Terminating a mortgage: payment, discharge and other causes of extinction

A mortgage is not set in stone for eternity. Like any guarantee linked to a debt, it has a lifespan and a number of events can put an end to it. Beyond its constitution and initial registrationUnderstanding how a mortgage lapses is essential. Whether you have finally paid off your mortgage, or other circumstances intervene, it is crucial to know how to get it officially removed from the public registers. Without this, the registration can continue to "weigh down" your property and complicate your future plans.

How does a mortgage expire? What are the procedures for obtaining its 'release' and cancellation? This article explores the different causes of extinction of a mortgage, whether they arise from the end of the debt or from the mortgage itself, and details the procedures for officially releasing your property from this charge. Good management of these causes of extinction is crucial for the owner of a mortgaged property.

Termination by consequence: the end of the debt

The fundamental principle is simple: a mortgage is an accessory to the debt it secures. It cannot exist without the debt. Consequently, when the principal debt disappears, the mortgage is automatically extinguished with it. This is set out in article 2474 of the Civil Code.

There are a number of mechanisms for extinguishing the debt that lead to the end of the mortgage:

• Payment in full : This is the most common cause. Once the creditor has been repaid the full amount due (capital, interest and any costs), the debt is extinguished and the mortgage that guaranteed it is no longer valid.
• The statute of limitations : If the creditor takes too long to claim what is owed, the debt itself may be extinguished by prescription (according to the legal time limits applicable to the nature of the claim). The mortgage then logically disappears.
• Innovation: Novation occurs when the parties decide to replace the old debt with a new one (for example, during a major loan renegotiation). In principle, novation extinguishes the old debt and its accessories, including the mortgage. Note, however, that the parties may expressly agree to transfer the mortgage to the new debt, but this requires a clear agreement.
• Compensation : If the creditor and debtor owe each other money, their debts may be mutually extinguished up to the amount of the smaller debt. If the debt secured by the mortgage is fully compensated, the mortgage is extinguished.
• Confusion: A rarer situation where the same person becomes both creditor and debtor of the same debt (for example, by inheritance). The debt is extinguished, and so is the mortgage.

It is essential to note that in order for the mortgage to be extinguished, the claim must be total and definitive. A partial payment, for example, is not enough. By virtue of the principle of indivisibility of the mortgage, it subsists in full to guarantee the outstanding balance, unless there is a specific agreement to the contrary with the creditor.

Expiry on a principal basis: the end of the mortgage itself

Sometimes a mortgage can disappear independently of the debt it secures. The debt remains, but the real estate guarantee is extinguished for reasons of its own.

The main causes of direct extinction of a mortgage are as follows:

• Waiver by the creditor : The creditor may voluntarily decide to waive his or her mortgage rights. This waiver (referred to in article 2474 of the Civil Code) is a unilateral act that does not, in principle, need to be accepted by the debtor. It may be express (in writing) or tacit, i.e. inferred from the creditor's behaviour. However, tacit waiver is very difficult to prove and requires clear and unequivocal acts expressing the intention to waive the guarantee.
• Prescription of the mortgage : We are not talking here about prescription of the debt, but of a specific prescription that concerns the mortgage itself when the property is held by a "third party holder" (a purchaser who is not personally liable for the debt). If the third party holder holds the property for a certain length of time (10 years if he has good title and is in good faith, otherwise 30 years) without the creditor taking any action, the mortgage may be extinguished by prescription, even if the original debt still exists.
• Loss of the mortgaged property : If the property to which the mortgage relates is totally destroyed (by fire or natural disaster, for example), the guarantee will cease to apply. However, there is one important exception: if the property was insured, the mortgagee's right is often transferred to the insurance indemnity, by virtue of the legal subrogation provided for in article L121-13 of the Insurance Code. The indemnity then replaces the property as the creditor's pledge.
• The purge : As explained in the previous article, the completion of the purging procedure by the third-party buyer (or certain specific judicial sales such as the adjudication on seizure of the property - see article 2461 of the Civil Code and R. 322-65 of the CPCE) extinguishes the mortgages on the property, which the resale right disappears. The preferential right of creditors is then transferred to the consigned sale price.
• Other causes : More rarely, a mortgage may be extinguished by consolidation (the creditor becomes the owner of the property and there are no other registered creditors), by the effect of certain court decisions (for example, a substitution of security in the context of collective proceedings), or by cancellation of the title that created the mortgage.

Discharge and cancellation of the registration: formalising the end

Even if the mortgage is legally extinguished (for example, because the debt has been paid), its registration remains visible at the Service de la Land Registry (SPF) until it has been officially deleted. This requires two distinct steps release and the cancellation.

La release is the act by which the creditor (or a judge) consents to the withdrawal of the registration. It is the authorisation to "lift the hand" that was weighing on the property. The cancellation is the physical operation carried out by the FPS, which consists of making a note in the margin of the initial registration to indicate that it no longer has any effect.

There are two ways of obtaining a release:

1. Voluntary release : This is the most common case, occurring after the debt has been repaid in full. The creditor agrees to the write-off. This agreement must be recorded in a authenticated deedThis is a deed received by a notary (articles 2435 and 2436 of the Civil Code). The notary draws up this deed, which certifies the creditor's consent (and often the cause, such as payment). A simplified form of notarial deed exists to reduce the cost of this formality, which is often perceived as an additional burden by borrowers who have paid off their credit.
2. Judicial release : If the creditor refuses to discharge the debt without a valid reason (even though the debt has been extinguished), or if the creditor cannot be found, has died without any known heirs, or is incapable, the debtor (or the current owner of the property) may apply to the relevant court for an order to discharge the debt (article 2437 of the Civil Code). The judge will check that the conditions for extinction have been met before making a decision.

Once the release deed (notarised or final judgement) has been obtained, it is sent to the SPF, which then proceeds with the cancellation of the registration. Only then is the property officially and publicly released from the corresponding mortgage charge. Failure to take this step could block a future sale or the taking out of a new guarantee on the property.

In very exceptional cases, a write-off can be cancelled (for example, if the release has been obtained by fraud). In such cases, the consequences are complex, particularly with regard to third parties who may have acquired rights to the property in the meantime.

Reduction of registration: partial extinction

Sometimes a mortgage registration is deemed "excessive" in relation to the secured debt. In this case, it is possible to obtain not the total extinguishment of the mortgage, but a reduction in the amount of the mortgage. reduction. This may involve :

• The basis: if the mortgage encumbers several properties when a single property would be more than sufficient to guarantee the debt (article 2439 of the Civil Code). The debtor can ask the judge to limit the registration to certain properties only.
• The amount: if the registration was made for a lump sum (for an initially unspecified debt) which turns out to be greater than the actual debt, or if a significant part of the debt has been repaid and maintaining the registration for the initial amount becomes disproportionate.

The reduction, whether agreed by the creditor or ordered by the court, is a partial cancellation of the registration.

Extinguishing a mortgage and releasing a property from the encumbrances that encumber it are important steps that require precise procedures to be followed. If you have repaid a debt secured by a mortgage, or if you think that a mortgage should be extinguished for any other reason, it is advisable to ensure that the discharge and cancellation procedures are carried out correctly. We can help you with these formalities and ensure that your property is effectively released, our firm is at your service.

Sources

• Civil Code (in particular articles 1346, 2435, 2436, 2437, 2439 et seq., 2461, 2474)
• Insurance Code (in particular Article L121-13)
• Code of civil enforcement procedures (in particular article R. 322-65)