General presentation of property security interests

What is a charge on immovable property?

A security interest in immovable property is a security interest in immovable property. It protects a creditor against the risk of insolvency of its debtor. It allows the creditor to be paid in preference to other creditors.

These guarantees are essential for mortgages and property transactions. Without them, lenders would be reluctant to finance property projects.

The different types of property security under the Civil Code

Article 2375 of the Civil Code lists four types of property security:

Property liens

These are legal guarantees. Since the Ordinance of 2021, all real estate liens are general. They cover all of the debtor's real estate.

The two main privileges are:

• Legal costs privilege
• Salary privilege

These liens rank high in the order of payment, but are only exercised over immovable property in the absence of sufficient movable property.

Mortgages

L'mortgage is the most common form of property security. It is a real right that allows the creditor, in the event of non-payment, to have the property sold and be paid from the price.

It comes in three forms:

• Conventional mortgage (most common)
• Legal mortgage (resulting from the law)
• Judicial mortgage (ordered by a judge)

The mortgage does not dispossess the owner but requires a notarial deed and publication.

Property pledge

Formerly known as "antichresis", the property pledge involves handing over the property to the creditor. The creditor will receive the proceeds until the debt is repaid.

This security is rarely used. The dispossession of the debtor limits its practical value.

Property retained or assigned as security

This modern security, often referred to as the property-securityIt makes the creditor the owner of the property until full payment has been made. It exists in two forms:

• Retained ownership (e.g. property leasing)
• Transferred ownership (e.g. security trust)

It offers maximum protection to the creditor.

Classification of property security interests

Conventional/legal/judicial sureties

• ConventionalResulting from an agreement (conventional mortgage, property pledge)
• Legal: imposed by law (liens, legal mortgages)
• Judicial: ordered by a judge (conservatory mortgage)

General/special security interests

• GeneralCover all of the debtor's immovable property (liens on immovable property, certain legal mortgages)
• Specialencumber a specific property (conventional mortgage, property pledge)

Possessory and non-possessory securities

• With dispossessionthe creditor holds the asset (property pledge)
• Without dispossessionthe debtor retains the use (mortgage, liens)

Preferential/exclusive sureties

• Preferential: confer a rank of payment (mortgages, liens)
• Exclusive: not subject to competition with other creditors (property security, right of retention)

Impact of recent reforms on real estate securities

Two major reforms have overhauled the real estate security landscape:

Order of 23 March 2006 a:

• Creation of a book dedicated to security interests in the Civil Code
• Introduced the rechargeable mortgage
• Introduced the life mortgage
• Admitted as property security

Order of 15 September 2021 a:

• Transformed special real estate liens into special legal mortgages
• Clarified the status of security interests granted by third parties
• Established a precise classification of creditors in collective proceedings

Why choose one type of security over another?

Each safety system meets specific needs:

Conventional mortgage: ideal for traditional mortgages.

Property pledgesThis is relevant for short-term receivables.

Security ownershipoffers maximum protection but is complex to install.

Right of retentionThe new "Efficient for building contractors" concept.

The choice depends on a number of factors:

• The nature of the claim
• The debtor's profile
• The cost of formation
• Effectiveness in the event of collective proceedings
• The value of the property

The legal professionals often recommend combining several types of security for optimal protection and to better understand the risks involved. rights and obligations of the owner.

Sources

• Civil Code, articles 2375 to 2488-5
• Order no. 2006-346 of 23 March 2006
• Order no. 2021-1192 of 15 September 2021