, and will determine a guideline price. On the auction date, if the property does not fetch the guideline price or more than, the mortgagee has an option either to accept the price or conduct an auction at a later date, which will be communicated to the court. The enforcement must be brought about within 10 years from the date of default.
  • If the mortgagee does not have a legal presence in Oman, then an Omani bank must act as a security agent for the foreign mortgagee to create the legal mortgage and register it with the MOH. It is the same in the case of multi- national syndicate loans extended against a security on a land or a property situated in Oman.
  • In the event of enforcement, the security agent will act on behalf of the foreign mortgagee(s) to bring about the foreclosure. This is accepted by the Omani courts.

Related Content


  • Oman Law No. 55/1990 Promulgating the Commercial Law
  • Oman Sultani Decree No. 29/2013 Omani Civil Transactions Law
  • Oman Sultani Decree No. 2/1998 Promulgating the Land Register Law
  • Oman Sultani Decree No. 5/1981 Organizing Usufruct Over the Sultanate's Land
  • Oman Sultani Decree No. 29/2002 Promulgating the Law on Civil and Commercial Procedures
  • Oman Sultani Decree No. 114/2000 Oman Central Bank Law