For the past several years, weaknesses of the current Law on Mortgages were evident in practice, so when changes within this matter were announced, they received a positive feedback from the legal public.
During the application of the Law to this date, we were faced countless times with the lack of logic and precision and often with the lack of any legal context for certain important institutes related to mortgages and their execution.
We expect that amendments to the Law, and particularly its future implementation by the competent bodies, will bring to the table solutions and clarifications, which will in consequence – hopefully – contribute to a greater legal certainty in this domain and, most of all, efficiency of this important security instrument.
(i) The first novelty is introducing the option for the mortgage creditor to designate a third person in order to undertake legal actions for the purpose of protecting and collecting the receivables secured by the mortgage. This solution should facilitate the position of the mortgage creditor by designating a qualified person that would take all necessary actions on its behalf.
(ii) Also a new point is that the consent of the lessee or third persons having certain derived rights over the real estate is no longer a pre-condition for recognizing a mortgage agreement or pledge statement as enforceable title. This is a particularly significant amendment, considering that the “pretending” lessees, which appeared often in practice, significantly impeded the execution of mortgages to the detriment of the position of mortgage creditors. With the same intention of easing the position of mortgage creditors, the legislator also regulated future registration of unilateral mortgage based on the pledge statement in a way to be performed on creditor’s application, unlike the previous solution – where registration was possible at the request of the real estate owner too, which enabled various abuses in case of unilateral mortgage registration.
(iii) Also a note of a great practical importance is that a new mandatory element of the real estate purchase agreement is the appendix of that agreement which needs to envisage the allocation of funds to the creditors (upon execution of the mortgage).
(iv) In terms of execution of the mortgage, several novelties were introduced and the most important ones are the following: (i) request for annotation of the mortgage sale may be filed by each mortgage creditor regardless of preferential right order; (ii) decision on annotation of the mortgage sale encompasses restraint of disposal of any kind for the owners, and not only of disposal of ownership; (iii) act of disposal of ownership or any kind of disposal of mortgaged property by the owner is null and void. These explicit legislative solutions completely eliminate the possibility of different interpretations of the provisions that used to govern this matter.
(v) On the other hand, the law also sought to protect the interests of debtors, so, before the moment of announcement of auction sale, mortgaged real estate may not be sold by way of direct bargain for less than 90% of the estimated value. Repeated sale by way direct bargain is allowed in case the real estate remained unsold during the first auction provided that the price is not lower than 60% of the estimated value. If the mortgaged property remains unsold in the out of court mortgage sale proceedings within the period of 18 months from the date of the decision on annotation of the mortgage sale became final and binding, the real estate registry shall delete the annotation ex officio, hence the creditors could afterwards be settled only in court sale proceedings only. However, if the real estate was sold, all registered mortgages ceases to exist ex lege regardless of whether the claim (or claims) is fully settled. In that way a new owner acquires a fully disburdened real estate, which is an important motivation for potential buyers.
(vi) The legislator sought to regulate certain ambiguities of the previous version of the Law, so it defined what is considered as debit interest encompassed by mortgage claim. It is proscribed that if the debit interest is not registered, the mortgage would encompass only statutory debit interest from the time of default. Also, the form (of notary public record) and contents of mortgage agreement, i.e. pledge statement on unilateral mortgage, was defined in order to receive the force of enforcement title, basis on which the mortgagee creditor having registered extrajudicial executive mortgage could realize its claims through judicial or extrajudicial way.
Finally, let us point out that the „Central mortgage evidence“, for which existence was no longer a need, is terminated, although many would agree that its existence was never necessary in the first place.
Amendments to the Law entered into force on 16 July 2015.