The term "mortgage" was introduced in Greece three centuries BC. It meant that the debtor was liable to the creditor with his own land. In domestic law, such a concept appeared in the early 90s of the last century. In modern Russia, the relations arising in connection with mortgages are regulated by the law "On mortgages (pledges of real estate)" as amended on November 25, 2017.
Mortgage in simple words
Another name for mortgages is real estate collateral. This is the name of the way by which obligations are secured, when the debtor gives the creditor an advantage in satisfying his claims from the value of the pledge, which becomes the real estate. In the system of these relations, the debtor acts as the pledger, and the creditor as the pledgee.
In the most general case, a mortgage can serve as security for various types of monetary obligations. At the same time, it is assumed that obligations may already exist at the time of the conclusion of the mortgage agreement, or may arise in the future. Currently, mortgage has developed in the field of providing loans and credits to citizens.
A mortgage can arise both by virtue of the law and under a mortgage agreement. By virtue of the law, a pledge arises when a transaction for the sale and purchase of real estate is made without the buyer paying for it in full. In this case, the seller acts as the mortgagee, and the buyer acts as the mortgagor. A mortgage under a contract involves a written transaction between two or even more parties. Under such an agreement, the owner or the person who legally carries out the economic management of the object becomes the pledger.
Basic provisions of the law on mortgages of real estate
The Law on Mortgages establishes that the parties who enter into a legal relationship conclude an appropriate agreement with each other. Under the terms of this document, one of the parties (the obligee of the obligation) has the right to satisfy its monetary claims. Their source is the cost of the object being the subject of the pledge. The contract is signed in relation to the property owned and used by the debtor.
The above agreement gives rise to a legal relationship on a mortgage, to which the principles of collateral are applied. Since the turnover of enterprises, apartments, structures, land plots is allowed by law, a pledge is possible in relation to these objects.
It is possible to establish a mortgage in order to ensure the fulfillment of the terms of the loan agreement or loan agreement. The obligation can proceed from the facts of purchase and sale, contract, lease or damage.
The law on mortgage (pledge) introduces the need for accounting for both the debtor and the creditor, if they are legal entities.
The subject of the agreement must ensure the payment of the principal debt either in full or in the part determined by the agreement of the parties. By concluding a deal, the parties to the agreement can make a condition on the payment of interest. The law establishes the possibility of payment of claims in the form of a lump sum; it cannot exceed the obligations under the contract.
The law provides for other payments, which include:
- compensation for damage;
- penalty;
- a fine in case of violation of the terms of the contract;
- reimbursement of legal costs;
- compensation of costs for the implementation of the object.
It happens that the creditor, wishing to preserve the integrity of the property, is forced to spend money on its full maintenance and protection. In this case, he is entitled to reimbursement of costs due to the mortgaged real estate.
The categories of objects that can become the subject of an agreement are determined by the law on mortgages. In accordance with civil law, the property that is registered in accordance with the established procedure can be pledged under a mortgage agreement.
Subject of the mortgage agreement
The subject of a mortgage agreement may be:
- land plots;
- buildings, structures, enterprises, other capital construction objects;
- residential buildings, apartments, as well as their parts, which are isolated rooms;
- garages, summer cottages, garden houses, other consumer buildings;
- aircraft, ships and space objects.
In some cases, the law on mortgages makes it possible to consider residential buildings that are directly related to the land plot as the subject of the contract. If there is no registration for plots, the state ownership of which is not divided, this cannot be an obstacle to the formation of mortgage legal relations.
According to the Civil Code and the law on mortgages, the thing that is the subject of the contract, as well as its accessories, are a single whole. Therefore, the accessories become part of the general pledge, unless otherwise established by agreement of the parties. A thing that cannot be divided without changing its main purpose cannot be an independent subject of a transaction.
The requirement to the mortgagor is that the property that is the subject of the contract must be in his ownership or at least in the economic jurisdiction. If the object is withdrawn from circulation or a claim can be levied on it, the security of claims with such property is not allowed. The same point concerns property in respect of which privatization cannot be carried out.
According to the law on mortgage, the subject of the contract may be the right to lease, if there is the consent of the lessor or the person who uses the object under the right of economic management.
A mortgage on property that is in common joint ownership at the time of the conclusion of the agreement can be established if there is consent to this on the part of all legal owners. Such consent must be in writing. In the case of shared ownership, the person has the right to mortgage the property belonging to him without asking the consent of other co-owners.
Contents of the mortgage agreement
The pledge agreement should indicate:
- the subject of the mortgage agreement;
- assessment of such a subject;
- the essence of the agreement;
- the amount of performance of the obligation and its term.
The mortgage agreement is concluded in accordance with the general rules and principles of civil law. The document must contain information about the subject of the agreement, its assessment, and other significant points in the fulfillment of obligations. The parties may include specific conditions in the document providing for the possibility of levying foreclosure on the property. This information is allowed to be issued in the form of a separate agreement.
The mortgage agreement contains the name of the object and the place in which it is located. The description provided in the document must be sufficient to identify the object. The right on the basis of which the object belongs to the lender is also spelled out in the document. If the subject is a lease, it is required to indicate its term.
The assessment of the subject of the contract is determined by the agreement worked out by its parties and is given in monetary terms. Assessment of an object of construction in progress is carried out at its market value.
Some features of the mortgage
The obligation that is secured by the mortgage is indicated in the contract together with the basis for its occurrence and the period for which it is established. The agreement may provide that the amount of monetary obligations will be established later; in this case, it is necessary to prescribe the conditions for determining the amount of obligations.
If, by agreement of the parties, the claims can be partially implemented, the terms and frequency of payments must be entered into the contract. If a specific size of the amount of payments is not established, it is necessary to prescribe the conditions for their determination.
The mortgage is subject to mandatory state registration. It becomes effective only from the moment an entry is made in the relevant state register. In the extract from the register, the entry on the pledge of real estate is reflected in the form of encumbrances of the owner's rights to this or that property.
A special case of real estate mortgage is a mortgage on an apartment. This form of pledge became widespread after the start of government programs aimed at supporting those citizens who purchase housing. Under a mortgage agreement of this type, the mortgagor pledges the apartment in order to thereby ensure the financial obligations assumed. The mortgage agreement for the apartment is signed by the lender and the owner of the apartment. Registration of the contract is made within a period that does not exceed five working days.
Insurance upon concluding a mortgage agreement
The creditor is vitally interested in the fact that the property received by him as a pledge was safe until the debtor fully fulfills his financial obligations. Therefore, the law provides for insurance of the subject of the mortgage against possible risks of damage or loss. Such insurance is compulsory. Banks often create their own insurance companies, which insure the objects of the mortgage agreement. These structures sometimes offer additional types of services to borrowers, which objectively leads to an increase in overall costs and increases the cost of a loan service.
