What does that mean? legal real estate pledge and above all, when is it expected? When you enter the real estate market, for example by taking out a mortgage to buy a new home, you will certainly be familiar with the term mortgage. It is actually a real security law on the credit you own: in the case of a mortgagee.g. the lending bank has this right. But when is a mortgage legal?
A lien is legal when the security right is granted directly by the legislature to the creditor, in some specific cases established by law. For example, it may be registered when the contract for the sale of real estate provides a deferment of installments protect the seller’s rights to the mortgaged property over time. Below is all the useful information.
What is a mortgage and what is it for?
Before diving into the specifics of a legal mortgage, it’s helpful understand what a mortgage is and how it works. In general, a mortgage is a tool creditor protection: in other words, it is a real right of guarantee that allows the creditor himself to expropriate the property of the debtor when the terms of the signed agreement are not respected – for example, the payment for the property.
The mortgage instrument can only be accessed for certain types of assets, in particular:
- propertysuch as land and houses;
- rights to real estatefor example, an apartment intended for use;
- registered movable propertysuch as cars;
- state revenue.
However, the mortgage cannot be applied to all other movable things, such as the furniture of the apartment or the present household appliances.
Mortgage registration takes place through Conservatory of the Real Estate Cadastre and has a duration of 20 years. When selling real estate, it is not mandatory to mortgage the real estate, except in cases expressly provided by law. In any case, it is always recommended to rely on a notary when dealing with matters related to mortgages, even with regard to the complexity of the matter.
Types of existing mortgages
Regulation of mortgages is governed by Civil Code, in article 2808 et seq. As required by law, they exist different types of mortgagesdepending on the lender’s needs or specific regulatory requirements:
- voluntary mortgage: is registered on the basis of a special will of private individuals, to protect the payment of an asset or a loan. It is the most common form of mortgage, such as that required by banks when taking out a loan, and although it is the result of a voluntary agreement between the parties, it must be officially registered, for example by a private contract verified by a notary public;
- judicial mortgage: is established by a judge’s decision, for example in connection with a judgment passed against a debtor in bankruptcy, so that he can pay his debt;
- legal mortgage: is established in cases where the law gives the creditor the power to pledge property, for example, after an agreement on installments when selling real estate. The right granted in this case to the creditor does not require the consent of the debtor.
When is a mortgage legal?
The legal pledge instrument is always governed by the Civil Code, especially thenArticle 2817, which defines the cases of application and entities that can use this guarantee. This is actually a very strong form of protection that it provides to the lender power to expropriate property the subject of the guarantee in case of breach of the signed contract and no less important to be prioritized over other creditors on the amount obtained from the expropriation itself.
In other words, a legal mortgage offers the lender the opportunity to take advantageforeclosure, when the debtor does not voluntarily fulfill the accepted obligations. In contrast to a voluntary pledge, where there is an agreement of both parties, and a judicial pledge, where the registration is imposed by a judge, with a legal pledge, the law gives this right to the creditor, even if the debtor did not agree to it.
It is always Article 2817 of the Civil Code that explains when a mortgage is legal or when it is possible to use this instrument:
- inside buying and selling real estate, a legal mortgage is granted to the seller to secure obligations arising from the sale of the asset. This tool is often used especially when selling real estate with a time-spaced payment agreement;
- in connection with the sale of real estate for giftsexchanges or right of use for considerationa legal mortgage is granted to the original owner of the property;
- a legal mortgage is finally guaranteed co-heirs, members and more sharingfor “payment of balances on properties assigned to the same co-sharers who are subject to this obligation“.
It is useful to emphasize that there is no obligation to register a legal mortgage: when the property is sold, the seller can expressly waive the right to use this guarantee.
How to register a legal mortgage and how much it costs
Including the characteristics of a legal lien, i.e. a right expressly granted to the creditor by law even without the consent of the debtor, it is useful to know the procedures and costs.
A legal mortgage can only be established for the sale of real estate through the land registry in your area of residence. In cases provided by law, registration of a legal mortgage takes place automaticallyif the seller does not explicitly use the waiver or if the debtor has already fulfilled his obligations.
As you can easily imagine, registering a legal mortgage has certain limitations costs, which is paid by the debtor of the goods, unless otherwise agreed. Generally speaking, costs include:
- L’notary feevariable depending on the professional chosen, usually from a thousand euros;
- 2% of the value of the mortgaged property for kRegistration;
- 0.5% for registration fees;
- 150 euros stamp duty.
In addition, an additional 0.5% will need to be paid to cancel the mortgage when the debt is repaid or at the end of its natural life. But How long does a legal mortgage last? As with the other types, the duration is set in 20 years.
Why is the legal mortgage cancelled?
As mentioned in the previous paragraphs, the creditor – that is, ad example, the seller of real estate – is not obliged to use a legal lien in cases established by law. In fact, you can choose to waive it by expressly declaring this to the notary. In fact, this is a very common eventuality: anyone who has already had the opportunity to buy real estate has surely noticed that the notary, when reading purchase contractexplicitly asks the seller if he wants waive the legal mortgage.
But why do many people choose not to take advantage of this powerful protection provided by the law? The reasons can be very different:
- the seller could provide collection priority purchase price, not the regularity of payment of installments. In addition, with the registration of a legal mortgage, a lawsuit in case of non-payment can be lengthy and expensive, so you have to wait many years to collect the loan;
- with the registration of a legal mortgage, the buyer would incur costs additional fees compared to those agreed for the property. Thus, the sale could turn out to be less profitable than originally thought, so much so that it could lead to an abandonment of the purchase.
In any case, when deciding whether or not to use a legal mortgage, we always recommend relying on a notary: in the real estate market, each sale has characteristics that must be assessed individually.