real estate finance – Syria Report

This law is a key part of the legal corpus dedicated to the real estate sector that the Syrian government has been developing in the past few years.

Law No. 15 of 2012
Establishment of Real Estate Finance Companies

The President of the Republic
In accordance with the provisions of the Constitution,
Pursuant to what has been approved by the People’s Council in its session held on 05/05/1433 Hijri, 28/03/2012 Gregorian,
Promulgates the following:

Chapter One
Definitions

Article 1
For the purpose of this Law, the following words and expressions shall have the meanings set out beside them:

Appraisal Company: A civil or commercial company Licensed by the Organisation to perform the task of real estate appraisal, established according to the provisions of the relevant laws.
Appraisal Expert: Each natural person Licensed by the Council who carries out, in his own name or in the name of a legal person, and upon his responsibility, the task of appraising real estate and determining the value and type of real estate.
Company: A Real Estate Finance or Refinance company that is legally Licensed.
The Council: The Council for the Administration of the Organisation.
Finance Agreement: A contract guaranteeing the conditions, requirements, and rights incumbent upon parties to the agreement.
Financier: A company originally Licensed to engage in Real Estate Finance activities.
General Director: The General Director of the Organisation.
Guarantee: The right of privilege or real estate insurance for Underwritten Real Estate.
Investor: Every natural or legal individual interested in attaining real estate finance for purchase, repair, cladding, and renting according to conventional or Islamic models.
Intermediary: Every natural or legal person Licensed by the Council to perform the task of financial intermediary between the Financier and the Investor or the Leaseholder.
Istisna: A finance process to increase construction on property owned by the Leaseholder, for which the Financier agrees with the Leaseholder to increase construction at an agreed-upon price and with characteristics specified by the Leaseholder. Based upon this agreement, the Financier is to agree with contractors to build according to the descriptions produced by the Leaseholder.
Leaseholder: Every natural or legal individual who owns property and has an interest in building on it according to the descriptions specified by him and to the extent that he desires.
License: A license issued by the Council of Ministers to Real Estate Finance or Refinance companies to operate according to the provisions of this Law and Law No. 39 of 2009 and its amendments.
The Minister: The Minister of Finance.
The National Institution for Real Estate Finance: A public institution with legal personhood and financial and administrative independence that works to provide stability and liquidity in the real estate market through the purchasing of shares of guaranteed Real Estate Finance loans, and the development of a secondary market in financial notes issued in exchange for these loans.
The Organisation: The Organisation for Oversight of Real Estate Finance updated with Law No. 39 of 2009 and its amendments.
President of the Council: The President of the Council for the Administration of the Organisation.
Real Estate Finance: The activity of financing for investment, whether for the aim of purchasing, building, repairing, or improving housing, service installations, or real estate specialized for housing, industrial, touristic, agricultural, or services activities, or other aims determined by the Minister. Leasing may take a conventional or Islamic form, such that which terminates with clearing and Istisna, with the guaranteeing of a right to preference over property or its mortgage as a security deposit, or the renter keeping the real estate property in the case that the lease ends with clearance, or with other guarantees accepted by the Financier based on the provisions and procedures specified by the executive instructions of this Law.
Real Estate Refinance: Refinancing of the real estate loan funds of Real Estate Finance companies or banks in return for the turning over of mortgage security rights to the finance companies.
Real Estate Parties: The Directorate of Real Estate Interests and those institutions under its purview. This includes the Temporary Record Directorate, the Public Institution for Housing, city and town councils, and cooperative housing organizations charged with holding records that dispose or record property for real estate areas and buildings that fall under their purview, and institutions that engage in the same task as pertains to real estate transactions and providing required documents.
Real Estate Value: The financial value of the real estate as determined by the originally licensed Appraisal Expert according to the objective of the appraisal procedure, as per the standards of appraisal.
Underwritten Real Estate: Real estate encumbered with the right of privilege, mortgage insurance, or other guarantees in the interest of the Financier.

Chapter Two
Establishment of Real Estate Finance and Refinance Companies

Article 2

Private or joint-stock Real Estate Finance and Refinance Companies can be established as joint-stock companies, the goal of which is to fund disposal of and investment in real estate, according to the provisions of this Law and its executive instructions.
Shares in the Company will be nominal and subject to exchange.
It is the right of non-Syrians to participate in the establishment or ownership of no more than 49 percent of the shares of the capital of the Company.

Article 3

The minimum capital of the Company is to be as follows:
Real Estate Finance Company: 1.5 billion Syrian pounds
Real Estate Finance Company providing financial services according to Islamic sharia provisions: 1 billion Syrian pounds
Real Estate Refinance Company: 2.5 billion Syrian pounds
The capital of a Company must equal the cash of one instalment of one of the public banks in the Syrian Arab Republic.
The participation of non-Syrians in the foreign share is to accord with the disposal prices published by the Central Bank of Syria.
The Council of Ministers can modify the minimum capital for Companies based on the suggestion of the Council.

Article 4
The Company must deposit an unconditional bank guarantee in the name of the Organisation at a rate of 10 percent of the capital of the Company, as per the model provided by the Organisation.

Article 5
If the Company determines that its goal is to engage in finance according to the provisions of Islamic sharia, it must state that fact honestly in the application to establish itself, providing specific details on sharia oversight and how it will be implemented.

Article 6
Finance companies are allowed to engage in finance lending according to the relevant laws and systems.

Article 7

Public banks in the Syrian Arab Republic are allowed to participate in the establishment of Companies according to the principles and standards produced by the Credit and Monetary Council.
Public banks are subject to the oversight of the Organisation as pertains to the provision of Real Estate Finance without breaching decisions made by the Credit and Monetary Council in this regard.

Article 8

Applications for the Licensing of Companies are to be presented to the Organisation according to the models and conditions that are specified for this matter.
The Organisation is to study applications in light of the provisions of this Law and laws and the relevant systems, taking into account the reputation of the applying party and its capacities, abilities, and previous experiences in the field of Real Estate Finance, and in light of the demand of the Syrian market and its needs. The studies are to be brought, upon the suggestion specific to this matter, to the Council to be resolved. It is to be brought to the Council of Ministers so that a License can be issued to the Company by the president of the Council of Ministers.
The basic system of the Company is to be approved according to the provisions of Legislative Decree No. 29 of 2011 connected to companies.

Article 9

The Organisation puts forth registration conditions, procedures, requirements, and all of the requisite conditions for the registration of the Company. It shall give it a special number in the relevant establishment record. The Company does not have the right to engage in Real Estate Finance until after this registration.
The Organisation is to put forth the financial standards that are incumbent upon the Company to follow.

Article 10
The Company is allowed to merge with another Company that conducts the same business, to halt its activity, to dispose of its principals – or the majority of them – following the agreement of the Council of Ministers, based on a recommendation from the Organisation. This must follow the provisions and procedures specified in the executive instructions of this Law, including the agreement of the Credit and Monetary Council, in the case that any or all of the Companies are indebted to the banks in the place of merger, or the Companies request the elimination or suspension of the practising of the activity.

Article 11

The Company is not permitted to take deposits from individuals.
The Company may take loans from public banks in the Syrian Arab Republic, according to the conditions and situations specified by the Credit and Monetary Council.
It is incumbent upon the Company to dispose of real estate property that is in abeyance according to the provisions of this Law within two years of the date of its ownership, according to the provisions of Article 5 of this Law, with the exception of real estate that must be put to use.
The Company may publish a record of the loan or Islamic bonds put forward for public subscription in exchange for financing amounts provided by Leaseholders. The same is true for the purchase and sale of loan and bond bills that are published by the National Institution for Real Estate Finance.

Article 12
Companies must comply with the legal and organizational demands relevant to their operations, including demands for sufficient capital, according to the instructions issued by the Organisation.

Article 13

Real Estate Refinance Companies can provide liquidity and financial resources to various real estate lending parties via the distribution of financial resources, the maturity of which suits the maturity of the loans granted by the Real Estate Finance companies and the banks, including lending to Real Estate Finance Parties.
Real Estate Refinance Companies are to issue bills or Islamic bonds to develop capital markets and Real Estate Finance, and are to put forward their issuance of loan support or public or private bond subscription, within the accounts of loans, their maturities, and the period of their finance.

Article 14
Loans belonging to Real Estate Finance Companies that are being refunded are subject to the principles and controls imposed by the Credit and Monetary Council.

Article 15
The Public Institution for Housing can sign the necessary Real Estate Finance agreements and contracts with Real Estate Finance Companies in the interest of its Investors or those underwriting its projects.

Article 16

It is incumbent upon the Company to hold its accounts according to international accounting standards.
An examiner of accounts from the Company or the relevant offices of examination from the Council of Accounting and Examination are charged with examining the Company’s accounts.

Article 17
It is incumbent upon the Company to provide financial and regular statements as specified by the Organisation.

Article 18

If it appears that the License of the Company had been issued upon the submission of incorrect information in the License application, the License is to be suspended with a decision from the Council.
If the Company does not address the reasons for the License suspension during the specified period and correct the conflicting information, the License is to be cancelled with a decision from the president of the Council of Ministers, based on the suggestion of the Council.

Chapter Three
Real Estate Finance Agreement

Article 19

Real Estate Finance in the field of purchasing real estate is to take place according to the provisions of this Law, as pertains to the Finance Agreement between the Financier and the purchaser in his capacity as an Investor and seller of real estate. The agreement is to guarantee the conditions specified by the executive instructions.
If the finance aims to invest in the construction of real estate on land owned by the Leaseholder, or to restore or improve real estate or other fields, the property of the Leaseholder must be registered in the records of the Real Estate Parties, and the finance is to take place according to the agreement between the Leaseholder and the Financier and any other party with an interest in the agreement.
The Council is to issue a decision with a model of Finance Agreements indicated in the two previous items.

Article 20
The Investor or the Leaseholder is able to dispose of the guaranteed real estate by sale, grant, or other disposals or arrangements of any personal right to it, following agreement by the Financier, under the condition that the disposer or those with rights agree to take the place of the Investor or Leaseholder, as concerns the requirements incumbent upon him in the Finance Agreement.

Article 21
The Investor or Leaseholder is able to rent Underwritten Real Estate, or enable another to take up its work, after gaining the written agreement of the Financier. The Financier is to stipulate the transfer of the rights of the renter – the Investor or Leaseholder – in renting the real estate or putting it to use in fulfilment of his dues.

Article 22
The Financier cannot refuse the disposal, renting, or use by another of Underwritten Real Estate, except due to essential conditions under which his interests and rights face danger. It is incumbent upon him to inform the Investor or the Leaseholder of these conditions in writing within 30 days of informing them of his interest in disposing of, renting, or allowing another to use the real estate, or else he is considered to consent to the proceedings. It is incumbent upon the Financier to stipulate the joint liability of the Investor or Leaseholder with the disposer in fulfilment of the attendant requirements upon the Finance Agreement. As for the real estate renter, his joint liability is with the Investor or Leaseholder, within the limits of the lease agreement.

Article 23
If the Investor or the Leaseholder disposes of Underwritten Real Estate, rents it, or enables someone to work it in contravention of the provisions of the previous articles, the Financier is able to terminate the agreement and request the fulfilment of the entirety of the balance of the finance and its accessories, or the remainder of the finance shares, according to the conditions of a notarized warning, within a term of no less than 30 days. If the Investor or Leaseholder does not fulfil this condition, it is incumbent upon the Financier to deal with it according to the procedures stipulated in Chapter Five of this Law.

Article 24
The Investor or Leaseholder can speed up the fulfilment in eight instalments, or with the entire finance. In this case, the value of the entitled shares decreases according to what suits the acceleration of the fulfilment, as per the Finance Agreement.

Article 25

Those who are not Intermediaries with names registered in the schedule, directly assigned by the Organisation to this end, cannot engage in Intermediary activities between the Financier and the Leaseholder or Investor in the Finance Agreement.
The Organisation determines the provisions and conditions of sticking to the schedule of the Real Estate Finance Intermediaries.
The system of Real Estate Finance Intermediaries is to be issued with a decision from the president of the Council of Ministers upon the suggestion of the Council.

Chapter Four
Real Estate Guarantees and Transfer of Rights

Part One
Restricting the Real Estate Guarantee

Article 26
The executive instructions of this Law specify the procedures for requesting the restriction of real estate guarantees upon the resolution of the application, within one week of the date of its submission to the Real Estate Party. The applicant must be informed of the decision issued on that subject and accept it and to complete its documents, or to refuse it with reasons in accordance with a registered book.

Article 27
The guarantee includes real estate accessories including buildings, plants, real estate allotments, common rights, and all of the facilities and common rights original to it subsequent to the signing of the guarantee agreement.

Article 28
If the mortgage insurance agreement stipulates that a mortgagee who has not satisfied the mortgage loan owns the mortgaged building, or if it stipulates that it is to be sold without complying with the legal procedures upon the lack of implementation, then in both cases the mortgage is valid and the stipulation is invalid, even if the stipulation is put in place in a subsequent agreement.

Article 29

In the case of finance with a lease ending in ownership, a note of the guarantee is to be written down in the real estate journal according to the lease agreement. This record cannot be disposed in the allocation of the real estate by the renter.
In the case of finance through Istisna, the Leaseholder of the Istisna agreement is to write down the note of the guarantee on the subject of the Istisna agreement in the real estate journal according to the Finance Agreement, in the interest of the Financier. This note does not forbid the improvement of the real estate.

Part Two
Transferring Rights Emerging from Finance Agreements

Article 30

The Financier cannot surrender his rights emerging from the Finance Agreement, according to the provisions of this Law with its guarantees, unless the Investor or the Leaseholder submits his agreement to the National Institution for Real Estate Finance, or one of the companies Licensed by the Organisation of Financial Documents and Markets to engage in direct documentation, according to the provisions that the executive instructions of this Law specify.
It is incumbent upon the Financier to inform his transferee of the statements concerning the cancellation of rights emerging from the Finance Agreement, as specified by the executive instructions in this Law. This does not require the agreement of the Investor or the Leaseholder.
A Company that has received rights connected to finance can issue financial notes or Islamic bonds after securing the agreement of the Organisation of Financial Documents and Markets, such that it does not exceed the value of the rights transferred to it. It can open these notes or bonds to public subscription. The rights emerging from the financial notes indicated on their due dates are to be fulfilled with the profits and earnings from the finance instalments with a real estate security guarantee.
The Financier is to continue to collect the transferred rights and the commencement of the rights emerging from the Finance Agreement, in the interest of the owners of financial documents issued by the transferee or the National Institution for Real Estate Finance, in its capacity as representative of the two of them, within the limits covered by the transfer agreement.
The Financier guarantees the fulfilment of the rights emerging from the financial documents indicated. Likewise, the agreement allows the guarantee of the other to fulfil those rights according to the provisions specified by the executive instructions of this Law.
It is incumbent upon the Financier to directly inform the Investor or the Leaseholder of the transfer of the right and the date on which the Investor or Leaseholder is to begin fulfilling the required payments to the transferee, according to the Finance Agreement. The transferee does not have the right to ask the Investor or the Leaseholder for any instalments or payments to the Financier connected to the finance that has already been fulfilled according to the Finance Agreement.

Article 31
The Real Estate Parties are charged with holding records of real estate disposal, including the mortgage or the property registry for the real estate areas and the interior buildings within their jurisdiction. They perform the same task as pertains to the real estate transactions falling under the provisions of this Law, and are to provide the necessary documentation.

Chapter Five
Announcing Real Estate Property Removal, and its Claim or Recovery

Article 32

The Finance Agreement organized according to the provisions of this Law is considered an executive authority that must be implemented by force according to the provisions of Article 273 of the Law of Principles of Civil Courts, issued in Legislative Decree No. 84 of 1953 and its amendments. It has the characteristic of an expedited operation.
Implementation takes place according to the provisions of this Law and the provisions of the third section of the Law of Principles of Civil Courts issued in Legislative Decree No. 84 of 1953 and its amendments, in a way that does not conflict with the provisions of this Law.

Article 33
Notification or warning takes place through expedited registered mail sent to the home town of the Investor or the Leaseholder as specified in the Finance Agreement, with notification of arrival, as pertains to the notices that the Financier issues before putting the agreement into effect.

Article 34
In the case that the Investor or Leaseholder fails to fulfil the required instalments, and that 30 days have passed since the notification, according to its fulfilment and upon the determination that the market Real Estate Value has decreased due to the neglect of the Investor of Leaseholder or user of the real estate, the Financier must notify the Investor or Leaseholder of the requirement that they compensate the loss to value, or to present any guarantee acceptable to the Financier to cover the sum. This must occur within a period of two years and one day from the date of the notice. The loss of the Real Estate Value can be proven through a report issued by the Appraisal Expert or Company.

Article 35
If the specified notification period passes without the Investor or Leaseholder fulfilling the conditions or providing the guarantee required for all of its instalments, they will then be required to fulfil the entirety of the remaining and guaranteed sums as per the real estate guarantee, based on the Finance Agreement. In this case, the Financier is to put into effect the Finance Agreement organized according to this Law and apply for the executive president to claim the real estate subject to the Finance Agreement. It is the role of the executive judge to hold the asset for one week in preparation for its sale, to implement the holding, to apply for the executive holding sign to be written in the real estate journal, to inform the Investor or Leaseholder and those with rights recorded on the real estate page, to provide notice of this, and to inform the bearer.

Article 36
The Investor or Leaseholder has the right to fulfil the required sums during a period not exceeding 30 days from the date of being informed of the claim and the written holding notice in the real estate journal, according to the provisions of Article 35 of this Law.

Article 37
If the Investor or Leaseholder debtor does not fulfil the executive notice within the allotted period, the executive judge is to decide, based on the request of the owed Financier, to put the real estate up for sale by auction. The executor claims the real estate, the value of which is to be estimated by one or more Appraisal Experts named by the executive judge from a list of experts confirmed by the Organisation, as per this Law.

Article 38
The Financier and the confirmed Appraisal Expert cannot take part in the auction, directly or indirectly. If they do so, this will invalidate any sale that emerges from this auction. If the amount of the auction does not reach the estimated value of the sale, and is less than the accounted rights of the Financier, on another date as established by auction, then the Financier has the right to request the suspension of the sale in exchange for releasing the Investor or Leaseholder of liability for all obligations.

Article 39
If the Investor or the Leaseholder fulfils the owed instalments and their accessories at any period prior to the decision to transfer the property, the executive procedures must be suspended unless the Investor or Leaseholder agrees to pay the expenditures organized by the process of implementation to the Financier, according to what is established in the executive file.

Article 40
The decision to transfer the property cannot resume unless there is a fault in the auction procedures that are sufficient enough for cancellation, in the form of a decision, or the issuance of the transfer order after an application to suspend procedures that have legally been ordered paused.

Article 41
Suspending the real estate implementation procedures does not require the filing of a sub-suit for liability of another, so long as the court does not rule otherwise.

Article 42
The Principles of Civilian Courts Law shall apply to the rejection of judges and experts, except that it does not require the submission of an application for a rejection according to the executive procedures, until it is ruled upon finally, except in the case that the rejection application is accepted by the specialized court. This requires the cancellation of all of prior procedures in effect during the period of the rejection application.

Article 43
The proceeds of the sale are distributed to those with recorded rights according to the date and degree of registration, following the determination of the taxes and fees owed on the real estate, as well as court fees.

Article 44
The public parties that are allowed to engage in Real Estate Finance are able, according to the provisions of this Law, to have recourse to one or more lawyers to represent them, rather than the Administration of State Cases, to gain and defend their rights.

Article 45
A discrepancy between the description of the real estate in the real estate journal and the present condition of the actual real estate is not to suspend the transfer of ownership by auction, unless the real estate journal is corrected in writing to accurately reflect the present condition of the actual real estate. The winner of the auction is responsible for undertaking and paying for this. This is to be prescribed in a partial transfer decision.

Chapter Six
General Provisions

Article 46

The Organisation allows the following compensations:
Annual compensations from the public parties in Real Estate Finance, including public expenditures in the Syrian Arab Republic.
Compensation of expenditures of the study of an application to License Real Estate Finance Companies.
Compensation for granting a License to Real Estate Finance companies and their branches and offices.
The Organisation determines the amount of each of these compensations, and modifies them according to decisions issued by the president of the Council of Ministers, based upon the suggestion of the Council.

Article 47
The provisions of the civil law connected to the rights of preference and real estate mortgage and transfer rights shall be in effect, unless rejected by a special text on this subject in this Law.

Article 48
A modernized Company, according to the provisions of this Law, can transfer the proceeds from the profit of its activities, enumerated hereafter, from its accounts in the foreign sector, relying on its originally certified balance:

Profits and rents realized annually by the dividends of subjects of Arab and foreign states, and their transferred share paid originally in the foreign section.
Remunerations and compensations belonging to the members of councils of the administration of Companies for non-Syrians residents and those under their authority.
50 percent of the net wages and salaries and remunerations, and 100 percent of the end of service compensations owed to the experts and technicians who are Arab and foreign subjects working in the banks.
The sums owed to the Companies which much be paid back and transferred outside in the foreign section.

Article 49
Companies are subject to the laws of commerce and corporations and their amendments in all matters not specified in this Law.

Article 50
Parties that provide Real Estate Finance, including public banks in the Syrian Arab Republic, are to abide by registration with the Organisation, according to the provisions of this Law and the systems issued by it, without negating the subjection of the banks to the laws specific to them.

Article 51

A professional union of the parties that practice Real Estate Finance and Refinance that enjoys legal personhood is to be created, subject to the provisions of this Law. All parties that practice Real Estate Finance activities in the Syrian Arab Republic are to be members of this union by fiat.
The union is to be responsible for the interests of its members, is to execute the provisions of the practice of the profession, and is to represent the parties that practice Real Estate Finance with any party in any matter pertaining to Real Estate Finance.
The basic system of the union is to determine its nature, tasks, and responsibilities and the provisions and procedures specific to its entire organization, as well as the council of its administration, the cost of joining it, the annual cost of membership and the disciplinary procedures for its members.
The president of the Administrative Council of the Organisation for Oversight of Real Estate Finance is to issue a decision establishing the union, and is to approve of its system. The union is to be registered in the records of the Organisation after the payment of the cost of registration, valued at 1 million Syrian pounds.
The Organisation and its representatives are to attend the council of the administration of the union and the organizations emerging from it, without having the right to vote in its decisions.

Article 52
The executive instructions of this Law are to be issued with a decision from the president of the Council of Ministers, based upon the suggestion of the Council.

Article 53
This Law is to be published in the Official Gazette and shall be considered effective from the date of its issuance.

Damascus, 06/05/1433 Hijri, 29/03/2012 Gregorian.

President of the Republic
Bashar Al-Assad

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