General property liens

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Definition and basis of property liens

A real estate lien is a legal security. It confers a preferential right over the sale price of the debtor's property.

What makes it special is that it does not have to be registered with the land registry.

Liens are based on the quality of the claim. The legislator considers certain claims to be more deserving than others. This hierarchy reflects legal and social policy choices.

Property liens after the Ordinance of 2021

The Order of 15 September 2021 has overhauled the system of real estate liens.

Prior to this reform, a distinction was made between:

• General property liens
• Special property liens

The order transformed all special real estate liens into special legal mortgages. All that remains are general property liens.

Article 2376 of the Civil Code is clear: "Liens on immovable property are granted by law. They are general.

This amendment simplifies security law but maintains the protection of certain creditors.

The two main general property liens

Legal costs privilege

This lien covers costs incurred for:

• Preservation of the debtor's assets
• Their liquidation
• Their realisation

These costs benefit all creditors. Logic: the creditor who made it possible to preserve or realise the property must be paid first.

Are covered:

• Sealing and inventory costs
• Seizure fees
• Sales and prize distribution costs

In order to be privileged, these costs must be useful to the general body of creditors.

The lien on salaries and similar allowances

Article 2377 of the Civil Code protects:

• Salaries for the last six months
• Holiday pay
• Compensation in lieu of notice
• Redundancy payments

This privilege extends to authors and artists for their royalties over the last three years.

In the event of insolvency proceedings, this privilege is coupled with a "superprivilege" guaranteeing immediate payment of wages for the last 60 days.

The principle of subsidiarity

General real estate liens are also general movable liens. They encumber all of the debtor's assets.

However, Article 2378 of the Civil Code lays down an essential rule: "Where the lien also relates to the general movables of the debtor, it shall not be exercised over immovable property unless there is sufficient movable property".

This is the principle of subsidiarity. Creditors must first pay themselves out of the movables. Real estate is only seized as a last resort.

In practice:

1. Seizure and sale of furniture
2. If insufficient, seizure of buildings

The creditor does not have to prove insufficiency. It is up to the other creditors to establish bad faith.

Property liens in the classification of security interests

Understanding classification of real estate securities is essential in determining the order of payment of creditors. In civil law, general real estate liens take precedence over all other real estate security interests, which has a direct impact on rights and obligations of the owner of a mortgaged property.

The order is as follows:

1. Exclusive rights (ownership-security, lien)
2. Privilege of legal costs
3. Salary privilege
4. Mortgages (sorted by date of registration)

In insolvency proceedings, Article L.643-8 of the French Commercial Code establishes a different classification. Real estate liens are outranked by:

• The salary superprivilege
• Claims arising after the opening judgment
• The privilege of conciliation

This hierarchy illustrates the legislator's desire to protect employees and encourage the rescue of companies.

General real estate liens remain powerful securities. Their exemption from registration and their favourable ranking make them effective protection for certain creditors, whose impact on the hierarchy of creditors can be considerable. analysed by a lawyer specialising in mortgages.

Sources

• Civil Code, articles 2376 to 2378
• Order no. 2021-1192 of 15 September 2021
• French Commercial Code, Article L. 643-8

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