Mortgage by force of law: what it is, features. Mortgage by force of law: what it is, features and requirements Mortgage by force of law in the certificate

From a legal point of view, a mortgage is a pledge of real estate. The property pledged as collateral serves to secure the borrower's obligations to the lender and, in case of failure to fulfill them, the lender will have the right to sell it and use the money received to repay the loan issued to the borrower. Existing legislation provides for two types of grounds for the emergence of a mortgage:

• Mortgage by operation of law;
• Mortgage by virtue of an agreement.

Mortgage by force of law.

A situation in which a mortgage arises not as a result of a special agreement between the parties on collateral, but upon the occurrence of facts determined by law, is a mortgage by force of law, or legal mortgage. The main cases in which a mortgage arises by force of law include:

• Purchasing a house, apartment, land using bank loans;
• Construction of a house using bank loans;
• A situation in which the seller of real estate simultaneously acts as a lender, providing a loan or installment plan to his buyer.

Example: The borrower purchases an apartment using loan funds received from the bank. Since the purchase is made using borrowed funds, its registration is carried out by concluding a so-called “agreement for the sale and purchase of an apartment using borrowed funds.” After state registration of such an agreement, the borrower becomes the owner, but the apartment is automatically considered to be pledged to the bank, and the certificate of ownership of such an apartment in the “Restrictions” column will contain the entry “Pledge by force of law.”

Mortgage by virtue of an agreement.

The basis for the emergence of a contractual mortgage is the conclusion by the parties of a real estate pledge agreement. Such an agreement is concluded simultaneously with the loan agreement and is not an independent obligation. A distinctive feature of a mortgage by virtue of an agreement is that a mandatory condition for granting a loan is the pledge of real estate already owned by the borrower. If with a mortgage, by virtue of the law, the loan is targeted and can only be used to purchase real estate, then with a contractual mortgage, the borrower has the right to spend the loan at his own discretion.

Example: A citizen owns an apartment and wants to get a loan for a large amount, which he subsequently plans to use to purchase expensive equipment. In this case, to obtain a loan, he needs to contact the bank, where, in parallel with the loan agreement, a mortgage agreement will be signed, according to which the apartment will be pledged to the bank.

In most cases, borrowers resort to a mortgage loan precisely for the purpose of purchasing real estate, which will subsequently act as collateral in the bank, and therefore, mortgages have become more widespread by force of law.

Transactions related to the purchase and sale of real estate have recently been increasingly processed through a bank using a mortgage loan. Favorable interest rates, minimal processing times, the possibility of using a maternity certificate and government subsidy programs make them more accessible. Those who encounter banking services for the first time, when they come to a branch, hear many new terms and expressions. One of them is a mortgage by operation of law. What it is is not immediately clear. Therefore, it is worth considering this issue separately so that the parties to the transaction have an understanding and awareness of what is happening.

Designation of mortgage by operation of law

In the Civil Code and Federal Law of the Russian Federation No. 102 “On Mortgage”, the legislator has established a definition of what it is - a mortgage by force of law. This type of lending always implies the presence of an encumbrance, or it is also commonly called property collateral. The most common way to register real estate transactions is through the use of bank funds. This is how a mortgage arises. The most reliable option is to register it by force of law, since the borrower will not be able to challenge ownership due to the guaranteed presence of an encumbrance.

As soon as the right to real estate is registered in the Unified State Register of Rights, we can talk about the emergence of obligations of this type of mortgage. Ownership rights are formed through the execution of a rent agreement, purchase and sale agreement, and pledge of property rights.

Design features

Most clients first get approved for a mortgage loan and only then start looking for a suitable property. Having decided, they sign a loan agreement and only then about the purchase and sale. As soon as the state registration of the mortgage has occurred by virtue of the law, the bank transfers the loan funds to the address of the real estate seller. Thus, clients cannot choose in what form the mortgage will be taken out. If we are talking about buying real estate using borrowed funds, the mortgage will automatically be considered issued by law.

Documentarily, the borrower becomes the owner of the property, but since it is purchased with borrowed funds, it also becomes collateral. The borrower can spend the funds received only on the purchase of real estate, which is subsequently transferred as collateral to the credit institution. Cash use of credit money is not provided.

Reasons for registration

The following types of real estate that can be purchased under a mortgage are established at the legislative level: an apartment on the secondary market or a new building, a room, a plot of land, a house (cottage, mansion), garage, cooperative, industrial premises. If one of them is purchased using part of bank funds, then a mortgage arises by force of law. This includes the case where real estate is purchased in installments.

It can also be provided when drawing up a rental agreement or for building a house. When constructing a structure or building on a land plot that is encumbered by a credit institution, the mortgage will apply to these objects as well. An exception may be the rules specified in the mortgage agreement.

Responsibilities and rights of the borrower

Once a mortgage is issued, by operation of law, the mortgage must be retained in the same form in which it was originally transferred. The borrower's liability also extends to cases of damage or loss of integrity of the property. If one of these points occurs, the lender must be notified.

In the case where the subject of the mortgage is a country house, the borrower has the right to develop the area around it with any buildings that do not contradict the law. To do this, he does not need to obtain the approval or consent of the bank.

If the parameters of a mortgage loan provide for the possibility of transferring the pledged property to a third party, then that person becomes the mortgagor and is responsible for fulfilling the terms of the mortgage agreement. This may also include obligations that were violated by the previous owner.

Registration of rights

Having decided what a mortgage is by law, you need to understand how the registration procedure occurs. Each case that is associated with a change in ownership is subject to state registration in the Unified State Register of Rights. Before completing a transaction, it is necessary to determine whether the object is encumbered by third parties. You can check the information through the online services of the Unified State Register or MFC by contacting Rosreestr.

To proceed with the registration process, you must take the following steps:

• Obtain approval for a loan from the bank, draw up a purchase and sale agreement.
• Provide these documents to the government agency, as well as the mortgage for registration.

Registration is carried out within 5 working days. If we talk about real estate objects such as a land plot, non-residential premises, structures, buildings, then Russian legislation provides for a period of 15 working days.

Documenting

Official confirmation that the property is encumbered is a mortgage. As a rule, after registering a mortgage by law, it is formalized by a bank employee. However, there are also cases when the mortgage is drawn up by a notary.

Since the property is encumbered, it cannot be sold without obtaining bank approval. In the certificate of registration of rights, in the “Encumbrance” section, a note must be made that the object was purchased using loan funds. As soon as all the debt is repaid and the obligations to the bank are fully fulfilled, the registrar will affix a cancellation stamp on the certificate of ownership. There is no state fee for this procedure; the law provides for a three-day period for carrying out this procedure.

Without the written consent of the mortgagee, it is impossible to seize or alienate real estate taken on a mortgage.

Is it possible to replace it with a mortgage by virtue of an agreement?

To understand what it is - a mortgage by force of law, it is necessary to distinguish its other type - a mortgage by force of contract. It is possible when completing a transaction with a property that the future borrower already owns, which he transfers as collateral. It is also possible that the borrower receives loan funds, registers ownership and only then transfers the property as collateral to the bank. Without registration as collateral, a mortgage by virtue of an agreement is also possible, in which case an encumbrance does not arise.

This direction has certain risks, since there is a possibility that the funds issued will not be returned. It is impossible to determine the type of mortgage on your own. It follows from the subject of the mortgage and the method of disposing of the funds received.

Briefly about the differences between the two forms of mortgage

To summarize the differences, it would look like this:

• Registration procedure: a mortgage, by virtue of the agreement, must be registered separately, and the documents must be submitted to the Unified State Register of Real Estate together with the mortgagor and the mortgagee. When drawing up a mortgage agreement, by force of law, the registration process occurs simultaneously with the registration of rights in the Unified State Register by the new owner. The pledgee and the pledgor may submit documents to the government agency separately.
• Registration of a mortgage by law implies the intended use of funds, in which the purchased property automatically becomes collateral. Under a contractual mortgage, there may not be any collateral, but the owner’s real estate may act as an encumbrance.
• The process of registering a mortgage by force of law does not provide for the need to pay a state fee, which cannot be said in its contractual form.

Change of holder or termination of the mortgage

In the event that a mortgage of property is issued by virtue of law, but the borrower does not fulfill his obligations, the mortgage may be transferred to the lender for sale. As soon as the obligations under the mortgage loan agreement are fulfilled, the debt is repaid, it (the mortgage) ceases to be valid. We can safely talk about removing the mortgage by force of law.

At the legislative level, it is possible to change the holder of a mortgage, for example, when selling it or refinancing a mortgage loan. If the owner of the certificate needs that there are no credit marks in the “Encumbrance” field, then he will need to issue a new certificate. To obtain it, the owner pays a state fee of 200 rubles.

Terms of consideration and necessary documents for removal of encumbrance

The maximum period during which state registration of the removal of the encumbrance takes place is three days. To carry out the procedure, you must provide the following documents:

• An application from the mortgagor with attached documents indicating full fulfillment of obligations under the mortgage.
• The mortgage holder's application is usually made on behalf of the bank.
• If the termination of obligations under the mortgage was made on the basis of a court decision, then it must also be provided.

The application can be submitted jointly by the property owner and the bank. In most cases, after full fulfillment of obligations, the client (former borrower) himself turns to the government agency. It is noteworthy that he can receive a mortgage by signing an acceptance certificate at the bank branch where the mortgage loan was issued. You will also need a certificate of absence of debt indicating the date when the mortgage agreement was closed.

If the bank is large, then it can independently remove the encumbrance after the borrower fulfills his mortgage obligations.

Each of us has heard the word mortgage; it means a pledge of real estate, which acts as collateral under a credit agreement, loan agreement or other obligations. Its essence is that the collateral becomes the property of the lender if the borrower violates the terms of loan repayment and fails to fulfill his loan obligations. There are two concepts of mortgage by force of law and by force of contract. By the way, the relationship between the mortgagor and the mortgagee is regulated in our country by the Federal Law on Mortgage (Pledge). Therefore, let’s look at the differences between a mortgage by force of law and by force of contract.

What does mortgage mean?

First, let's answer the question of what a mortgage is in general. As mentioned earlier, this is a type of collateral. Or, in simple words, the surrender of real estate as security to a lender for a cash loan. This term refers to any type of real estate that is registered in the Unified State Register of Rights. These include:

• apartment;
• room;
• garage;
• land plot;
• industrial premises;
• commercial real estate.

In simple terms, this term means collateral of real estate for a cash loan. Despite the fact that the collateral is at the disposal of the borrower, he cannot fully own it or transfer it to another person. This restriction is valid until the end of the agreement between the lender and the borrower. In case of violation of the terms of the loan agreement, the borrower, of course, transfers the collateral to the lender to repay the loan debt.

What is a mortgage by law?

First, let's answer the question of what a mortgage means by force of law. Everything here is quite simple, in simple terms, when this type of security arises not on the basis of an agreement between countries, but on the basis of Russian legislation.

A targeted loan for the acquisition of property is secured by the acquired real estate, which in fact becomes the property of the borrower, which is recorded in the Unified State Register of Rights, and at the same time is encumbered by the lender, this is a mortgage by force of law. What it is? How it works in practice: you purchased an apartment using borrowed funds from the bank, in fact you are not the owner of the funds, so when registering the transaction you become the owner of the property, but at the same time it is pledged to the bank that issued the funds until full fulfillment by the borrower of its obligations.

Another feature of the relationship for this type of security is that registration of a mortgage by force of law occurs without additional agreement of the parties. In simple words, an encumbrance on the purchased object is imposed upon registration of the purchase and sale agreement in the Unified State Register of Rights, when the buyer and seller register the agreement. But the encumbrance is imposed immediately without the consent of the bank and the borrower.

There is no state fee for registration actions.

The last question is how to remove the mortgage by force of law, here you need to contact Rosreestr again with the mortgage document (this is a document that certifies the mortgagee’s right to the property). If this document does not exist, or more precisely, it was not drawn up, then both parties must be present at the procedure for removing the encumbrance, that is, the borrower and a representative of the financial institution.

What is a mortgage by contract?

Everything is simpler here; this form of collateral arises on the basis of a mutual agreement between the parties to the loan agreement. That is, when applying for a loan from a bank, the lender and the borrower determine the procedure for their relationship by an additional agreement. The peculiarity of this type of pledge, unlike the previous one, is that the terms of the agreement can be individual. Here are some examples:

• a property purchased using credit funds is registered directly in the name of the buyer, that is, the bank, in fact, does not impose an encumbrance on the property;
• the issued funds provide another property owned by the borrower;
  the borrower and the lender draw up a separate mortgage agreement, which is registered separately from the transfer;
• title, usually when the buyer receives a certificate of title.

Registration of a mortgage by virtue of an agreement is carried out on the basis of a separate mutual agreement. That is, if in the previous version the encumbrance was imposed immediately upon registration of the purchase and sale agreement, then in this case this must be done separately. Usually, according to the agreement with the bank, the encumbrance is imposed after the registration of the purchase and sale agreement.

What is the difference

First of all, the difference between a mortgage by law and a contract is that in the first option it arises on a legal basis, and in the second option on the basis of a mutual agreement, that is, a contract. By force of law, a mortgage is registered automatically when registering a purchase and sale transaction in the second option only upon mutual application of the parties.

Another difference is that in order to register a mortgage, according to the law, an application can be submitted by one of the parties, both the mortgagee and the mortgagor. If we are talking about a contract, then the application must be submitted jointly. And the last difference is that, by virtue of the law, a state duty is not charged for a mortgage, but by force of agreement, yes.

Please note that with a mortgage, by virtue of the agreement, the bank bears certain risks, because it does not have a guarantee that the issued funds will be used for the intended purpose for the purchase of the property.

So, to summarize, a mortgage by virtue of a contract is, in fact, the relationship between a lender and a borrower that is governed by a mutual agreement between the parties, and not by the legislation of our country; this is what distinguishes a mortgage by virtue of a law. How to remove an encumbrance, the procedure will not differ significantly, that is, in both cases, Rosreestr must submit either a document confirming the termination of the relationship, or both parties to the agreement must be present.

Many people have heard about mortgages by force of law and mistakenly believe that this concept is associated with the process of obtaining a mortgage for residential real estate. In fact, the current legislation applies the concepts of mortgage by virtue of law and contract, which have a number of significant differences. We'll talk about them in today's article.

What does the legislation say?

Regardless of the purpose of lending, any mortgage always presupposes the presence of collateral, which is subject to an encumbrance throughout the entire loan period. Any type of mortgage always presupposes the presence of collateral, which most often is mortgaged real estate or the borrower’s own home. For the bank, the pledge acts as a guarantor, and if an individual is unable to repay the loan debt, the credit institution has the right to sell the pledged object and compensate for its debts with the proceeds.

Legislation today contains two types of grounds for a mortgage:

1. by virtue of the contract;
2. by force of law.

The first type of mortgage is always associated with the presence of special agreements between the parties to the transaction, which are written down in the contract and presuppose the individuality of the agreement. The second type of mortgage is strictly related to legislative regulation and arises in the presence of certain facts.

Mortgage by force of law: what is it?

A mortgage by force of law is often referred to as legal in financial and legal circles. It is related to the legislative regulation of property transactions. When a borrower contacts a bank, he or she has the opportunity to purchase residential real estate using the bank’s funds, which, when applying for a loan, in most cases apply a mortgage by force of law. Such a transaction is considered one of the most reliable, since the encumbrance is a guarantor for the bank to repay the loan funds and the process of challenging the loan transaction after signing the loan agreement will be fruitless for the borrower.

The obligation arises after completing the registration procedure with a government agency. Mortgage by law is closely related to the moment of transfer of ownership, which may arise when concluding an agreement for the sale of real estate, rent or other property transactions.

A mortgage arises by force of law in the following cases:

• purchase of an apartment, private house or land using loan funds;
• construction of real estate using a loan;
• sale of housing with the provision of installments, when the seller of the property is also a creditor.

In most cases, individuals begin searching for housing if they have an approved loan decision from a credit institution. After selecting an object, a loan agreement is signed and a purchase and sale agreement is drawn up with the transfer of loan funds to the seller’s bank account.

This scheme for purchasing real estate with a mortgage is the most popular, but not the only one. Often, the purchase and sale agreement provides for the provision of an installment plan to the buyer, which means the imposition of an encumbrance until final settlement. In some cases, an official proof of collateral is required and a mortgage note is created. The document can be issued at a bank or at a notary. Once the loan obligations are fulfilled in full, the mortgage is terminated. The law allows for a change of owner, which often occurs when the borrower uses refinancing.

In practice, a mortgage by law is the most common option for purchasing housing using loan funds. After going through all stages of the loan process and signing the agreement, its state registration occurs. After making entries in the register, the borrower becomes the owner of the mortgaged property, and the document on ownership in the restriction column is stamped “ Bail by force of law" An individual has the right to reside and use engineering structures, but in fact the property is in the possession of the bank until the loan is repaid in full.

Features of a mortgage by virtue of an agreement

This type of mortgage arises on the basis of an agreement regarding the collateral property. The agreement arises as a result of mutual agreements or under a separately concluded mortgage agreement. The main feature of most contracts is that the main condition of the loan is the registration of residential real estate owned by an individual as collateral. During the registration process, the obligations and rights of each party are negotiated individually.

A mortgage, by virtue of the law, always involves the targeted use of loan funds, that is, they can only be spent on the purchase of residential real estate. A distinctive feature of the agreement by virtue of the contract is the ability to use the loan at the discretion of the borrower.

Today, the practice of concluding such agreements exists only among a small number of credit institutions. A special case is the procedure for privatization of property, when the conditions for the transfer of ownership are separately negotiated between the parties to the transaction. All types of such mortgages can be divided into the following categories:

• there is no encumbrance and there is no collateral as such;
• the borrower's real estate is used as collateral;
• ownership arises after the loan is issued and the collateral is subsequently transferred to the disposal of the bank.

The small number of such agreements in the financial market is explained by their higher risk for credit institutions, since there is no guarantor for the repayment of loan funds. After concluding a loan agreement, the borrower has a certain period of time during which he looks at the desired property and goes through the registration procedure. In the future, he is obliged under the terms of the contract to provide it as collateral. Since with such a scheme there is no fact of imposition of an encumbrance, then if misunderstandings arise, it is difficult for the creditor to prove the fact of the issuance of borrowed funds and it is almost impossible to sue the right of ownership of the property in a judicial body.

Mortgage by force of law and by force of contract: differences

The main difference is related to the grounds for the emergence of a mortgage. For a legal type of transaction, this is the law, for the second type it is an agreement. The main distinguishing features include the following:

• the need to register with a government agency;
• type of collateral for a loan;
• obligatory state duty.

A mortgage, by force of law, requires registration, which occurs after the borrower applies to the government agency with the required package of documents. The Unified State Register accepts papers from the borrower and the lender, who have the right to submit them separately or together. The mortgage under the agreement is registered as an independent agreement, and both parties to the transaction must be present when submitting documents to the Unified State Register.

Upon agreement, by force of law, funds are issued for the targeted purchase of residential real estate, which becomes collateral. According to the agreement, real estate owned by the borrower by right of ownership can act as collateral.

A legal mortgage does not impose the obligation to pay a state fee, which occurs when concluding a contractual mortgage. Moreover, it is associated with an encumbrance, which may be impossible to circumvent if the bank does not consent to conduct a property transaction.

How is a legal mortgage registered?

According to current legislation, when the owner of real estate changes, in order to be recognized as legal, the transaction must go through the procedure of state registration of property rights. You can perform such actions if there is no encumbrance on residential property; you can find out about the presence in the MFC, Rosreestr or on the official portals of organizations. Today, you can use the online method at any time and generate an extract via the Internet by setting a number of necessary parameters regarding the object of interest.

It is worth considering that when registering property transactions, documents undergo a thorough check for authenticity, so fraudulent schemes are kept to a minimum. Registration of a legal mortgage occurs as follows:

1. a loan agreement and a purchase and sale agreement are concluded;
2. a list of mandatory documents is prepared for registration with a government agency, including a sales contract and a loan agreement, a mortgage, if any;
3. all attachments regarding the loan agreement are attached;
4. Within 5 working days, registration is carried out and a note is made about the presence of an encumbrance, which lasts until the loan is fully repaid.

If it is impossible to personally register with the Unified State Register, you can use the services of a notary who will certify the mortgage for a small fee.

Conclusion

Today, current legislation makes it possible to conclude a mortgage agreement by force of law or contract. Both options can be used to obtain credit funds, but the possibility of inappropriate use is provided by the option of execution under an agreement, which provides for certain rights and obligations of both parties to the transaction.