Court-ordered mortgages: legal and conservatory mortgages

The world of mortgages is not limited to the guarantees voluntarily granted on a home loan. Did you know that a court decision may, in certain cases, be the very source of a mortgage ? Or that it is sometimes possible to take security over a property even before you have obtained a final judgment on your claim? These mechanisms, although specific, are important tools in the legal arsenal, both for securing the enforcement of a decision obtained and for taking preventive measures in emergency situations.

This article explores two particular types of mortgage that are closely linked to the judicial context: thelegal mortgage attached to judgments of conviction and theprotective judicial mortgage. We are going to decipher how they work, the conditions under which they are implemented and their practical usefulness for creditors.

The legal mortgage attached to sentencing judgments

Unlike a conventional mortgage, which arises from a contract, this mortgage arises directly from the law, hence its name "legal mortgage". More specifically, article 2401 of the Civil Code states that it arises from "judgments". This does not mean just any judgement: it is attached to court rulings that pronounce a "legal mortgage". financial penaltyIn other words, they order one party to pay a sum of money to another.

What types of decisions are involved?

• The judgments handed down by the courts (Court of First Instance, Commercial Court, Industrial Tribunal, etc.) or administrative (Tribunal Administratif, Cour Administrative d'Appel, Conseil d'État) that order a party to pay sums of money (debts, damages, etc.).
• The arbitral awardsbut only once they have been coated with theexequaturIn other words, a court decision giving them enforceability on French territory.
• Some administrative constraints issued by public bodies (such as social security bodies for the recovery of unpaid contributions), where the law explicitly gives them the effect of a judgment.

An essential point is that this mortgage arises by operation of law of the judgment of condemnation. The creditor does not need to ask the judge for it, and the judge does not have to grant it specifically in his decision. It is an automatic consequence attached by law to this type of judgment.

However, like all mortgages, to be effective vis-à-vis third parties (other creditors, potential purchasers of the property), it is imperative that it be registered from the Service de la Publicité Foncière (SPF). It is this registration that will give it its rank (its priority) and enable the creditor to exercise its right of pursuit if the property is sold. Without registration, it remains an empty shell compared with the others.

What is the scope of this mortgage? It is its general basis of assessment It potentially encumbers all present and future immovable property belonging to the convicted debtor (although the latter may apply to the courts for a reduction if the registration on all his assets is manifestly excessive in relation to the debt). On the other hand, it is special in respect of the secured claim It only secures the exact sums involved in the conviction (principal, interest awarded by the court and legal costs).

The legal mortgage on judgments is therefore an invaluable tool for creditors who have been successful in court. It transforms the claim recognised by a judge into a real right over the debtor's property, considerably increasing his chances of actually being paid. Historically, its existence has been debated, with some considering it too severe or creating inequalities, but it remains an important element of French security law.

The judicial conservatory mortgage: a preventive measure

Imagine the following situation: you have a large claim against someone, but the legal proceedings to obtain a judgement are likely to take a long time. In the meantime, you're worried that your debtor will organise his insolvency by selling his property. Is there a way of taking out security quickly, as a preventive measure? The answer is yes, thanks toprotective judicial mortgage.

Governed by Articles L511-1 et seq. of the Code des procédures civiles d'exécution (CPCE), this mortgage is a precautionary measure. Its main aim is not to obtain immediate payment, but to 'freeze' the situation by taking security over one or more of the debtor's properties, while a final judgment is obtained on the merits of the case.

To be able to apply for such a measure, two cumulative conditions must be met:

1. Your the claim must appear to be well-founded in principle. It is not necessary to have irrefutable proof at this stage, but you must show the judge that your claim for payment is plausible and serious.
2. You must provide proof of circumstances likely to threaten recovery of your claim. You must show that there is a real risk that the debtor will not be able to pay on time (for example, if he squanders his assets, if he is already heavily in debt, if he is planning to flee...).

The procedure for obtaining and implementing this mortgage is specific and generally takes place in several stages:

• Judicial authorisation (often required) : In most cases, you will need to request authorisation to make this entry from the competent judge (the Juge de l'Exécution - JEX, or the President of the Tribunal de Commerce if the claim is commercial and is being requested before any legal proceedings). The major advantage is that this authorisation is generally requested by requestThe debtor is not notified at this stage, which preserves the element of surprise and the effectiveness of the measure.
• Exemptions from authorisation : Article L511-2 of the CPCE provides for exceptions where the judge's authorisation is not required. This is the case if you already have a writ of execution (even if it is not final), a court decision (even if it is not enforceable), or for certain specific claims such as an accepted and unpaid bill of exchange, an unpaid cheque, or unpaid rent resulting from a written lease.
• Provisional registration : Once authorisation has been obtained (or if you are exempt), you must promptly (within 3 months of obtaining judicial authorisation, if applicable) arrange for a provisional registration of the mortgage to the SPF. This registration ranks immediately and provides temporary protection. It is initially valid for three years, renewable once for the same period (article R532-7 of the CPCE).
• Informing the debtor : Crucial step: once you have taken the provisional registration, you must mandatory inform your debtor by deed of the court commissioner, within a very short period of time (8 days). It is from this point that the debtor can contest the measure before the judge if he considers that the conditions were not met (article R532-5 of the CPCE). The burden of proving that the conditions are The burden of proof lies with you, the creditor (article R512-1 of the CPCE).
• Action on the merits essential : Provisional registration is only a temporary measure. If you do not already have an enforceable title, you must initiate proceedings to obtain a final judgment ordering your debtor to pay the claim. Article R511-7 of the CPCE generally requires this to be done within a reasonable period of time. one month from the date of provisional registration, failing which the protective measure will lapse.
• Final registration : Once you have obtained a final and binding judgment against your debtor, you must convert provisional registration into definitive registration. This formality must be completed within two months of the date on which the judgment becomes final (article R533-4 of the CPCE). The great advantage is that this definitive registration will rank on the date of the initial provisional registration (article R533-1 of the CPCE), thereby preserving the priority you had acquired, sometimes a long time before.

The judicial conservatory mortgage is therefore a powerful but technical tool, a race against time for the creditor who must respect strict deadlines to avoid losing the benefit of his provisional guarantee.

When can I use these mortgages?

These two types of mortgage meet different needs:

• L'legal mortgage attached to judgments of conviction is the logical outcome of successful legal proceedings. It reinforces the effectiveness of a court decision ordering payment, by giving the successful creditor a property guarantee over the debtor's assets.
• L'protective judicial mortgage is an emergency measure, a preventive guarantee to be used when you have a probable claim but not yet an enforceable title, and you legitimately fear that your debtor will become insolvent before the end of the procedure. It is a way of securing your rights for the dispute.

Navigating between these different forms of mortgage, understanding when and how to use them, or how to deal with them if you are in debt, requires a great deal of knowledge. in-depth legal expertise. Whether you have obtained a judgement in your favour and wish to guarantee its enforcement, or you are involved in a dispute and fear for the recovery of your debt, our practice can advise you on the most appropriate guarantee strategies for your situation.

Sources

• Civil Code (in particular article 2401)
• Code des procédures civiles d'exécution (CPCE) (in particular articles L511-1 et seq., R511-1 et seq., R532-1 et seq.)
• Commercial Code (in particular article L632-1 on the nullity of the suspect period)