English, Islamic and the Saudi Property Laws

Background Information

Different legal jurisdictions and financial systems deal with property laws differently. As such, various aspects of property laws are defined and are operated differently under every legal system. It is worth noting that there are differences and similarities among various legal systems.

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This research paper endeavors to compare the English Property Law, the Islamic Property Law, and the Saudi Property Law. Three of the aspects discussed include charitable trusts, mortgage, and private inheritance.

Charitable Trusts

Definition

Under the English Property Law, trust can be defined as the creation and protection of property by the settlor/ feoffor where the property is put under a trustee/feoffee until when it is available for the beneficiary/ cestui que upon realization of set conditions (Sulçe 221-226).

The term waqf, which an Islamic Law equivalent for trust, can be defined as to hold, confinement, or prohibition of property, put under a wali or mutawalli by a waqif and given to mustahiqeen (the intended user) (Suleiman 24-43; Obaidullah 1-130).

The Saudi Property Law definition of trust is derived from the waqf definition and the secular definition and brings out the concepts of creating community sustainability, the principle of perpetuity, inalienability, and irrevocability of property (Obaidullah 1-130).

How Charitable Trusts Operate

Trust under the English Property Law operates under the provisions borrowed from the Roman laws and the medieval English Property Law (Sulçe 221-226). The settlor, who puts a property under a trustee, oftentimes does the creation of a trust. The trustee is tasked with the protection and the preservation of the property on behalf of the beneficiary, who is the intended user of the property. It is worth noting that trusts rarely require comprehensive formalities unless in such cases as land ownership transfers (Sulçe 221-226).

The English Law emphasizes considerable levels of certainty in settlor protection and/or legal/court actions. Three forms of certainty, including intention, subject matter (the property), and objects beneficiary (Sulçe 221-226).

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Under Islamic Property Law, waqf/trust operates under the Quran guidance, the Sunna and pleasing God (qurba) (Suleiman 24-43; Obaidullah 1-130). The trust is established by a living adult (man or a woman), commonly referred to as the waqif, loosely translated as the settlor of the founder (Suleiman 24-43). The waqif creates the trust relationship by making of the asl or the principal of the asset inalienable in perpetuity (Suleiman 24-43; Obaidullah 1-130).

It is worth noting that two forms of waqf exist, including family endowment and endowments meant for charity. The property under waqf is preserved and its consumption/use outside the provisions prohibited. Possession of a fiduciary, through a mutawalli, is adopted to prohibit and restrict the sale, offering, inheritance, and/or any other form of use until the property is available for use by the mustahiqeen translated as the beneficiary (Suleiman 24-43; Obaidullah 1-130).

Trust under the Saudi Property Law charitable trust operates as provided for by the sharia law (waqf) and the secular form for the non-Muslims (Obaidullah 1-130). For the sharia trust, the waqif-mutawalli-mustahiqeen relationships are established as discussed under the Islamic Property Law (Obaidullah 1-130). For the non-Muslims, the secular provisions regulate the operations of trusts (Obaidullah 1-130).

Purpose of trust

Under the English law, trust relationships exist to fulfill several purposes, including privacy, children and disabled person custody, estate planning, charities, and charitable practices, pension plans, asset/property protection, fiscal advantages, and money laundering (Sulçe 221-226).

Under Islamic Law, trust is created for major purposes of charity, wealth preservation, family business continuity, protecting the vulnerable, and estate planning (Suleiman 24-43; Obaidullah 1-130).

A waqf in Saudi Arabia is created with the core objective of social benefit (Obaidullah 1-130). The donor/or the founder of the waqf stipulates who is to benefit from the trust and the prerequisites and the procedure to be followed. For instance, a waqif may set aside property for the construction of a school to provide affordable education to society (Obaidullah 1-130).

Similarities and Differences

The key similarity of trust relationships under the English, Saudi, and Islamic Property laws is the transfer of property or assets by the settlor/founder to the trustee for the benefit of the beneficiaries. Besides, charity is a key essence of waqf and charitable trust under the English law (Obaidullah 1-130; Sulçe 221-226; Suleiman). Under all three legal jurisdictions, the societal benefit is the key principle behind charitable trusts.

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Some of the differences according to (Volaw Group 1; Obaidullah 1-130; Sulçe 221-226; Suleiman 24-43)

  1. The Islamic law forbids the sale of the property by the trustee unless with permission from an Islamic court while in the English law the trustee is not prohibited from transacting with the property.
  2. A waqf operates under unstipulated period while trusts under the English law have specific time stipulations.
  3. The settlor is the English Property Law can terminate/revoke a trust unlike a waqif in the.
  4. There are limitations on the nature of asset transfer in the Islamic Property Law such as transfer of usufruct whereas the English property law permits their transfer.
  5. The waqif should never have any interest in the property under Islamic trust but the English law allows the settlor to be a beneficiary.

Breach of Trust

Breaches under the English Property law are dealt with by providing remedies to the affected stakeholders in trust relationships (Martin 1-1102). Breaches occur, especially when the trustees do no fulfill their duties.

Oftentimes, remedies for breach of trust include compensation and holding the perpetrator to account through specific performance (Martin 1-1102). It is imperative to note that breach of trust happens in two major ways, including the duty of care, which is addressed by compensation, and misapplication of property, which is addressed through claiming the restoration of the property (Martin 1-1102).

The mutawalli has a moral and a duty to protect the property under the trust and, therefore, they are committed to the administration of the property and the trust. As such, cases of breach of trust under Islamic Law are minimal. However, when mismanagement and breach of contract occur, the law requires the removal of the mutawalli.

Further, the mutawalli is held accountable and fined while the other stakeholders are compensated (Suleiman 24-43; Obaidullah 1-130).

The provisions of the Islamic law are provided to deal with cases of breach of trust and mismanagement of waqf under the Saudi legal jurisdiction (Obaidullah 1-130).

Mortgages

Definitions

In the English Property Law, a mortgage is defined as security for a loan, which comprises a transfer of an equitable interest in the mortgagor’s property to the lender and provides that the lender’s interest be terminated upon the payment of the cost and the accrued interest (Crown 1).

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The Islamic Property law defines mortgage as a method of restraining property, which is considered as a guarantee for credit (Tameme and Asutay 150 – 167).

Under the Saudi Arabia legal jurisdiction, a mortgage is defined as the pledging of property as security for a loan/debt (McMillen 1-23). It is worth noting that the definition is borrowed from the Islamic law governing mortgages and Rahn (pledges) (McMillen 1-23).

How mortgages operate

Mortgages under the English Property law operate on an interest basis where the mortgagee finances (gives a loan) the mortgagor to acquire a property. The contract is governed by the principle of repossession of property in case of default in payment and other noncompliance. Upon the completion of the loan payment, the property ceases to be under mortgage (Crown 1).

Under Islamic law, mortgaging operates under two major ways, including Murabaha and Ijara. Under the Murahaba mortgaging, the mortgagor makes a 20% upfront. The mortgagee purchases the property and sells it to the customer at a relatively higher price and the property is registered under the customer’s name (Property News Team 1; Islamic Mortgages 1).

The Ijara mortgaging, on the other hand, does not require large initial payment by the mortgagor. However, the registration of the property under the customer’s name is not done immediately. Therefore, the lender/mortgagee acts as the lender of the property. Ownership of the property is transferred upon the completion of the payment (Islamic Mortgages 1; Tameme and Asutay 150 – 167).

Under the Saudi Property Law, mortgages operate under the Mortgage Law, which is based on the Rahn principles. However, it is worth noting that the modern practice of the Mortgage Law does not entirely follow the classical formulations of the Rahn principles (McMillen 1-23). The law applies to real estate and movable assets. Some of the key provisions of the mortgage law include (McMillen 1-23);

  • There is a direct link between the underlying loan and the assets/property under a mortgage contract.
  • The mortgagee has the right to hold and keep the assets under the contract.
  • The is an obligation to safeguard and maintain the assets under mortgage.
  • All the expenses associated with the contract should be paid by the pertinent party.
  • All the parties are forbidden from selling, mortgaging, leasing, lending or placing the property.
  • The creditor is prohibited from using the asset/property under.
  • Security of the property under mortgage.
  • Selling the property to pay the loan.
  • Giving the mortgagee under the contract the priority to pay before other creditors.
  • The assets/property should be returned upon the completion of the payment.

Similarities and differences

Some of the similarities of mortgage contracts under the three legal jurisdictions, English Property Law, Islamic Property Law, and the Saudi Property Law include the holding of property for a loan, mortgagor protection, mortgagee’s rights, and some aspects of operations.

Differences

  • The mortgages under the Islamic Law and the Saudi Mortgage Law operate interest-free where the mortgagee gets revenue from sale or leases whereas the mortgage contracts under the English Law or interests oriented.
  • Foreclosures are more likely to occur under the English law relative to Islamic law and the Saudi law.
  • In some Islamic and Saudi courts, foreclosures resulting from payment defaults may be nullified whereas in the English law all defaults may lead to foreclosure provided that due court procedures are followed.

Protection of borrowers vis-a-vis lenders rights

The English law on mortgages protects the mortgagor and provides for mortgagee’s rights (Crown 1). For instance, the borrower is protected from misrepresentation concerning the terms and conditions of a mortgage contract. As such, the terms and conditions of the mortgaging contract should be clear to the borrower before the signing of the contract. The borrower is also protected from unfair treatment and has the equity of redemption (Crown). In case a mortgagor defaults on payment, the law gives the lender the right to due repossession or resale of the property (Crown).

In Islam Property law and the Saudi Mortgage Law, the sharia provisions protect the mortgagor from any forms of misinformation and lack of clarity, especially on hidden charges. The mortgagor enters into a contract properly informed. The mortgagee has the right to demand their lease payments from the mortgagor and repossess the property in cases of default, especially covenant default (McMillen 1-23).

Default and remedies (repossession and foreclosure)

Under the English law, the property can be repossessed in case of default in payment. During repossession or foreclosure, both the debtor and the lender are fairly protected by the law. The lender oftentimes initiates the process and an out of court arrangement can be made for the payment of the arrears. However, in the foreclosure process, court involvement is necessary. The legal court then issues repossession orders, including outright foreclosure, suspended foreclosure, money order, or time order (Crown 1). Occasionally, the debtor can sell the property and settle the debt.

Foreclosures are less likely to occur under Islamic law and Islamic mortgaging financing since the contracts are interest-free and are considered ethical. Further, the out of court settlements are more likely to happen. The vetting of the Islamic financing by Sharia adviser makes it even harder for foreclosure since there are no hidden charges and, therefore, the debtors.

However, when foreclosure is warranted the interest-free contracts simplify the foreclosure processes for the lender since the court only orders for the termination of the lease.

Some courts allow foreclosure and repossession of property upon non-repayment under the Saudi Mortgage Law (Hassan and Mahlknecht 1-480). The generally accepted repossession of property, however, is repossessions that arise from other forms of defaults and noncompliance, including covenant default. One the courts issue an order of foreclosure, the mortgagee can sell the property based on the provisions of the Execution Law (Hassan and Mahlknecht).

Private Property Inheritance

Definition

The English Property Law defines property inheritance the transfer of ownership of a property from one person, especially the deceased, to the legatees who are recognized by the law or written in a legal will (Crown 1).

The Islamic Property Law defines property inheritance as the transfer of property (cash, land, houses, and other rights) from a dead individual to living legatees (relatives and other heirs as provided by Wassiyat or will) as per the provision of the Quran and sharia (Chebet, Orero and Luvanda 1-8).

The Saudi Property Law definition is borrowed from the Islamic law definition (for the Muslim umma) and the international inheritance law for non-Muslims and it describes inheritance as the legal transfer of property ownership from the deceased to the inheritors (Meyer-Reumann & Partners 1).

How private property inheritance works

In English law, it is recommended that the owners of the property write a will. The will expresses what the owner of the property would like to happen to the property upon death, or sometimes before death (Crown 1).

As such, legatees are named in the will and each should get their share according to the will. In cases where a will is not written the law gives a provision on how the property is to be divided among the living relatives (Crown 1).

Inheritance in Islamic Property Law operates under the provisions of the Quran and the Prophetic teachings. Before death, the Quran requires that a person makes a provision of what happens to one-third of their property upon death. Two-thirds of the property is not subjected to Wassiyat writing since they should be divided among the family members as provided by the Quran (Chebet, Orero, and Luvanda 1-8; Meyer-Reumann & Partners 1).

Upon death, all forms of debts, including the funeral cost, are cleared. Subsequently, one-third of the Tarakah (property) is distributed by the execution of the Wassiyat. The distribution of the other two-thirds is done as per the provision of the Quran among the heirs (Chebet, Orero and Luvanda 1-8; Meyer-Reumann & Partners 1).

Similarities and differences

There exist some similarities among the three legal systems in inheritance

  1. Oftentimes, the family members are the key beneficiaries of the property of the deceased.
  2. All the legal systems provide for the writing of a will by the owner of the property.
  3. In cases where a will is absent, the three legal frameworks give formulae on how the property of the deceased is shared.
  4. Oftentimes, the wills are executed after the death of the as opposed to before the death.
  5. In all the legal systems, inheritance involves the transfer of ownership of a property from one person, usually the deceased, to the legatees.

Differences

  1. The writer of the will in the Islamic Law is limited to only one-third of the property whereas in the English Law there are no such limitations.
  2. Gender issues play a significant role in Islamic inheritance, for instance, a son is entitled to what two daughters get, whereas, in English law, both genders have equal treatments.
  3. Inheritance tax is significantly mentioned in inheritance under English law while such a thing does not exist in the Islamic law.
  4. Religion plays a significant role in inheritance under the Islamic law but the English law is somewhat free from religious beliefs.
  5. Stepfamilies, children born out of wedlock and adopted children are more likely to benefit in the English law than in the Islamic law.
  6. The minimal age of the testator is set at 15 years (or attaining puberty) under the Islamic law but whereas the minimal age of the testator is set at 18 years.

Legatees

Heirs of property under inheritance in the English Law are provided by the will written by the testator. Otherwise, the law stipulates who should inherit the property when there is no will (Crown 1).

The heirs include spouses, children, stepchildren, parents, siblings, half-siblings, grandparents, aunts, uncles, step-aunts, step-uncles, or any other living relatives. In the case where the deceased did not have a will and there are no living relatives, the property is considered “ownerless property” and consequently taken by the government (Crown 1).

The Islamic property law (which is adopted in the Saudi Arabia property law for the Muslims (Meyer-Reumann & Partners 1)) stipulates the inheritors of the property. The strategy to distribute the property to be inherited categorizes heirs into two major groups that include the primary and the secondary heirs (Chebet, Orero and Luvanda 1-8).

The primary heirs are the family immediate family members of the person whose property is inherited. The immediate family members include the spouse, children, parents, and grandchildren (Chebet, Orero, and Luvanda 1-8). It is worth noting that grandchildren are considered heirs when the son is deceased (Chebet, Orero, and Luvanda 1-8). The secondary heirs include the grandparents, the siblings, uncles, and aunts. Aunts and uncles are considered as heirs when the grandparents are deceased (Chebet, Orero, and Luvanda 1-8).

The heirs for the property of non-Muslims under the Saudi Property law jurisdictions are named in the will.

The will

Writing a will is optional but recommended under the English Law. For a will to be considered legal, certain conditions must be fulfilled, including the testator must be at least 18 years and of sound mind, made voluntarily, written, signed by adult witnesses in the presence of the testator (Crown 1). The absence of a will in the English Law jurisdiction results in the legacy or the left property divided among the living relatives as per the provisions of the law (Crown 1).

The Islamic Property Law allows for the writing/drafting of a will, which is known as the Wassiyat (Mustafa 55-59). The Holy Quran and the teachings of the Prophet indicate the need for the living to provide the heir reasonable usage guidelines. Further, there are prophetic traditions, which direct Muslims to have wills (Mustafa 55-59; Islam Laws 1).

Any person who has attained puberty or 15 years can make a Wassiyat orally (in the presence of at least two witnesses), or in writing with a recognized signature.

Wassiyat has only executed upon the death of the al-musi/testator and the payment of all debts and burial expenses (Islam Laws 1).

Writing of the will in Saudi Arabia is based on the Islamic laws for the Muslims and the international laws for the non-Muslims (Meyer-Reumann & Partners 1).

Works Cited

Chebet, Mahmoud Halima, Joseph Orero and Anthony Luvanda. “Information and Knowledge Management.” Information and Knowledge Management 4.9 (2014): 1-8. Print.

Crown 2016, Welcome to GOV.UK. Web.

Hassan, Kabir and Michael Mahlknecht. Islamic Capital Markets: Products and Strategies. Wiley, 2011. Print.

Islam Laws 2011, “Islamic Law of Will, What is Wasiyat in Islam”. Web.

Islamic Mortgages 2011, “All You Need to Know about Islamic Finance in the UK. Web.

Martin, Jill. Hanbury & Martin: Modern Equity. London: United Kingdom: Sweet & Maxwell, 2012. Print.

McMillen, Michael. “Rahn Concepts in Saudi Arabia: Formalization and a Registration and Prioritization System.” ResearchGate (2010): 1-23. Print.

Meyer-Reumann & Partners 2016, “The Rules of Succession and the Related Rules of International Private Law in the Kingdom of Saudi Arabia. Web.

Mustafa, Mzee Mzee. “Islamic Law of Inheritance: The Case of an Illegitimate Child and Possibility of Having an Asset of Deceased Father: A Tanzanian Case Study.” Journal of Law, Policy, and Globalization 45.2016 (2016): 55-59. Print.

Obaidullah, Mohammed. Awqaf Development and Management. Jeddah; Saudi Arabia: Islamic Research and Training Institute, 2013. Print.

Property News Team 2014, “Guide to Sharia Law Mortgages”. Web.

Sulçe, Nertila. “Trust as Relationship Treated by Common Law Legal Systems and as a Relationship Treated by Civil Law Legal Systems. Things in Common and Comparison between the Two Systems.” European Journal of Sustainable Development 4.2 (2015): 221-226. Print.

Suleiman, Haitam. “The Islamic Trust waqf: a Stagnant or Reviving Legal Institution?” Electronic Journal of Islamic and Middle Eastern Law 4.2016 (2016): 24-43. Print.

Tameme, Mohammed and Mehmet Asutay. “An Empirical Inquiry into Marketing Islamic Mortgages in the UK.” International Journal of Bank Marketing 30.3 (2012): 150 – 67. Print.

Volaw Group 2014, “Trusts & Shari’a Law”. Web.

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