Is it possible to create mortgages over real estate and how are these protected and enforced?
Real Estate (2nd edition)
19.1 Yes. Here are some typical forms of security relevant to real property financing:
(a) Legal charge.
(b) Debenture (corporate borrowers only).
(c) Legal or equitable mortgage/charge over shares in a company that holds the real property.
(d) Assignment of rental income.
(e) Assignment of insurance proceeds.
(f) Guarantees from shareholders, related companies or individuals.
19.2 Legal charges over real property must be registered at the Land Registry. Debentures creating fixed and floating charges are noted on the title for the real property if related to a registrable legal charges, but are not capable of being registered in their own right. Charges over shares are recorded on the register of members for the company.
19.3 Assignments by way of security are usually created by deed and notice must be given to the counterparty to perfect the security.
19.4 Enforcement by lenders would generally proceed by way of appointment of receiver and/or exercise of the lender’s power of sale. The process of enforcement will be governed by the terms of the security instrument and, in the case of security over real property, the Registered Land Law (2018 Revision).
19.5 Securitisations involving Cayman Islands real property are generally not common given the size of the jurisdiction. Sale and leaseback transactions are also not common, due in part to the high level of stamp duty that would be payable on the transaction.
Mortgages can be granted over French real estate assets by means of notarial deeds.
They can be granted to secure amounts due under agreements drafted in French or any other language and submitted to French law or any other law.
They shall be published at the land registry so that to be enforceable against third parties. There is no time limit to register a mortgage, but it will take rank according to its date of registration.
Mortgages are registered for a period corresponding to one year after the secured debt final payment date (but no more than fifty years).
In the absence of insolvency proceedings of the French mortgagor, the secured creditors benefiting from a duly registered mortgage will effectively have priority over the real estate asset. Secured creditors can enforce mortgages in the following ways if the secured debts are due and unpaid (subject to insolvency proceedings specific rules):
- by way of a public auction;
- by way of application to the court for the attribution by court order of the property to the secured creditors, in accordance with the judicial attribution procedure; or
- if so provided in the security deed, by way of appropriation (pacte commissoire), in which case the secured creditors become the owners of the real estate asset.
The value of the real estate asset shall be determined on the transfer day by an expert designated by the parties, or judicially if no agreement can be reached. Such enforcement process should in theory be straightforward, but due to lack of consistency with certain French law rules and necessary compliance with others (such as preemption right), it remains unused.
Enforcement of French mortgage is in any case complex and long.
Yes, mortgages (Hypotheken) or land charges (Grundschulden) can be created over real estate, and they are registered in the land register. The main difference between a mortgage and a land charge is that, while the mortgage exists only as long as the underlying debt is not repaid, land charges are generally independent from a specific claim but are abstract in nature. That is why banks generally prefer land charges over mortgages as the former give more flexibility and higher security. In fact, land charges are significantly more common than mortgages in Germany.
Both instruments are enforced through foreclosure procedure which may take several months and typically either results in a forced sale of the property or forced administration to satisfy the secured creditor form the property's proceeds. The German foreclosure procedure is rather complicated, very formalized, contains a range of pitfalls and requires extremely careful preparation. Under both the German law governing the land register and the law of foreclosure proceedings the rank of the mortgage or land charge, as the case may be, is critical. If any other rights are registered in rank higher than the enforced lien, the higher-ranking creditors (whose rights would be deleted in the foreclosure procedure) will be compensated first – and the enforcing creditor would only receive any remaining proceeds. Hence, a detailed analysis of the value of the property and of other encumbrances on the property is essential to assess the merits of applying for foreclosure.
It is possible to create mortgages over real estate. Such mortgages would usually be registered at the Land Registry and the Companies Registry and notice will be deemed to be given to any third party acquiring an interest in the real estate.
Mortgages usually contain a provision to the effect that the mortgagee shall have a right to take actual possession of the property and sell it to satisfy part or whole of the outstanding mortgage in case of an event of default, such as the failure to repay.
- whether it is possible to create mortgages over real estate in your jurisdiction
- how mortgages are created and protected
- whether enforcement of mortgages is straightforward or potentially cumbersome and the basic procedure for enforcement
Real estate mortgages can be created with a mortgage agreement and registration of the mortgage with the Land Registry. Registration requires that the owner of the real estate consents to the mortgage.
Such registration procedures fall under the authority of the Land Registry Office that checks and verifies any document submitted for registration, providing adequate protection for both the mortgagor and the mortgagee. Land Registry entries in Hungary are public, easy to access and are deemed as authentic proof of registered rights, such as mortgages.
There are two main types of enforcement of mortgages: (i) judicial enforcement and (ii) out-of-court enforcement procedures.
A judicial enforcement procedure comprises two phases: (i) a commencement phase and (ii) a court bailiff phase.
During the first phase, the mortgagee needs to obtain an enforceable document. In typical cases, enforceable documents could be (i) final and binding court decisions (creditors / security holders usually try to avoid this procedure, as it could require several years to obtain a final and binding court decisions) or (ii) a notarized agreements which are stamped by the notary as directly enforceable.
Once the enforceable document is obtained, the second phase may start, being led by the court bailiff, who typically arranges a public auction where the sale of the real estate may take place.
Out of court enforcement procedures can be conducted by the mortgagee and do not require the involvement of court officials. These can be: (i) sale of the real estate and use the proceeds to satisfy the claims of the mortgagee or (ii) acquisition of the real estate by the mortgagee.
Yes, mortgages can be created over real estate. This is the most commonly-used security in relation to real estate assets. A mortgage ("hipoteca") constitutes, under Spanish law, an encumbrance over a property attached thereto as security for fulfilment of a personal obligation. If the obligation is not fulfilled, the mortgagee is entitled to request the sale of the property in public auction and the proceeds would serve to pay the mortgagee's credit plus any judicial costs. Any remaining balance is handed over to the mortgagor. Mortgages in Spain confer a lien on the property in favour of the mortgagee without conferring title to the property, which remains in the hands of the mortgagor.
Mortgages must be made in writing, executed before a Notary Public in a public deed, and recorded at the relevant Land Registry. Without such formalities, mortgages have no legal effect. Second or further mortgages are permitted but they are subject to the priority system of the Land Registry. The person who registered his mortgage first will have a priority right over the second (first in time, first in right). For this reason, it is normal practice to obtain a title search certificate from the Land Registrar attesting as to whether or not prior mortgages or encumbrances exist over the property to be mortgaged.
The law imposes a limit on the amount of interest on the principal debt that may be secured by a mortgage, that is a limit of up to five years' interest, referring to both ordinary or default interest.
Mortgages may be granted by contractual agreement or by unilateral decision of the owner of the property. In the latter case, the person in favour of whom the mortgage is granted must accept it. Should he not do so within two months of being notified of the mortgage, the mortgagor may cancel the mortgage by executing a further public deed.
For the creation of a mortgage it is necessary for the parties to agree on the value of the property, which will be the reference amount for the auction in the case of foreclosure. A valuation certificate must be issued by an expert and attached to the mortgage deed.
In Spain, both the amount and the obligation secured by the mortgage must be determined in the mortgage deed. The amount of the debt, however, need not be known exactly at the time of the execution of the mortgage deed, and the mortgage may be established at a maximum amount (as would be the case if the mortgage secures a line of credit).
Furthermore, a mortgage may secure a future obligation, provided that the Land Registry is notified when the obligation arises.
The mortgagor may transfer the mortgaged property by a deed of transfer to a third party. In this case, the new owner will have his property encumbered by the mortgage, as mortgages run with the land. In order for the new owner to subrogate the underlying personal obligation secured by the mortgage, the consent of the mortgagee has to be obtained.
The mortgagee, on the other hand, may assign all or part of his credit to a third party. The assignment of a credit secured by a mortgage involves the assignment of the mortgage as well. The assignment must be executed in a public deed and recorded at the Land Registry and the mortgagor must be notified of the assignment. In practice, however, mortgagors routinely waive the right to be notified.
In the event of a default by the mortgagor, the mortgagee may request a judge to give him possession of the property and to allow him to manage it until it is sold in public auction. It must be stressed that a mortgage in Spain will not confer title over the property in the event of default by the mortgagor. It only gives the mortgagee the right to settle his debt with the proceeds of the foreclosure sale of the property. The mortgagee may also request that the property be awarded to him at the foreclosure proceedings. The sale may be carried out by public auction either through judicial or extrajudicial proceedings.
A judicial sale of the mortgaged property may be carried out via foreclosure proceedings ("Procedimiento Ejecutivo") or through one of the two special and faster summary proceedings: the "Procedimiento Sumario" which is heard by a Judge or the "Procedimiento Extrajudicial" which is heard by a Notary.
After the property is acquired in public auction, the price will have to be deposited with the Court (or the Notary in extrajudicial proceedings). The Court will subsequently issue a writ (a public deed in the case of the Notary) evidencing the award of the property to the highest bidder and ordering the discharge or cancellation of later liens over the property. This discharge or cancellation does not extend to any liens or encumbrances that may have been attached to the property before the registration of the mortgage.
It is important to note that credits secured by a mortgage have priority in the event the debtor becomes insolvent.
In recent years regulations related to mortgages have been amended to include measures to reinforce the protection of mortgagors, as a result of certain court rulings (both at domestic and European levels) in the context of the economic crisis and the large number of non-performing loans which gave rise to numerous eviction proceedings.
A new amendment to the mortgage regulations is currently being drafted in order to implement Directive 2014/17/ EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property, which is expected to be passed by December 2018.
Yes, mortgages can be created. In the case of leasehold property, the lessee can create a mortgage / security on his leasehold interest in the property, if the terms of the lease do not prohibit this.
A mortgage has to be by an instrument in writing signed by the mortgagor, attested by at least two attesting witnesses and registered with the Sub-Registrar of Assurances.
A mortgage or charge by a limited company is also required to be registered with the Registrar of Companies.
A “mortgage by deposit of title deeds” can be created (in the towns of Kolkata, Chennai, Mumbai and other specified towns) by delivery to the creditor of documents of title to immovable property, with intent to create a security thereon.
A seller of immovable property has a charge upon the property transferred, for unpaid purchase consideration and interest.
Under what is known as an “English Mortgage” (where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage money) the mortgagee has the power to sell the property without intervention of the Court, in default of payment of the mortgage money.
Specialised statutes such as the Recovery of Debts Due to Banks and Financial Institutions Act 1993, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002 and the Insolvency and Bankruptcy Code 2016 provide for realization of security upon a default in payment, depending upon the nature of the parties and the relief sought.
In other cases, mortgages are enforced by filing a civil suit.
It is possible to create mortgages over real estate. A mortgage under Irish law is the conveyance of the legal title subject to a proviso that the title is conveyed back to the mortgagor when the loan is redeemed. A mortgage of registered land is referred to as a charge – but its effect is basically the same.
A lender's interest arising from a mortgage/charge is principally protected by the registration of the mortgage with the PRA. Where the security is created over registered land, the charge is registered with the PRA on the Land Registry and its legal is conclusive evidence of the chargee's entitlement to the charge over the relevant property. (In limited and exceptional circumstances – e.g. fraud or mistake – the court may order the PRA to amend the register.) A mortgage of unregistered land must be lodged with the Registry of Deeds (also operated by the PRA) ("ROD"). However, unlike the system for registered land, registration with the ROD is not conclusive. Registration of a mortgage with the ROD affects the priority of the security interest.
Where the mortgage/charge is created by a company, particulars of the charge must be registered with the Registrar of Companies ("ROC") within strict time periods according to the procedures set out in the Companies Act 2014 ("CA 2014"). If the mortgage/charge is not registered with the ROC accordingly, it will be void as against any liquidator appointed to the company, and any creditor of the company.
Banks in Ireland typically enforce mortgages by appointing a receiver over the property. The receiver is deemed to be an agent of the mortgagor and has a duty to obtain the best price reasonably possible in selling the asset. A receiver will also typically have the power, in the mortgage deed and under CA 2014 (if applicable), to manage the property pending a sale. Otherwise a mortgage may be enforced by a sale by the mortgagee. Where the property is a principal dwelling house of the mortgagor, if the mortgagor does not voluntarily yield up possession, the mortgagee must apply to the Circuit Court for an order for possession. In these cases the mortgagee, or credit servicer, must follow the procedures stipulated by the Central Bank of Ireland ("CBI") for dealing with consumer mortgage default. These requirements are set out in the CBI's Code of Conduct on Mortgage Arrears and Consumer Protection Code. If the court makes an order for possession the mortgagor must vacate the property at the stipulated time at which point the mortgagee may sell.
Mortgage is the most commonly used security that generally allows the lender to sell the mortgaged real estate, generally through a public auction, and satisfy its claims with the obtained funds.
If a building is mortgaged, the mortgage extends to the related part of the land plot underneath the building. Premises, lease rights, unfinished constructions and a share in the construction of residential property can also be mortgaged. Mortgage is used for all types of contracts, including asset deals, construction agreements and agreements on share participation in residential construction.
No notarization of the mortgage agreement is required, except for the cases when the parties to agree on out-of-court taking of the mortgaged real estate by the creditor in case of default.
Mortgages have to be registered in the public register.
The creation of mortgages over real estate requires the execution, by the owner of the real estate, of a public deed in front of notary, as well as the registration of the mortgage by the notary with the land registry. Collective mortgages on several plots are also possible.
Mortgages may be created in the form of a security paper, a bearer or registered mortgage note, or in the form of a dematerialized security solely registered in land register.
A claim secured by a mortgage over real estate can either be enforced according to the ordinary collection procedure, for individuals, or to the bankruptcy procedure, for legal entities, or according to a specific debt enforcement proceeding limited to the forced sale of the mortgaged real estate. Such proceeding implies several procedural steps, which the debtor can oppose to postpone the execution of the mortgage and ultimately the forced sale by public auction. By law, the entire proceeding cannot be completed in less than six months, but in reality it very often lasts more than twelve months.
Yes, mortgages can be created over real estate. As mentioned above, the answers in this Guide only relate to registered land in England and Wales. Where the real estate interest is leasehold, the terms of the lease must be first reviewed to ascertain if consent of the landlord is required in order to create the mortgage.
A legal mortgage will generally be compulsorily registrable at the Land Registry. The main exception is a mortgage over a leasehold property where the lease term has less than seven years to run. If the legal mortgage is not registered at the Land Registry, it may lose priority as against third party interests (including another registered mortgage) even if that interest or mortgage was granted after the unregistered mortgage. Priority is generally determined by the date of registration and not creation.
A company or limited liability partnership incorporated in the UK under the Companies Acts must also register security with the Registrar of Companies within 21 days after the date the security is created. If the mortgage is not registered with the Registrar of Companies, it will be void as against third parties and other security subsequently registered will have priority.
Enforcement is generally straightforward. The lender has a number of methods of enforcing the mortgage, it can:
- appoint a receiver; the receiver will normally have wide powers to deal with the property including the power to sell or lease the property and use the proceeds to satisfy the debt;
- sell the real estate and use the proceeds to satisfy the debt;
- take possession of the real estate (this is unusual because of liabilities assumed by taking possession e.g. environmental liabilities); or
- obtain a court order vesting ownership of the freehold real estate in the name of the mortgage holder (known as 'foreclosure', although this term may also be used in the sense of general enforcement of security over property); however this is rare.
Yes, mortgages can be created over real estate (or an interest therein). As a technical matter, however, in some states, the manner in which security is granted over real estate is by deed of trust (rather than a mortgage) where the property owner places the property in trust with a trustee for the benefit of the lender. In the case where the interest to be secured is a leasehold, the terms of the lease must first be reviewed to ascertain if the lease is indeed financeable and to ensure that any requirements prescribed by the lease have been satisfied.
In order to perfect the lender's interest in a mortgage, the mortgage must be recorded in the real estate records in the county where the applicable property is located. Once recorded, a mortgage will generally have priority over any future encumbrances (except for encumbrances that the lender was aware of or should have been aware of). While a mortgage does not need to be recorded in order to be enforceable, the failure to record generally exposes the lender to have its interest subordinated to any subsequent bona fide purchaser for value that records its interest first. Depending on the municipality where the property is located, the method for recordation (i.e., physical delivery vs. electronic recording) and the volume of documents submitted for recording, the actual recordation of a document may take place on the day of closing or days or weeks after the closing of the transaction. Any delay in the recordation of a mortgage is not a practical concern because the lender will have obtained a title insurance policy for its mortgage loan and the title insurance company will insure the lender for the gap period between closing and recording.
A mortgage is a lien which provides the lender with the power to sell the property owned by the borrower at the time the mortgage was granted. In the case of a default, the lender may exercise such power of sale through the foreclosure of the mortgage. There are two types of foreclosure – judicial and non-judicial foreclosure. The remedy of judicial foreclosure is available in all states, and more than half also permit non-judicial foreclosure. The specific remedies available to a lender and the manner in which a foreclosure is carried out is governed by state law with significant variations. Generally, in a judicial foreclosure, the lender must commence a lawsuit against the borrower to initiate the foreclosure process. The entire process is then run through the court and, as a result, takes longer than a non-judicial foreclosure and allows the borrower to raise defenses as part of the proceeding. In a non-judicial foreclosure (typically permitted in states that employ a deed of trust regime), the lender may proceed with the foreclosure outside of court in accordance with state law. Non-judicial foreclosures are naturally less formal and proceed quicker than a judicial foreclosure. In either case, the borrower will have the right to attend and bid at the auction and the lender will have the right to credit bid the amount of its indebtedness. If anyone other than the lender is the winner of the auction, then the lender will receive the proceeds from the sale up to the amount of its indebtedness with any surplus going to junior lienholders or the borrower. If the lender is the winner of the auction, it or its designee becomes the owner of the property. Depending on the state and the terms of the loan, the lender may be able to pursue the borrower or other credit parties for any deficiency.
Yes. Mortgages can be granted by the owner over real estate and are formalized by public deed. They are valid provided that they are filed with the Public Registry.
The most common forms to structure a secured financing for real estate in Mexico are: (i) mortgages, and (ii) security trust agreements.
The mortgage agreement has to be granted before a notary public and the public deed recorded with the Public Registry, in order to perfect the security on the land.
Upon default of the borrower’s obligations under the financing documents, the mortgagee/creditor has the right to initiate a foreclosure proceeding in the form of a special summary judicial procedure (juicio especial hipotecario) to enforce the mortgage. In general, the court orders a public auctioning of the real estate to use the proceeds to repay and satisfy the loan in benefit of the creditor. Only under certain circumstances, the court may allow the mortgagee to retain the land in satisfaction of the debt.
Mortgage is the main method used for financing a real estate and it can be created as security for any kind of debt, present, future or contingent,
In practice, if a bank loan is used to acquire a real estate, the bank usually request an adequate guarantee for the loan or establishment a mortgage on the relevant real estate. To create a mortgage over real estate, the agreement should be signed in front of the land register offices and it should be registered to the land registry. The mortgage can be cancelled through demand of the lender, due to expiration, due to expropriation etc.
As known, the main aim of the mortgage is to foreclosure in case the debtor does not pay the debt on due. In such case, the lender applies to the relevant Execution Office for cash-in the mortgage and the Execution Office serves a payment order to the debtor and requires payment of the debt, together with default interest and legal charges thereon. In case no objection or payment is made the Execution Office appoints experts to evaluate the market value of the real estate. After completion of the necessary foreclosure proceedings, the Execution Office decides on the dates of public auctions (2 auctions take place) for the sale of the real estate. In both auctions, at least 50% of the market value determined by the experts is required to be offered. In case such offers are obtained by the Execution Office, the real estate will be sold to the highest bidder and such bidder will be required to pay the amount of its bid in cash to the Execution Office and the Mortgagee will receive its receivables according to the regulations in the relevant Law.
A mortgage is created by written notarial deed and must be registered with the competent local Land Registry to be perfected against third parties.
The secured creditor shall send the debtor a formal notice of default requesting the immediate (generally within 10 working days) payment of the outstanding debt encompassing interests and expenses. This notice is generally delivered through registered letter.
The foreclosure proceedings shall be preceded by the service of the title empowering to levy foreclosure.
The attachment of immovable assets is accomplished by serving the debtor with the pleading of attachment (atto di pignoramento), which should contain inter alia the indication of the attached assets and the rights over such assets, and transcribing the same pleading with the relevant land registries. Once the pleading of attachment (atto di pignoramento) is served upon the debtor, the following occurs:
(a) The judicial officer (or the distraining creditor) shall transcribe the pleading of attachment with the relevant land register and deposit a copy of the pleading with the court's clerk office.
(b) Within the following 10 days, the title empowering to levy foreclosure and the order of payment shall be filed with the clerk office.
(c) The attached assets are put under custody (also the debtor may be appointed custodian of the relevant asset).
(d) The foreclosure procedure formally begins.
Mortgaging of property is possible under Law9/1965 (Tranfer and mortgaging Act). In addition to the basic loan agreement and any other accompanying agreements (guarantees etc), a mortgage agreement is signed. When the loan is approved and the loan amount is to be granted to the borrower, the lender and the borrower (otherwise the mortgagor and the mortgagee), meet at the land registry and submit a declaration of the mortgage. The mortgagee pays the mortgage fee and the mortgage is officially registered. With the registration of the mortgage an encumbrance is created over the property. Encumbrances take priority in accordance with the time they have been registered at the land registry.
Only the registered owner of the immovable property is able to mortgage the property.
Where the borrower’s obligations are more than 120 days overdue, the lender has the right to proceed with the sale of the property. The lender will send some Notices as prescribed by the law. If the borrower fails to comply with the notices, a notice will be sent by the land registry informing the borrower that the immovable property will be put into auction. The borrower can appeal such a decision of the land registry within 30 days from the service of the notice.
If the Court decides that the auction should go ahead or if the borrower does not appeal, a notice is sent to the borrower to appoint a valuator of his own choice. The lender will also appoint a valuator of his choice. For the first 3 months after the auction procedure begins, the bit cannot be lower than the 80% of the value.
Creating mortgages including revolving mortgages over ownership and superficies of real estate is possible, and is in fact the usual practice in the market.
When you create a mortgage, it is not necessary for possession to be transferred. Mortgages can be created through mere agreement of the parties, and the fulfilment of the requirement of perfection by registering the mortgage. It should be emphasised that parties who take out a mortgage on the real estate should ensure they have disposal authority.
However, in practice, in order to save on registration costs, some lenders allow only provisional registrations to be made. Once a mortgage based on the provisional registration is formally registered, that mortgagee enjoys priority over those mortgagees whose mortgages were registered after the provisional registration. However, provisional registration is merely for securing priority, and thus it is not possible to enforce the mortgage, unless formal registration is subsequently completed. Therefore, it is vital that lenders ensure that they are always in possession of all documents necessary to allow them to formally register such a mortgage.
A mortgagee shall have the right to receive the performance of his or her claim prior to other obligees. If more than one mortgage is created with respect to the same property, the order of priority of those mortgages shall follow the chronological order of their registration. Furthermore, mortgages principally extend to the things that are an integral part of the properties that are the subject matter of the mortgage, except for buildings on the mortgaged land.
Mortgages can be enforced through the method of a secured real property auction (meaning the exercise of a real property security interest through an auction), or the method of execution against earnings from the secured real property (meaning the exercise of a real property security interest by the method of allotting the earnings from the real property to performance of the secured claim) under the Civil Execution Law.
Exercise of a real property security interest under the Civil Execution Law shall be commenced only when all of the designated documents have been submitted.
When an event of default under a mortgage occurs, and the applicable mortgagee adopts the method of a secured real property auction, the applicable mortgagee can initiate the secured real property auction by filing an application for foreclosure with an execution court. The execution court shall, in order to commence the secured real property auction, issue a commencement order for a compulsory auction in which it will declare that the real property shall be seized for the obligee. In the process under the Civil Execution Law, the property owner is given certain opportunities to contest, and secured creditors with perfected liens, creditors with judicial liens, and the tax authorities will be given a chance to register their claims with the court. The court will then order an appraisal to set a minimum bid for the auction, and the sale at auction will extinguish any liens on the property, with title immediately passing to the winning purchaser. The court will then distribute the sales proceeds in order of priority. Tax liens will have priority over mortgages only to the extent that the underlying taxes were due and unpaid prior to the provisional registration of the applicable mortgage.
When an event of default under a mortgage occurs, and the applicable mortgagee adopts the method of execution against earnings from the secured real property, the applicable mortgagee can initiate the execution against earnings from the secured real property by filing an application with an execution court. The execution court shall, in order to commence an execution against earnings from the secured real property, issue a commencement order for compulsory administration in which it will declare that the real property shall be seized for the obligee. It will also prohibit the obligor from disposing of the earnings if the obligor has a claim for rent or any other right to seek delivery pertaining to earnings from the real property. The execution court shall appoint an administrator simultaneously with the issuance of a commencement order for execution against earnings from the secured real property. The administrator may conduct administration, collect earnings, and conduct a realization with regard to the real property for which a commencement order for compulsory administration has been issued. The administrator will then distribute the sale proceeds in order of priority. Tax liens will have priority over mortgages only to the extent that the underlying taxes were due and unpaid prior to provisional registration of the applicable mortgage.
Alternatively, lenders can consent to a voluntary sale of the property by mortgagor, and many lenders are able to obtain more money and a faster recovery through this method. If there is a willing purchaser, and the property owner is cooperative, a voluntary sale may make more sense for all parties. In the case of structured finance of real estate, the parties often set the rule of a voluntary sale of the property by mortgagor under the lender’s instruction.