In today's article, as part of the series entitled "Tuesday Mornings for the Construction Industry," we continue the series of articles on the subject of mortgages, this time focusing on aspects related to their establishment, expiry, deletion, and disposal of the vacated mortgage space.
Last week ( #244 ) we introduced you to general issues related to mortgages, including the issue of what can be covered by them.
I. Establishing a mortgage
The entry of a mortgage is constitutive in nature, meaning it is necessary for its creation.
Furthermore, the effect of the entry occurs ex tunc, i.e., regardless of when the entry actually takes place, because it takes effect from the moment the application for entry is filed with the land and mortgage register court.
The basis for entering a mortgage in Section IV of the land and mortgage register may be an agreement/declaration on the establishment of a mortgage, a court decision (e.g. a decision on granting security) or another body and, in exceptional cases, a statute.
Mortgage registration is made upon application, and in special cases, the court may make an entry ex officio if a specific provision so provides. An application for registration may be submitted by a notary public via the IT system (if the mortgage is established during a notarial act) or on an official form, along with the documents constituting the basis for the entry in the land and mortgage register and confirmation of payment of the entry fee. The person authorized to submit such an application is the property owner, perpetual usufructuary, or mortgage creditor (if they have a right that may be entered in the land and mortgage register). If the mortgage encumbrance arises by operation of law, the application may be submitted by an authorized body. Additionally, a bailiff may submit an application for registration via the IT system.
After the entry is made, the court notifies the participants in the proceedings – i.e., the owner or perpetual usufructuary of the property and the entity in whose favor the mortgage was established. Within two weeks of service of the entry notification, each participant is entitled to file an appeal against the entry decision.
II. Expiration of the mortgage
A mortgage is extinguished when the claim secured by the mortgage expires, except for situations in which further secured claims may arise from a given legal relationship.
Expiration occurs as a result of, among other things, payment, set-off, renewal, depositing the subject of the performance in court deposit, performance in lieu of performance (datio in solutum).
It should be emphasized that a receivable may also be extinguished despite the creditor's interest not being satisfied. This occurs in cases such as contractual release from debt, termination or invalidation of the legal relationship by the parties or the court in cases provided for by law, evasion of the legal consequences of the declaration of intent that gave rise to the receivable, impossibility of performance due to circumstances for which the debtor is not responsible, the occurrence of an event specified in the legal act, or the death of one of the parties if the obligation is personal in nature.
If a mortgage expires, the creditor is obligated to take all necessary steps to remove it from the land and mortgage register. This means providing the debtor with appropriate documents, such as a declaration of consent to the removal of the mortgage, which constitutes the basis for removing the mortgage from the land and mortgage register.
III. Deletion of the mortgage
Deletion of a mortgage from the land and mortgage register can occur after the obligation has expired and is generally a technical matter. Submitting an application to delete a mortgage is the responsibility of the owner or perpetual usufructuary of the property, who should ensure that entries in the land and mortgage register are consistent with the actual legal status. The application is submitted to the district court that maintains the land and mortgage register for the encumbered property. The application must be accompanied by the creditor's consent to the deletion of the mortgage (the basis for deletion) and confirmation of payment of the mortgage deletion fee. Pursuant to Article 100 of the Act on Land and Mortgage Registers, if a mortgage is deleted, the creditor is obligated to take all necessary steps to enable the deletion of the mortgage from the land and mortgage register.
It is worth mentioning that the creditor’s consent to the deletion of the mortgage should include confirmation that:
- all receivables secured by a given mortgage have expired and no new claims covered by this security can arise in the future, or the given mortgage has expired,
- the creditor consents to its deletion from the land and mortgage register.
Consent to the deletion of a mortgage should be submitted at least in writing with a notarized signature, and in the case of banks it may be a declaration pursuant to Article 95 of the Banking Law.
If the creditor fails to cooperate, the property owner may bring an action against him to reconcile the legal status disclosed in the land and mortgage register with the actual legal status.
IV. Disposal of the vacated mortgage place
Disposal of a vacant mortgaged property encumbers the property owner or perpetual usufructuary to establish a new mortgage in place of an expired mortgage or to transfer another mortgage encumbering the property to that place (with the beneficiary's consent). This right also applies to the owner if the mortgage has only partially expired – in that case, the owner may dispose of the vacated property in that part where the mortgage has expired. It is important to remember that disposal of the property can only occur within the "limits of the expired mortgage," meaning that a mortgage can be established on the vacated mortgaged property for an amount no greater than the amount of the expired mortgage.
A mortgage established or transferred on a vacated mortgaged property has the same priority as an expired mortgage. This means that in the case of multiple creditors, despite the expiration of the mortgage in first place, the position of subsequent creditors will not change – i.e., they will not gain priority in satisfying their claims from the property. Therefore, in the case of multiple mortgagees, they should take care to safeguard this situation and exclude the owner or perpetual usufructuary's right to dispose of such a vacated mortgaged property.
In just one week, we will present you the subject and scope of mortgage security.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of March 17, 2025
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