Federal Decree-Law No. (25) of 2025 promulgates a new UAE Civil Transactions Law, in force on 1 June 2026. It replaces the 1985 law in full. For lenders, security agents, factors, and trustees operating in the UAE, several of the most-used recovery levers have been re-stated — and a handful of standard-form drafting habits no longer survive.
Here are six provisions that change the security and recovery playbook.
1. Auto-acquire and out-of-court sale clauses are void
Article 1317 of the new law makes void any clause that allows the mortgagee to take title on default in exchange for the debt, or to sell the mortgaged property without observing the legal procedures. The mortgage itself survives; only the clause is void. The same posture should be assumed for possessory pledges.
The lender's recovery remains the regular foreclosure route under Article 1316 — sale through the competent court, deficiency claim ranking as unsecured. Standard-form provisions that try to short-circuit this should be removed.
2. The 6-month surety release rule
Article 1006 is a short provision with disproportionate consequences. The surety is released from the suretyship if the creditor does not initiate judicial proceedings to claim the debt against both the debtor and the surety within 6 months from the day following maturity.
The credit-control implication is direct: every dishonoured facility with surety support needs a diarised 6-month review and an issue-or-justify decision. Surety templates that rely on a long passive watch over the principal debt are exposed.
Two related provisions complete the picture:
- Article 1007 requires the creditor to file in the debtor's bankruptcy or insolvency; failure costs recourse to the extent of damage.
- Article 1005 releases the surety pro tanto to the value of any securities the creditor loses.
3. Receivables assignment — the fixed-date trigger
For factoring, securitisation, and receivables-backed lending, Article 407 confirms that an assignment of right is opposable to the debtor and third parties only on the debtor's acceptance or notification. For third-party opposability via acceptance, the acceptance must be of fixed date. Article 416 then awards priority among multiple assignments to whichever assignment first becomes opposable to third parties.
Standard receivables documentation should ensure each underlying debtor's notification or acceptance is captured with reliable date evidence. Article 411 separately calibrates the warranty: for consideration, the existence of the right at assignment is warranted unless agreed otherwise; for a gift, no warranty even of existence; for solvency, no warranty without specific agreement (Article 412). Drafting choices should be conscious.
4. Mortgage substitution — proceeds, insurance, expropriation
Article 1313 confirms that the mortgage attaches, on perishing or damage of the property, to any property that replaces it — compensation, insurance proceeds, or expropriation consideration. Article 975 separately confirms that fire-insurance proceeds attach to registered or notified real rights on the property and that the insurer may not pay without consent.
Security agreements should articulate the substitution clearly and capture the insurer-notification protocol. The same posture applies to expropriation-prone assets.
5. Tenancies and the mortgagee
Article 1318 confirms that an existing lease binds the mortgagee only if of fixed date pre-dating the mortgage. A deferred lease (beginning after the existing lease) is unenforceable against the mortgagee unless recorded in the mortgage deed.
For income-producing collateral, this is the level at which to discipline the tenancy schedule annexed to the security agreement. Where the lender's appetite is tied to rental income, the fixed-date evidence should sit alongside the cash-flow waterfall.
6. Pre-contractual disclosure — even between sophisticated parties
Articles 121–123 introduce a positive duty of disclosure during negotiations, with bad-faith conduct creating liability for actual damage. Article 122 codifies a mutual disclosure duty for information of "decisive importance" to consent. Article 122(4) makes void any agreement that limits or excludes the disclosure duty.
For term-sheet practice, indication letters, and bilateral negotiations, this means standard "no representations outside the agreement" wording should be supplemented with an explicit acknowledgment that the codified disclosure regime applies. Confidentiality of negotiation information is protected by Article 123 in its own right.
A note on running periods
Articles 6–7 of the new law require limitation periods that have not yet expired on 1 June 2026 to be recalculated against the new periods. Where the new period is shorter than the period under the 1985 law, the new period runs from 1 June 2026; where the residual under the old period is shorter, the residual prevails. Every running surety, mortgage, and tort claim diary should be reviewed before that date.
Related Civil Code 2025 guides
Published 18 May 2026. General information only — not legal advice. Contact us for matter-specific advice.