The following paper is an examination of property rights under three legal systems: English law, Islamic law, and Saudi law. The paper will specifically focus on three types of rights and these are mortgages, leases, and easements. The paper endeavors to observe the distinction between the operation of these rights within the three jurisdictions by answering the questions of how these rights are created, how they operate in the different legal systems, and what are the similarities and differences in operation that are observable in the three jurisdictions.
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It will further highlight the laws that govern these rights under various jurisdictions. Essentially, the paper is a study of these rights, which should ideally affect a person’s enjoyment of property in the same manner, but which do so differently depending on the legal system under which they are created and registered. It is therefore an inquiry into these points of divergence and the considerations that the law makes which bring about these differences.
What are mortgages?
According to English property law, an interest in the property of any kind can be mortgaged. A mortgage is a form of property transfer security or rather the transfer of an interest in land to act as security for an obligation that is to be undertaken by the mortgagor (Clarke and Kohler 663). These interests can either be legal or equitable. In these kinds of transactions, the mortgagor transfers the ownership or other interest in the property to the mortgagee and retains a proprietary interest known as the equity of redemption (Clarke and Kohler 663).
According to shari’ah law, which is the law that governs all transactions between Muslims, Muslims are not supposed to pay interest and this, therefore, disqualifies them from taking part in any of the conventional forms of mortgages (Robert and Richards 100). Under shari’ah law, making money from money is considered a form of usury and therefore wealth should only be created through legitimate trade or investing in assets (Islamic mortgages).
In Saudi Arabia, the law that is followed is the shari’ah law, and therefore, for a long time, the conventional model of mortgages has not been legitimized under Saudi law. Due to a recent law that was promulgated in 2013 however, the law has provided for the financing of homes using mortgages in much the same manner as the western and English conceptions of these types of securities.
How it works
Under English law, depending on the formalities that are used when creating the mortgage, the mortgage of a legal interest can either be legal or equitable depending on the formalities that are followed by the parties. If the mortgage is with regards to land or immovable property, then the mortgagor remains in possession of the property during the period that the mortgage is in force unless he fails to meet his obligations.
If the mortgage is with respect to goods, then the mortgagor will have to part with both the legal or equitable interest in the property as well as the possession in the goods. This, therefore, makes the mortgage an unfavorable type of security for goods because the mortgagor has to depart with possession of goods even if he/she has not defaulted in his obligations (Clarke and Kohler 664).
The model of financing in Islamic law is founded on the basis of a risk-sharing agreement. Here, the customer and the bank agree to share the risks of investment on certain terms. The alternative that arises as a result of this is a situation whereby the lender, i.e. the mortgagee, initially buys the property which is the subject matter of the mortgage, and then later sells it to the mortgagor at a higher price (Robert and Richards 100).
Currently, under Saudi law, mortgages are regulated by the new mortgage law which provides for more straightforward access to housing credit but in the 1970s, banks in Saudi Arabia carried out financing much in the same manner as their other Muslim counterparts (Held and Ulrichsen 150). The mortgage that is envisioned under the Registered Real Estate Mortgage Law (RREML) is a contract that gives the mortgagee rights over a particular piece of real estate which allows him to use the property to settle debts that are owed to him (Al Hamoud). The right of the mortgagor to dispose of the property is derived from the registration of the mortgage instrument as per the registration laws. The rights of the mortgagee under the agreement are assignable.
What Law governs mortgages?
In the English legal system, mortgages are governed by both the common law and statutory law. An example is the Law of Property Act of 1925 which was considered to have radically altered the law of severance of joint tenancies (Clarke and Kohler 589). On the other hand, the common law has been relied upon where there are no answers under the existing legislation, for example, to answer the question of the remedy that lies for the benefit of a joint tenant whose fellow joint tenant has mortgaged the property that they hold together without his knowledge or consent (Clarke and Kohler 590).
Under Islamic law, mortgages are covered by shari’ah law which adequately provides for the principles that adhere to Muslim beliefs and values. Under Saudi law, the use of shari’ah law has been altered by the introduction of new statutory laws that now govern the use of mortgages as securities. For example, these laws provide specific regulations for the creation and registration of mortgages, the remedy of the mortgagee in case of default and also, matters of regulatory oversight which falls under the Saudi Arabian Monetary Agency (Oxford Business Group).
Under the English conception of the mortgage instrument, there is a possibility of there being an extra party to the transaction where A advances money to B and C takes out a mortgage as security for the benefit of A (Clarke and Kohler, 663). In most instances, however, it is the borrower who takes out the mortgage on his property for the benefit of the lender. In shari’ah law, however, the only two parties are the bank and the person for whose benefit the bank purchases the property. In Saudi law, the parties are similar to those in the English legal system.
The mortgage is similar in all legal systems in that it involves the same parties i.e. the lender and the borrower. The differences arise in the kinds of transactions that they enter into in order to give rise to the mortgage. For instance, in an English mortgage, the agreement is for the transfer of an interest in the specified property while the possession of the property might either remain with the mortgagor or be transferred to the mortgagee.
Under Islamic law, however, the process of lending is effected by the lender purchasing the property on behalf of the borrower and then reselling the property to him. The current Saudi law operates in the same manner as the English law in that the mortgage instrument is signed by the parties and then it is registered. It contains the rights and obligations of the parties under the agreement and simply covers the advancement of funds to be repaid later like in the English model. The law of Equity is however not applicable in Saudi Arabia and therefore there are no equitable mortgages under Saudi law.
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What are leases?
Under English law, leases are a type of agreement in relation to the property where the possession of the property vests in a non-owner for a limited period of time for a specified consideration. If the subject matter or the property island, then the interest created is a lease and if it is goods, then the interest that is created is a bailment (Clarke and Kohler 609).
Leases under English law can either be express or implied in that the person granting the lease can either do it voluntarily or the lessee can take possession of the property without the consent of the lessor. An example of this latter situation is where the tenant remains in the residence of a particular piece of land after their tenancy has ended (Clarke and Kohler 619). Under Islamic law, the lease agreement is referred to as Ijarah which literally translates to the sale for a benefit (Maryum par.2- 4).
This transaction is related to usufructs which refer to a legal right that is held by one person to use or derive some kind of benefit from property belonging to someone else, provided that the property remains in good condition (Maryum par. 3). This legal right is transferred to the lessee at a consideration which is the rent.
Under Saudi law, the lessor is empowered to lease the assets and utilities that are within his capacity as their owner.
How it works
Under Saudi law, the Finance Lease Law, the lessee is obligated by the lease to utilize the property for the specific use for which he leased it (Al Hamoud par. 3). The lessee is also obligated to cater to the operational maintenance of the property while the main maintenance remains the obligation of the seller. The lease agreement, therefore, dictates the rights and obligations of the parties under the agreement.
Under English law, the property can either be leased for personal or commercial purposes. Leases for commercially used properties are usually for shorter periods than those for other purposes and the lessee also has the option of selling the lease once the business purpose terminates. This is to increase commercial efficiency as businesses are usually volatile and there are those which generally last longer than others (Clarke and Kohler 619).
Under shari’ah law (Maryum par. 3-5), it is an only non-consumable property that can be the subject of a lease. Furthermore, a property may depreciate over time, and therefore, some of the rent may be apportioned as a depreciation allowance. Also, shari’ah law stipulates that the contract must be drawn up for a stipulated time and the parties must also clearly delineate the property which is the subject matter of the lease. If the leased property is harmed because of the fault o the lessee, then he is held responsible. Even though the property belongs to the lessor, he cannot unilaterally vary the terms of the lease.
What law governs the law of leases?
Leases are governed by both statutory law and the common law. This is under English law. Under Islamic law, leases are governed by shari’ah law. Under Saudi law, there has been a shift from shari’ah law and now, there are statutory provisions that govern and regulate the formation of leases. This law is the Finance Lease Law, under which the lease agreement may be used for financing purposes. For example, one is allowed to issue a negotiable instrument against the assets which have been leased according to the rules and regulations that are issued by the capital markets authority (Al Hamoud par. 5).
In this way, the lease in Saudi Arabia is also structured in a manner that ensures business efficacy, just as is the case with the lease under English law which is able to be transmitted from one person to another.
Parties to a Lease
The standard parties to any lease contract are the lessor and the lessee. As has been earlier mentioned, under English law, the lessee, under the lease agreement acquires a property right over the leased property that is inalienable and as a consequence, acquires the power to transfer the property to a person of his choosing. In fact, the Law of Property Act of 1925 states that is the person who holds a proprietary interest over land enters into a deed whose effect is to transfer the legal interest in land, then it will operate to transfer to transfer the interest in the land to that person.
This is made possible even though there was a term in the lease agreement which provided that the lessee would require the consent of the lessor if he is to transfer the legal interest in the property to a third party. The resultant situation is one in which the lease would have been effectively transferred to the third party even though the lessor will still have the power to exercise his right of forfeiture against the lessee for breaching his duty towards the lessor (Clarke and Kohler 23). A scenario like this therefore brings the third party into the picture as a party who has the capacity to be affected by the terms and agreements under the original lease.
Under Shari’ah law, it has been noted that the lessor is the party that owns the property that is used for the benefit of the lessee. Under Saudi law, the parties are also the lessor and the lessee but as seen above, there is a possibility of there being additional parties depending on the further agreements that may be entered into with regards to the lease. If the lessee takes draws a negotiable instrument against the lease, then the assignee of the instrument will have a legal right over the leased property which can also be affected by the operation of the original lease.
In all the systems of law, leaseholds the same meaning as a type of agreement that gives the lessee property rights over the leased property over a specified period of time. The only notable difference is the way in which the law in each legal system provides for the inclusion of other auxiliary parties to the lease agreement so that ultimately, the lease may end up affecting the rights and duties of more parties than those mentioned in the original lease.
What are easements?
By definition, an easement is a private property right that allows an individual to make use of another person’s land (Clarke and Kohler 343). An easement right can be created expressly through an agreement between the property owner and the third party or it can be implied by necessity (Burns 64). Easements operate as encumbrances to a piece of land and therefore must be registered so as to warn any other subsequent owners of that piece of land of the effects of purchasing it.
Islamic shari’ah law also recognizes easement rights even though they are a creation of common law (Burns 64). The justification for this recognition has been highlighted as the benefits that easements present to the public at large. In this regard, they are likened to the use of channels, highways, rivers, and seas. It has been described as a right that is vested in the public at large and therefore, cannot be specialized by one individual. Under shari’ah law, the granting of an easement are greatly influenced by the presence of a water source on a person’s property and therefore, if a traveler has to enter another person’s land in order to gain access to water, then an easement will be granted by law as a matter of necessity (Burns 64).
Article 1362 of the United Arab Emirates civil code defines an easement to be right that is granted to adjoining property owners to use the neighboring land for a specific purpose. The easement does not give the right holder the right of possession over the property but merely a right of use.
How do easements work?
In all three jurisdictions, the easement gives rise to two types of land: The dominant and the servient land. The dominant land is the land that enjoys the benefit of the easement while the servient land is that which is burdened by the easement. Under the UAE, the law provides that the right of an easement may be acquired by consent, legal disposition, or inheritance. In the enjoyment of his rights, the right holder is cautioned to use his rights within reasonable limits and must not exercise his rights in a manner that would increase the burden of an easement unless it is indisputably necessary (Mehairi).
The right holder however has the right of reasonable access to his land for example to carry out repairs and if the holder of the servient land attempts to deny such access, then the holder of the easement is entitled to just compensation in case of any loss that he has suffered (Mehairi).
Under English law, the case of Re Ellenborough Park  Ch 131, laid down the conditions that a right must fulfill for it to be considered an easement. These conditions have persisted in modern-day law. The most indispensable of these features is that which provides that an easement must be an appendage of the land that it benefits and cannot under any circumstances be severed from it.
The rationale for this provision has been postulated to be that the law cannot give the right to a person to make use of and therefore devalue the land of another unless such right is vital to the use of that person’s property. An example of an easement would, therefore, be where a person has the right to use an adjoining piece of land as a car park even though it does not belong to him so as to provide access to his office complex. Essentially, an easement is granted so that the person to whom it granted can effect a permanent and salutary change to his property.
As has been previously noted, shari’ah law places a lot of weight on the use of water in deciding whether or not an easement should be granted. The right of third parties to access water e.g. to water one’s camels or to drink also affects the way the property owner enjoys his property. For instance, a private landowner cannot obstruct a stream or river which originates or crosses through his land if this obstruction will affect the rights of those downstream to enjoy the free flow of water (Burns 65).
What law governs easements?
Under the English law, easements are considered to be construction commons law but they have slowly and gradually worked their way into statutory law. They are therefore regulated under both regimes. Under Islamic law, they are governed by the principles of shari’ah law as has been seen with the examples on the access to water. Under Saudi law, they are regulated under the UAE civil which provides for the enjoyment of these rights as well as how an easement can be terminated.
For example, Article 1365 of the civil code provides that the rights of an easement may arise where there are restrictions imposed upon a property owner to build on his land. Under these provisions, therefore, the restricting party is supposed to allow access to the property owner so that he can erect a building on his own property.
The parties to the easement agreement
In the case of an express easement, the parties are usually the property owner and the third party to whom the right of easement is being granted. This is the case in all three systems of law. In an implied easement, however, the parties may be numerous and unlimited because the easement is more often granted to the public at large. For example, under shari’ah law, an easement that is implied by the necessity of the traveler to access water is an agreement that is between the property owner and the public at large.
The property owner, therefore, owes an obligation to any person that is in need of accessing his land for the purpose of getting water. Under Saudi law, an easement also arises by way of inheritance and this, therefore, means that the easement can bind the property owner and beneficiaries of the inheritance or the survivors of the party to whom the easement was granted.
In comparison, easements under the three jurisdictions operate more or less in the same manner. There is unanimity in the fact that the main purpose of the easement is to allow third party access into the property owner’s land. All the jurisdictions also acknowledge the fact that easements may arise as a result of an agreement between the parties or impliedly by operation of the law. The main distinguishing feature is to be found in shari’ah law, which places a lot of importance on the access to water sources and even provides that a right of an easement may arise where there is a vital source of water that originates from or passes through the property owners land.
It is also worth noting that albeit all the three jurisdictions recognize the importance of an easement, the reasons why the law embraces them are different in every jurisdiction. Under the English law, they are granted so that the person for whose benefit the easement is created may be able to access his land and develop it for more efficiency in use. Under English law, therefore, the easements serve the larger purpose of efficacy and the need to ensure that land, which is a limited and finite resource is utilized to its maximum capacity. Under shari’ah law, on the other hand, easements are considered to be useful most especially because of the benefit that they offer the public at large. It is because of the public benefit that the law grants them and therefore in most cases, they are meant to benefit the public at large as opposed to individuals.
In conclusion, the paper has shown that leases, mortgages, and easements operate differently in different jurisdictions. Although they are all interests inland, they are created for different purposes and operate in different manners in the three legal systems. Mortgages, for example, cannot operate in the traditional manner within Islamic states because earning of interest is forbidden within shari’ah law. Leases do not also operate in the same way that they do under English and Saudi law. Evidently, the principles of Islamic law have been instrumental in shaping the way these rights are created and the way that they operate in Islamic states.
Furthermore, it is also noteworthy that Saudi Arabia, which also follows shari’ah law, has enacted laws in the recent past which have shifted the dynamic of how these rights operate within the country. The structures that are currently in place seem to adhere more to English law as opposed to the traditional shari’ah law. The reason for this is the real estate sector which has grown exponentially over the last few decades and which the government is hoping to grow more through revolutionizing finance laws.
All in all, it is clear that each legal system has designed the operations of these rights around an overarching policy. Whereas English law places a lot of weight on business efficacy, Saudi law is more concerned with growing its real estate sector and Islamic law on its part is looking to enact the most shari’ah compliant laws possible.
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