When a creditor has a claim that appears to be justified but has not yet been validated by a writ of execution, the wait can be a source of anxiety. The risk that the debtor will organise his insolvency by selling his property is a legitimate concern. Faced with this situation, the judicial conservatory mortgage is a powerful preventive tool. It enables a security interest to be taken over a debtor's property even before a final court ruling has been obtained. Coming under the category of judicial suretiesTo be effective, this measure must be rigorously implemented. Understanding the procedure, its publicity and its effects is essential for any creditor wishing to secure his or her rights. The assistance of a law firm with expertise in this area is therefore crucial in navigating the subtleties of this procedure and guaranteeing the future recovery of the debt. Our practice dedicated to enforcement procedures regularly confronts us with these issues.
Conditions specific to judicial conservatory mortgages
A number of conditions relating to the nature of the property must be met before a judicial protective mortgage can be registered. French law strictly regulates the property assets that may be subject to such a measure, while providing protection for certain assets and specific regimes for situations of shared ownership.
Property concerned: buildings by nature and by destination
Judicial conservatory mortgages can only relate to immovable property. However, the concept of immovable property is broader than it appears, and covers two main categories. Firstly, immovable property by nature, which is the most obvious: this is the ground (land) and anything permanently fixed to it (buildings, structures). On the other hand, the measure can be applied to immovable property by destination. This is movable property that the law considers to be immovable because of the link that unites it to the land. For example, industrial machinery installed in a factory or agricultural equipment attached to a farm are considered to be immovable property by destination and can therefore be included in the basis for the mortgage.
Asset protection: inalienability, unseizability and family housing
Some properties benefit from legal protection that prevents the registration of a mortgage. This is the case for property declared inalienable by a clause in a deed of gift or a will. Similarly, property considered by law to be exempt from seizure cannot be mortgaged. The most common form of protection concerns the sole trader's principal residence, which cannot be seized by business creditors. It should be noted that this protection is not absolute and there are exceptions. In addition, the family home enjoys special protective status, particularly under matrimonial property regimes, which may make it more difficult to set up a security interest without the agreement of both spouses.
Special cases of undivided and joint property
The situation becomes more complex when the property does not belong entirely to the debtor. If the property is jointly owned, i.e. held by several people without their respective shares being materially divided, the mortgage can only be registered on the debtor's share. The creditor only takes security over the debtor's rights in the joint ownership. In the event of subsequent division, the mortgage will be transferred to the debtor's assets or balance. In the case of joint property belonging to spouses married under a community property regime, the rules are even different. In principle, the creditor of only one spouse may not register a mortgage on a joint asset without the involvement of the other spouse, unless the debt has been incurred for the maintenance of the household or the education of the children.
Provisional publication of the judicial conservatory mortgage
The effectiveness of a judicial conservatory mortgage depends on its publication. This step makes it enforceable against third parties, meaning that no one can ignore its existence. This publicity is initially provisional, pending confirmation of the claim by a writ of execution.
Formalities for registration at the Land Registry Office
To be valid, the mortgage must be registered with the land registry (formerly the mortgage registry) of the place where the property is located. This is done on the basis of the judge's authorisation or, if the creditor already has a title, even one that is not enforceable, of this document. The application is submitted by a lawyer and must contain precise information if it is to be accepted. This formality has a cost, which is added to the amount of the secured debt. It is a fundamental step, because without this registration, the security has no legal value vis-à-vis other creditors or a potential purchaser of the property.
Contents and compulsory information
The registration is made by means of two identical forms. These documents must contain compulsory information, failing which they will be rejected by the land registry. These include the full identity of the creditor and debtor, the precise description of the encumbered property (with its cadastral references), the valuation of the claim in principal and accessories, and the nature of the title on which the claim is based. Careful drafting of these schedules is essential. A simple clerical error could result in registration being refused, wasting valuable time for the creditor. It is in this context that the role of the enforcement judge may be requested by the debtor to contest the validity of the measure and request that it be lifted.
Duration of provisional registration and renewal
The provisional registration of a mortgage is valid for three years. This period is generally sufficient to allow the creditor to complete the legal proceedings to obtain a writ of execution. If, for a legitimate reason, the legal proceedings should extend beyond this period, the registration may be renewed once for the same period. This renewal must be requested before the expiry of the first three-year period, otherwise the registration will lapse and the guarantee will be lost.
Consequences of registration lapsing
A registration that has not been converted into a definitive registration within the required timeframe or that has not been renewed lapses. The penalty is severe: the mortgage is deemed never to have existed. The creditor then retroactively loses the benefit of the security and the rank it conferred. If, in the meantime, other creditors have registered their own securities, they will take precedence over the creditor. The security may lapse if the creditor fails to initiate proceedings to obtain a writ of execution within one month of registration, or if he does not proceed with final publication within two months of obtaining such a writ.
Effects of a provisional judicial mortgage: enforceability and alienability
Contrary to popular belief, a judicial conservatory mortgage does not completely paralyse the rights of the owner of the property. Its consequences are more subtle and aim to preserve the value of the property for the creditor, without making it completely unavailable.
Distinction from sequestration and unavailability
It is important not to confuse a judicial conservatory mortgage with a real estate seizure. A seizure renders the property unavailable, meaning that the debtor can no longer sell or give it away. A mortgage, on the other hand, does not make the property unavailable. The owner retains the right to dispose of the property. He can therefore decide to sell it. This is a fundamental distinction that has important practical consequences for both the debtor and the creditor. The question then arises: can you sell a mortgaged house? ? The answer is yes, but the security interest will affect the sale price.
Right to the value and deposit of the sale price
A mortgage gives the creditor a preferential right and a right to follow. The right of succession means that the security "follows" the property, regardless of who owns it. If the owner sells the property, the mortgage does not lapse. The creditor will be able to enforce its rights against the new buyer. However, in practice, a sale is made "free and clear of any registration". This means that the sale price will not be paid directly to the seller. It will be deposited, i.e. frozen, generally in the hands of the notary, up to the amount required to pay off the mortgage creditor. The mortgage is thus transferred to the sale price, guaranteeing that the creditor will be paid out of the funds generated by the sale.
The notary's responsibility in the distribution of the price
The notary responsible for the sale of a mortgaged property plays a central role. Before finalising the deed, he must check the mortgage status of the property. If he discovers one or more registrations, he cannot release the sale price to the vendor without first paying the registered creditors, according to their rank. He may be held professionally liable if he fails to fulfil this obligation. It is he who distributes the price, ensuring that the creditor benefiting from the judicial conservatory mortgage (which has become definitive in the meantime) receives the sums due to him.
Definitive publication of the judicial conservatory mortgage
The provisional nature of the conservatory mortgage is, by definition, temporary. It must be transformed into a definitive guarantee in order to produce its full effects and enable the creditor to recover its claim on the price of the property.
Deadlines for final advertising
Once the creditor has obtained a writ of execution recording his claim (a final judgement, for example), he must act quickly. The law imposes a specific deadline for the final publication of the mortgage. In accordance with article R. 533-4 of the Code of Civil Enforcement Procedures, this formality must be carried out within two months of the date on which the judgment establishing the creditor's rights becomes final. Failure to comply with this time limit means that the provisional registration lapses, with the drastic consequences that this entails.
Formalities for final registration and return to ordinary law
The final registration is made by a new entry at the Land Registry. The creditor must file a statement referring to the provisional registration and mentioning the enforceable court decision obtained. This new registration takes effect on the date of the provisional registration. This is the whole point of the protective measure: it makes it possible to "make a date" and guarantee a ranking that cannot be called into question by security interests registered subsequently by other creditors. Once the final registration has been made, the judicial mortgage is no longer "protective". It becomes a judicial mortgage under ordinary law, governed by articles 2412 et seq. of the Civil Code.
Interaction of judicial conservatory mortgages with collective proceedings
The opening of collective proceedings (safeguard, reorganisation or judicial liquidation) in favour of the debtor has a major impact on the rights of creditors, including those who have taken the precaution of securing a mortgage.
Suspension of registrations and invalidity of the suspect period
A judgment opening insolvency proceedings automatically entails a prohibition on the payment of any claim arising prior to the judgment opening the proceedings. This also implies a prohibition on registering new securities, such as a mortgage, to secure these prior claims. In addition, if the registration of a judicial conservatory mortgage was made during the "suspect period" (a period running from the date of cessation of payments to the opening judgment), it may be cancelled if the creditor was aware that the debtor was in a state of cessation of payments. The relationship between precautionary measures and collective proceedings is therefore a strategic issue.
Declaring security and maintaining rank
Even if they hold a mortgage, creditors are not exempt from an essential formality: declaring their claim to the insolvency proceedings. They must declare the amount of their claim and mention the existence of the mortgage that secures it. This declaration must be made within the legal timeframe (generally two months from publication of the opening judgment). If the mortgage was registered before the opening judgment and is not cancelled during the suspect period, it retains its rank. The creditor will then be paid from the sale price of the property, in priority to unsecured creditors (those who have no security).
The judicial conservatory mortgage procedure is an effective but technical weapon. Its implementation requires great precision and compliance with strict deadlines, otherwise you risk losing all the benefit of the guarantee. If you are faced with a debtor whose solvency is uncertain, don't wait until it's too late. Contact our team of lawyers to assess your options and secure your rights.
Sources
- Code of civil enforcement procedures
- Commercial code
- Civil Code
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