Mortgages dominate the real estate security landscape. This security, which does not dispossess the debtor, offers the creditor effective protection. For the owner of the encumbered property, it involves a series of specific rights and obligations that are essential to know.
Definition and characteristics
A mortgage is an accessory real right over an immovable. It confers two essential attributes on the creditor:
- a preferential right: to be paid before other creditors on the sale price of the property
- a right of resale: to seize the property wherever it is located
Three main characteristics define it: it is indivisible, accessory to the secured claim and must be published to be enforceable against third parties. A good understanding of these aspects is essential for setting up and registering a mortgage validly.
The three types of mortgage
Conventional mortgage
Resulting from an agreement between creditor and debtor, it requires a notarial deed. It is special - relating to one or more specific properties - and must state the nature and amount of the secured claim.
Preferred area: long-term property loans.
Legal mortgage
Arises directly from the law. There are two categories:
- General legal mortgages: encumber all of the debtor's real estate (e.g. mortgages of minors on their guardian's property).
- Special legal mortgages: since 2021, these have replaced the former special real estate liens (e.g. vendor's mortgage on real estate).
Judicial conservatory mortgage
Authorised by the judge when a claim appears to be well-founded and its recovery appears to be in jeopardy. It allows a provisional mortgage to be registered even before a judgement is handed down.
The 2006 and 2021 reforms
The Order of 23 March 2006 modernised the law on securities by creating a dedicated Book IV in the Civil Code. For mortgages, it :
- relaxed the conditions for incorporation
- introduces new mechanisms (rechargeable mortgage, life mortgage)
- authorised the guarantee of future receivables
The Ordinance of 15 September 2021 transformed special real estate liens into special legal mortgages, simplifying the real estate security system.
New mortgage mechanisms
Rechargeable mortgage
A major innovation in 2006, it allows an existing mortgage to be reused to secure new debts, without having to go back to the notary. The advantage: you save the cost of registering a new mortgage.
Its practical success remains limited.
Life mortgage
Allows elderly people to borrow by guaranteeing repayment through a mortgage on their home, with no periodic repayments. The capital and interest are repaid on the death of the borrower through the sale of the property.
Implementation and realisation
If the debtor defaults, the creditor has several options for enforcing its guarantees, in particular its Preferential and subsequent rightsand can :
- Seizing the property and having it sold at auction
- Applying for judicial allocation of the property
- Implement a commissory agreement (contractual allocation provided for at the time of incorporation)
The mortgage therefore remains the central instrument in property lending, despite competition from bank guarantees and property leasing. If you have any questions or require assistance with this complex guarantee, please do not hesitate to contact consult a lawyer specialising in mortgages.
Sources
- Civil Code, articles 2385 to 2451
- Order no. 2006-346 of 23 March 2006 on securities
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
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