The procedures for realizing secured assets in general and mortgaged assets in particular are stipulated in the 2015 Civil Code and Decree 21/2021/ND-CP, which regulates the implementation of the Civil Code on securing the performance of obligations. Accordingly, in this article, TNTP will present the specific steps to realize mortgaged assets.
1. Step 1: Notice of realizing mortgaged assets to fulfill obligations
Article 300 of 2015 Civil Code stipulates the notice regarding the realizing of secured assets. Before realizing the mortgaged asset, the mortgagee must notify the mortgagor and other co-mortgagees in writing within a reasonable period. The law does not currently provide guidelines about a reasonable period; thus, the parties should specify the notice period for realizing the mortgaged assets in the mortgage contract.
The main content of the notice regarding the realizing of mortgaged assets is stipulated in Article 51.1 of Decree 21/2021/ND-CP, including the reason for realizing the secured asset, the realized asset, the time and place for realizing the secured asset.
2. Step 2: Delivery of the mortgaged asset for realizing
According to Article 301 of 2015 Civil Code, the person holding the mortgaged asset is obliged to deliver the mortgaged asset to the mortgagee for realizing when one of the cases of realizing the mortgaged asset occurs. In case the person holding the mortgaged asset does not deliver the asset, the mortgagee has the right to request the court to resolve the matter.
Therefore, the delivery of the mortgaged asset mainly depends on the goodwill of the mortgagor/ person holding the mortgaged asset. In case the mortgagor/ person holding the mortgaged asset is uncooperative in delivering the mortgaged asset, the mortgagee has the right to file a lawsuit requesting the court to resolve the matter according to procedural rules.
3. Step 3: Payment to secure obligations
The proceeds from realizing the mortgaged asset, after deducting the costs of preserving, seizing, and realizing the mortgaged asset, will be paid in the priority order specified in Article 308 of 2015 Civil Code.
i) In case the proceeds from realizing the mortgaged asset, after deducting the costs, exceed the value of the secured obligation, the surplus will be returned to the mortgagor.
ii) In case the proceeds are less than the value of the secured obligation, the unpaid portion of the obligation is considered an unsecured obligation, unless the parties agree to supplement the secured asset. The mortgagee has the right to request the obligor to perform the unpaid portion of the obligation.
Mortgage take effect against third parties from the time of registration. When a mortgaged asset is used to secure multiple obligations, the priority order of payment among the mortgagees is determined as follows:
i) In case all mortgagees have registered the mortgage in accordance with the law, the order of payment is determined by the order of registration;
ii) In case some mortgagees have registered the mortgage in accordance with the law and others have not, or do not have registered in accordance with the law, the mortgagees who have registered in accordance with the law will be given priority;
iii) In case none of the mortgagees have registered the mortgage in accordance with the law, the order of payment is determined by the order of establishment of the mortgage.
The above-mentioned priority order of payment can be changed as agreed by the mortgagees. The subrogating party of the right to priority of payment shall only be given priority within the secured extent of the subrogated party.
4. Step 4: Transfer of ownership of the asset
After completing the transfer of the mortgaged asset to another party (that can be the mortgagee or a third party), the asset owner and the party entitled to realize the asset must follow the legal procedures to transfer ownership of the asset to the purchaser.
The above is TNTP’s article on “Legal regulations on the procedure for realizing mortgaged assets”. We hope this article is useful to readers.
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