Immovable property securities are the cornerstone of real estate lending for both individuals and businesses. Ordinance no. 2021-1192 of 15 September 2021 radically overhauled this essential area of security law, making structural changes including the outright abolition of special real estate liens, which stands out as the flagship measure. This reform, which came into force on 1 January 2022, is in response to a to modernise and simplify French mortgage lawwhich was regularly criticised for its complexity.
This legal upheaval, which is radically transforming the landscape of property guarantees, deserves to be analysed in detail to understand the practical issues involved and the consequences for the ownerscreditors and legal practitioners.
General provisions on property security interests
The same definition and classification
Article 2375 of the Civil Code, which replaces the former article 2373, maintains the tripartite classification of security interests in immovable property, which includes privileges, pledges on immovable property and mortgages. Added to this is real property retained or assigned as security.
However, this structural continuity masks profound changes in the very content of these securities, particularly in relation to real estate liens and mortgages.
Simplification for legal entities
Article 2326 of the Civil Code, which applies to both movable and immovable securities, considerably simplifies the creation of security interests by legal persons. From now on, a security interest may be created over the assets of a legal entity by virtue of powers resulting from deliberations or delegations drawn up under private signatures, even if the creation of the security interest requires a notarial deed.
This rule, previously limited to companies under the former article 1844-2 of the Civil Code (now repealed), has been extended to all legal entities under private law, including associations. This gives legal entities greater flexibility when creating mortgages, without the need for notarial powers.
The reform of real estate liens: generalisation
The disappearance of special real estate liens
The major innovation of the reform lies in the pure and simple abolition of the category of special liens on immovable property. Article 2376 of the Civil Code now states that real estate liens are general and exempt from the formality of registration.
- From the seller of the property
- From the lender
- The co-sharer
- Architects and contractors
- The syndicate of co-owners
These liens have not really disappeared, but have been transformed into special legal mortgages, as we shall see later.
The reasons for this removal
There are several reasons for transforming special real estate liens into legal mortgages:
- Simplifying property security law by reducing the number of legal categories
- Harmonising the system of property security interests subject to publicity
- Eliminate the retroactive effect of special liens, a source of legal uncertainty
In fact, since the reform of land registration by the decree of 4 January 1955, these liens were already subject to registration, like mortgages. There was therefore little practical justification for their status as liens.
General property liens: short list
Article 2377 of the Civil Code now lists the only preferential claims on most buildings:
- Legal costs (on condition that they have benefited the creditor against whom the lien is asserted)
- Remuneration and allowances due to employees, apprentices and other beneficiaries
This very short list contrasts with the previous abundance of liens on immovable property. Article 2378 specifies that these privileges are exercised in the order set out in article 2377 and that they take precedence over the preferential right attached to pledges on immovable property and mortgages.
Legal mortgages: extension of the scope of application
The 2021 reform has profoundly altered the scope of legal mortgages. These key changes have led to the transformation of many property liens into legal mortgages.
General legal mortgages
Article 2393 of the Civil Code sets out a list of general legal hypothecs, which is longer than that set out in the former Article 2400. In addition to those provided for by special laws, the claims to which a general legal hypothec is attached include
- Those of one spouse against the other
- Minors or adults under guardianship against the legal administrator or guardian
- Those of the State, départements, communes and public establishments against receivers and accounting administrators
- Those of the legatee, on the estate's immovables
- Funeral expenses
- Those that have been the subject of a judgment, against the debtor who has been convicted
- Those of the Treasury and Social Security Funds
Some of these legal mortgages are the subject of special provisions in the Civil Code, such as that of spouses (now limited to the regime of participation in acquests) or that of minors and adults under guardianship.
Reclassification of the "judicial" mortgage attached to judgments
An important clarification concerns the mortgage traditionally referred to as a "judicial" mortgage, attached to judgments of conviction. Article 2401 of the Civil Code now expressly describes it as a legal mortgage, which is its true legal nature.
In fact, this mortgage results directly from the law and not from a court decision specifically granting this guarantee. Only judicial conservatory mortgages, constituted as conservatory mortgages by court order, retain the status of judicial mortgages (article 2408 of the Civil Code).
Special legal mortgages: heirs to special privileges
Article 2402 of the Civil Code sets out the list of claims to which a special legal mortgage is attached. This list is a simplified version of the former special real estate liens:
- The claim to the sale price of a building is secured on the building itself
- The claim of the person who provided the funds for the acquisition of an immovable is secured on the immovable.
- The claims of the syndicate of co-owners are secured on the sold lot of the debtor co-owner.
- The claim of an heir or co-partitioner is secured on shared, donated or bequeathed property
- Claims against a deceased person and legacies are secured on the estate property
- The claim of the first-time buyer holding a home purchase lease contract is secured on the property covered by the contract.
- Certain claims by the State and local authorities relating to administrative police measures
The legal mortgage of the syndicate of co-owners has been significantly extended: it now covers "debts of all kinds" relating to the current year and the last four years in arrears, and not just the expenses and works listed exhaustively.
Conventional mortgages: modernisation and greater flexibility
Mortgage on future property: reversal of the principle
Article 2414 of the Civil Code introduces a radical change by stating that "a mortgage may be granted on present or future immovable property". This provision overturns the old principle that mortgages could only be granted on present immovable property, with mortgages on future property being permitted only in exceptional circumstances.
This important development brings the mortgage regime into line with that of other security interests, which can generally relate to future assets. In particular, it makes it easier to finance property projects under development.
However, the text imposes a strict formal condition: the notarial deed must specifically describe the nature and location of each of the future mortgaged properties.
The rechargeable mortgage: limited retention
The rechargeable mortgage, created in 2006, abolished in 2014 and then partially reinstated at the end of 2014, has seen its regime confirmed by article 2416 of the Civil Code. This security can be used to guarantee claims other than those mentioned in the deed, provided that they are business claims.
The ordinance has not followed the proposal of the Grimaldi Commission's preliminary draft, which suggested extending the rechargeable mortgage to all types of debt. Its use therefore remains limited to the professional world.
Extension of subrogation to accessories to the claim
Article 2390 of the Civil Code provides an important clarification: "The mortgage extends to the interest and accessories of the secured debt. This extension benefits the third party subrogated to the debt for the interest and other accessories due to him.
This provision puts an end to a controversy in case law by expressly stating that subrogation in the secured debt also entails subrogation in all ancillary items, in particular contractual interest. This clarification is particularly welcome in property loan refinancing transactions.
Rules governing the registration and effects of mortgages
Simplified registration rules
The rules governing the registration of mortgages are largely taken from previous provisions, with a few simplifications. Article 2434 of the Civil Code states that the registration preserves the mortgage for a period of ten years from the date of its publication.
The reform abolishes certain rules deemed too technical that were previously included in the Civil Code and are now dealt with at regulatory level.
Resale rights specified
Articles 2450 to 2460 of the Civil Code specify the effects of the resale right attached to the mortgage. Article 2455 expressly recognises the right of the third party purchaser to raise against the creditor all defences that belong to the principal debtor.
This clarification is important because it puts an end to a controversy in the case law regarding the scope of the defences that can be raised by a third party purchaser of a mortgaged property.
The simplified purging procedure
The procedure for purging mortgages, which allows a third-party purchaser to release the property from the mortgages that encumber it by offering to pay the purchase price, has been simplified. Articles 2461 to 2472 of the Civil Code reorganise the old provisions in a more logical order.
Article 2472 innovates by extending the purge procedure to pledges on immovable property by destination. This extension was necessary to take account of the possibility, now recognised, of creating a pledge over such property (article 2334 of the Civil Code).
A considerable practical impact for professionals and private individuals alike
This unprecedented reform of property security will considerably alter the practices of legal and property professionals.
For notaries, this means adapting their deed formulas and advice, particularly in relation to property sales and mortgages. The disappearance of special privileges in favour of special legal mortgages certainly simplifies legal concepts, but requires practices to be updated.
For banking institutions, the reform provides welcome clarification, particularly with regard to the transfer of security interests in the event of subrogation. The reversal of the principle prohibiting mortgages on future property also opens up new prospects for the financing of property projects.
For private and business property owners, the reform enhances legal certainty by removing the retroactive effect attached to the former special liens. It also makes it easier to understand the mechanisms of real estate guarantees.
This reform is not simply a technical touch-up, but a genuine overhaul of property security law, combining conceptual simplification and greater legal certainty, while preserving the effectiveness of guarantees.
For an in-depth analysis of the impact of this reform on your existing real estate guarantees or to set up new guarantees tailored to your needs, our firm is at your disposal. Contact us for a personal advice on mortgages which will take into account the specific features of your asset situation or your professional activity.
Sources
- Civil Code, articles 2375 to 2474 (reformed by Order no. 2021-1192 of 15 September 2021)
- Order no. 2021-1192 of 15 September 2021 reforming the law on securities
- Decree no. 55-22 of 4 January 1955 reforming land registration
EN 
FR