Vacant Land Mortgage

There is now only one kind of mortgage that is similar to the former covered mortgage. According to the new rules, a mortgage will secure a monetary debt, up to a certain amount, even if it includes a prospective debt. A new mortgage will secure the interest, legal and execution costs and all other ancillary or collateral costs within this upper ceiling if they are specified in the mortgage registration deeds.

Previous rules did not provide for the 'splitting' of a mortgage. As a rule, in practical terms, when part of a debt guaranteed by a mortgage was transferred, previous mortgage loans were usually scaled back in favor of the cedant and new mortgage loans were created in favor of the assignors. Amendments to the mortgage creditor's right to divide a mortgage after having notified the owners of the property mortgaged with the mortgage with effect from the date of registration in the Registry.

In this context, it is essential that the approval of the mortgage borrower or other lower ranking creditor is not necessary. Furthermore, in the case of a mortgage which secures more than one debt, the cession of a debt leads to the automated splitting of that mortgage and to the cession of that mortgage in proportion to the value of the ceded debt in proportion to all the debts guaranteed by the mortgage before the splitting, unless the shares are otherwise specified in the contract.

Before the change, the landlord of an encumbered real estate could not require that the value of a mortgage be capped if the amount of the mortgage was too high. Furthermore, a mortgage borrower was not entitled to have a mortgage deleted from the registry if it was created to safeguard a prospective receivable and the prospective receivable never arose, regardless of whether that prospective receivable could or could not arise at that time.

This change makes new receivables available to the mortgage borrower and thus strengthens his standing vis-à-vis the mortgagee. First, the mortgage borrower is now authorised to demand a mortgage repayment if the burden is excessively high. Second, a mortgage borrower is eligible for remission of the mortgage if, ten years after its creation, no right to security has arisen with this mortgage.

Until now, when a mortgage expired, lower ranking mortgage loans were given higher rank. Recently created mortgage loans have always had a lower precedence than those previously created, unless the mortgage holders agreed to change the current precedence. It introduces a mechanism allowing a mortgage borrower to have a free mortgage exposure (as a consequence of its expiration or due to being reduced by the court).

When a mortgage that has previously encumbered a property expires, the borrower can set up a new mortgage with the same precedence or transfer a mortgage with a lower precedence to this one. They may also retain the right to later enjoy the free mortgage credit status if the booking is recorded in the Registry at the same moment as the cancellation of the mortgage.

Covered mortgage loans created on the basis of applications for registration of mortgage loans submitted prior to the entry into effect of the change are also subject to the new rules, with the exception of rules on the sale of free mortgage exposures.