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The importance of a mortgage security

By George Coucounis

The mortgage security registered over an immovable property protects the mortgage creditor with regard to the business risk he undertakes towards the mortgage debtor. Granting a loan or credit facilities for development, business or other purpose, including housing purposes, requires for the obliged debtor to be able to pay off his debt. Should he expresses inability to meet his obligations, the mortgage creditor may activate the relevant procedure for the sale of the immovable property burdened with the mortgage security, in order to be enabled to receive his money, plus interest and costs. The system is generally reliable, but the only weakness is the delay observed until setting out the reserved price and the date for the forced sale of the property burdened in public auction. No Court order is necessary since the Land Registry provides the ability for the forced sale of the property through a relatively simple and short procedure after sending a notice of claim of the debt owed and an affidavit accompanying it. The default on the part of the mortgage debtor is enough for the creditor to start the procedure to collect the debt. However, there is usually a delay on behalf of the creditor, such as banks or other credit institutions, holding back the procedure, allowing them to collect interest on the one hand and on the other hand expecting to gradually collect the debt from the obliged debtor and his guarantors.

The Mortgage and Transfer of Immovable Properties Law, L.9/1965, provides that in every mortgage of an immovable property there is a silent term that the mortgage debtor has the right to mortgage it and is obliged towards the creditor to pay any tax, due or cost in relation to the property, to repair and maintain it in a good condition and allow the creditor to enter into and examine it regarding its state of maintenance and repair. Among his other rights, the mortgage creditor is obliged to keep the certificate of registration of the property, as well as when the mortgage debtor insures the property against damages or wear and tear, the creditor may ask and keep the insurance policy, as well as the receipts for the payment of the relevant premiums. When there are two or more mortgages burdening the same property, their ranking is determined according to the order they were registered at the Land Registry. The mortgage creditor, as long as the mortgage deed does not include a term to the contrary, can transfer the mortgage which was introduced to his benefit to any person in the same manner a property is transferred.

In the event there is default for the payment of the mortgage debt for a period longer than one month or more from the day it became due under the terms of the mortgage, the mortgage creditor may serve to the debtor a statement of account and a written notice calling him to pay the amount due and informing him that if he continues to be in default for a month’s period from the service, an application for the forced sale of the property burdened will be filed with the Director of the Land Registry in order to pay off the debt. If the mortgage debtor does not comply with the notice within the time limit set, the mortgage creditor can apply to the Land Registry and request the sale of the property and submit an affidavit to the effect that the amount stated in the statement of account has become due and that the said amount or a part thereof has not been paid. The sale of the property is conducted through public auction in accordance with the Sale Regulations and the proceeds of the auction will be disposed as follows:- (a) for the dues, rights and other expenses of the sale, (b) for the payment of all dues, taxes or rights burdening the property, (c) to repay any amount set out in a Court order regarding a previous mortgage, (d) to repay any amount secured through the mortgage in favour of the mortgage creditor who submitted the application for the forced sale, (e) to repay any amount secured through subsequent mortgages, (f) to repay any claims under Court judgements registered as memos. If there is a surplus, then it is paid to the mortgage debtor.

George Coucounis is a lawyer and leading partner of George Coucounis LLC, a legal firm based in Larnaca -Cyprus
E-mail: coucounis.law@cytanet.com.cy   |   www.coucounislaw.com   |   tel.:- 24818288.

 

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