The Mortgage: Definition, Varieties and Legal Effects

The mortgage allows a creditor, who is not paid within the agreed period, to obtain the seizure of the immovable of his debtor to guarantee his payment, but under certain conditions.

We will consider the following:

a definition of the mortgage (1);

  • The different types of mortgages provided for by law (2);

  • The legal effects of mortgages (3).

1 – Definition of the mortgage

The mortgage allows a creditor, who is not paid within the agreed time, to obtain the seizure of the immovable, from his debtor to guarantee his payment.

The mortgage remains in full on all the buildings affected by it, on each portion of these buildings and even their improvements, until the debt is paid.

Only:

1) Immovable property which is in commerce, and its accessories deemed immovable;

2) Usufruct of the same goods and accessories during the period of its term.

2 – The different mortgages

Articles 2394 and following of the Civil Code lay down a number of legal conditions for the validity of the mortgage.

Thus, the mortgage can only take place in the cases and in the forms authorized by law.

The Act provides for three distinct classes of mortgages:

  • The legal hypothec resulting from the law, it is by right without necessary legal action (2.1);

  • The judicial mortgage resulting from the judgments must be sought from a judge and obtained by a judicial decision (2.2);

  • The contractual mortgage which results from the agreements, it, therefore, presupposes an agreement of will between the parties and to be formalized in a special agreement (2.3).

2.1 – The legal mortgage

Except in the case of participation in the acquisitions, and although it is of right, the legal mortgage can be registered only by the intervention of justice.

The recipient of a legal mortgage may:

register its interest in all the buildings currently owned by its debtor;

take the additional entries on the buildings subsequently entered in the assets of its debtor.

The legal mortgage can only be realized for certain rights and claims:

1) those of one spouse, on the property of the other;

2) Those of minors or adults in guardianship, on the property of the guardian or legal administrator;

3) those of the State, departments, municipalities, and public institutions, on the assets of the receivers and accounting administrators;

4) those of the legatee, in respect of the property of the estate, pursuant to Article 1017 of the Civil Code which provides that the heirs of the testator, or other debtors of a bequest, will be personally obliged to pay it, each in proportion to their share and portion of the estate and, hypothecary for the entire estate, up to the value of the estate they hold. ;

5) Preferential claims on the generality of furniture;

2) Funeral expenses;

3) Any costs of the last disease, whatever the termination, concurrently with those to whom they are due;

5) Supplies of subsistence made to the debtor and his family during the last year and, during the same period, products delivered by an agricultural producer under an approved long-term interbranch agreement, and the amounts due by any contractor of an agricultural operator under an approved standard contract.

6) The claim of the victim of the accident or of his dependents relating to medical, pharmaceutical and funeral expenses, as well as to compensation awarded following the temporary incapacity for work;

7) Allowances payable to manual and non-manual workers by compensation funds and other institutions authorized for the provision of family allowances or by employers exempted from membership of such an institution by virtue of the article 74 f of Book I of the Labour Code;

8) Claims of compensation funds and other institutions authorized for the service of family allowances in respect of their members, in respect of contributions paid by them-The Commission has undertaken to pay them for the payment of family allowances and for the equalization of the costs resulting from the payment of such benefits.

2.2 – The Mortgage

The mortgage is the result of:

  • either contradictory or by default, final or provisional, in favor of the person who obtained them.

  • arbitral awards with the judicial order for enforcement

  • judicial decisions rendered in foreign countries and declared enforceable by a French court.

A creditor who benefits from a mortgage may:

  • register its interest in all the buildings currently owned by its debtor;

  • take additional entries on the buildings subsequently entered in the assets of its debtor.

2.3 – The conventional mortgage

The conventional mortgage may be granted only:

– by notarial deed declaring, in particular, the cause of the mortgage but also the

the nature and circumstances of each property on which the mortgage is made.

  • by those who have the capacity to dispose of the property, they are submitting to it.

  • for one or more claims, present or future. If they are future, they must be determinable.

  • for capital, up to a fixed amount, which the notarial deed mentions with a penalty of nullity.

  • on buildings present except in the following cases and conditions:

1) A person who does not own real property present and free or who does not possess it in sufficient quantity for the security of the debt may agree that each of those he subsequently acquires will be allocated to the payment of the debt-ci as they are acquired;

2) The person whose immovable subject to the mortgage has perished or suffered damage such that it has become insufficient for the security of the debt may likewise do so, without prejudice to the right of the creditor to continue repayment immediately;

3) Anyone who possesses an existing right allowing him to build for his own benefit on the funds of others may mortgage the buildings whose construction has begun or simply projected; in the event of their destruction, the mortgage shall be automatically deferred on new buildings constructed at the same location. for one or more claims, present or future. If they are future, they must be determinable.

Thus, those who have on the immovable only a right suspended by a condition, or resolvable in certain cases, or subject to rescission, can only grant a mortgage subject to the same conditions or to the same rescission.

The property of minors, of minors in guardianship, and those of absent persons, as long as possession is referred only provisionally, can be mortgaged only for the causes and in the forms established by law, or by virtue of judgments.

In the case of undivided ownership of immovable property, the mortgage retains its effect regardless of the outcome of the division if it has been granted by all the undivided co-owners. Otherwise, it shall retain its effect only to the extent that the undivided co-owner who granted it is when the undivided immovable or immovable or immovable is divided, or, where the immovable is lawful to a third party, if the interest holder is allotted the price of the license.

A mortgage of a share in one or more undivided immovable property shall retain its effect only to the extent that the undivided co-owner who granted it is, at the time of the division, allotted to the undivided immovable or immovables; it then retains it to the full extent of the allotment without being limited to the share that belonged to the undivided interest holder who granted it; where the immovable is lawful to a third party, it shall also retain it if that co-owner is allotted the price of the licitation.

Contracts entered into in a foreign country may not give a mortgage on the goods of France, unless there are provisions contrary to this principle in the political laws or in the treaties.

The mortgage may subsequently be used to secure claims other than those mentioned in the instrument of incorporation provided that the instrument expressly provides for it.

The reload agreement which he enters into, either with the original creditor or with the new creditor, shall take the notarized form.

It must be published barely inoperable to third parties.

Its publication determines, among them, the rank of creditors registered on the rechargeable mortgage.

These provisions are of public policy and any clause to the contrary is deemed to be unwritten.

The mortgage shall automatically extend to interest and other collateral.

The mortgage is transferred automatically with the secured claim.

3 – The legal effects of mortgages

Unless the mortgagee proceeds with the sale of the mortgaged property in accordance with the terms of the Civil Enforcement Laws, which cannot be waived by the mortgage agreement, the unpaid mortgagee may:

apply in court for payment of the immovable, unless the immovable is the principal residence of the debtor.

enter into a mortgage agreement under which he will become the owner of the mortgaged real property unless the immovable is the principal residence of the debtor.

In these two cases, the building must be assessed by an expert appointed amicably or judicially.

If its value exceeds the amount of the secured debt, the creditor owes the debtor an amount equal to the difference; if there are other mortgage creditors, he shall record it.

The mortgage follows the property in a few hands that it passes, to be paid according to the order of their claims or registrations.

If the third-party holder does not fulfill the formalities which will be established below to purge his property, he shall remain, by the effect only of the registrations, obliged as the holder, to all mortgage debts, and enjoys the terms and time granted to the original debtor.

The third-party holder shall, in the same case, be required to pay all interest and capital payable,

  • no matter how much they can raise, or abandon the mortgaged building, without reservation.

If the third-party holder fails to fulfill one of these obligations, each creditor holding a resale right to the immovable shall have the right to continue the seizure and sale of the immovable under the conditions legally provided for that purpose.