Mortgage – Lien on Real Estate

A mortgage, or lien on real estate, is a type of security right established over real estate that is not handed over to the creditor's possession, nor does it entitle the creditor to hold it as a pledge. This is precisely what is specific and essential about a mortgage: unlike a pledge or pignus, with a mortgage the property remains in the possession of the owner/debtor, rather than passing into the creditor's possession as with a pignus.

What Types of Mortgage Are There?

There are voluntary mortgages and compulsory court-ordered mortgages.

Compulsory Court-Ordered Mortgage

The legal basis on which a compulsory court-ordered mortgage rests is crucial. Such a lien is established in proceedings to secure monetary claims, based on a motion by the applicant for security, who asks the court to issue a decision securing the claim by establishing a mortgage over the real estate of the opposing party.

Voluntary Mortgage

The other type of mortgage is the voluntary mortgage, or voluntary lien, which in practice is most commonly used when individuals and banks conclude loan agreements.

How Does a Creditor Acquire a Mortgage Lien?

Generally, a creditor acquires a mortgage lien by registration in the land registry. On the basis of a valid mortgage agreement, registration in the land registry is requested, and the mortgage is entered by registration as an encumbrance on the property.

Where Can a Mortgage Lien Be Seen as an Encumbrance?

Since the property encumbered by a mortgage remains in the debtor's possession and does not pass to the creditor, the land registry is the only place where the existence of a mortgage as an encumbrance is visible. The mortgage is tied to the property, so when the property is transferred, it is transferred to the acquirer together with the mortgage. This is why the principle of reliance on the land registry is important, as what is entered in it is deemed to be true. Registration of the mortgage is essential because the land registry is public, so anyone buying a property can check whether it has any encumbrances registered in the land registry folio.

In the land registry, a mortgage can be entered as an encumbrance on the whole registered property unit, on the ideal share of a co-owner, or on one of the component parts of that registered property unit. Since it is a type of security right, its primary purpose is to secure the satisfaction of a claim.

Mortgage Action

If a claim secured by a mortgage is not settled by the debtor, the creditor has the right, on the basis of the mortgage, to file a mortgage action for the enforced collection of the secured claim. The mortgaged property then serves primarily as a means of satisfying the creditor.