Currently, the need for borrowing money has become essential in daily life and business activities. To mitigate the risks that may arise from loan transactions, a Mortgage of property is considered one of the effective legal tools commonly applied by the parties involved. Therefore, when applying the mortgage of property measure, parties should proactively study the legal regulations regarding this measure. In this article, TNTP will present some basic information about mortgage of property.

1. What is a Mortgage of property?

Mortgage of property means the use by one party (hereinafter referred to as the mortgagor) of property under the ownership of the obligor as security for the performance of an obligation to the other party (hereinafter referred to as the mortgagee) without transferring such property to the mortgagee.

The mortgagor shall hold the mortgaged property. The parties may agree to deliver the mortgaged property to a third person to hold.

2. Mortgaged property

Mortgaged properties are the properties or rights chosen by the parties to secure the rights of the mortgagee when there is a breach of the secured obligations. Mortgaged properties include both real and movable properties. These properties can be existing or future assets. Mortgaged properties must meet all the conditions specified by law, such as being owned by the mortgagor, being identifiable, and being transferable in civil transactions. Parties should take note of the following:

• In cases where the entire or part of the real or movable property has accessory objects, those accessory objects are also considered part of the mortgaged property unless otherwise agreed.

• Concerning mortgage on land use rights that the mortgagor owns property on land, such property shall also be part of the mortgaged property, unless otherwise agreed.

• Where mortgaged property is insured, the mortgagee must notify the insurer that the insured property is being mortgaged. The insurer shall pay the insured sum directly to the mortgagee upon the occurrence of an insured event. If the mortgagee failed to notify the insurer that the insured property was mortgaged, the insurer shall pay the insured sum in accordance with the insurance contract and the mortgagor shall be obliged to make payment to the mortgagee.

3. Effectiveness of mortgage of property

The effectiveness of a mortgage of property includes the effectiveness in binding the rights and obligations of the parties in the mortgage relationship and the effectiveness against third parties.

A mortgage of property contract becomes effective from the moment it is concluded unless otherwise agreed or specified by law. Therefore, a mortgage of property contract can become effective at one of three points in time: the statutory point, the agreed point, or the point of conclusion. The priority order is determined in decreasing order as follows: the statutory point, the agreed point, and the point of conclusion.

The statutory point can be understood as when the law has regulations on registering, notarizing, authenticating, etc., for a mortgage of property. According to Land law, unless it is related to real estate business, a mortgage contract for land use rights, land use rights and properties attached to land must be notarized or authenticated (Article 167, Land Law 2013).

Mortgage of property becomes effective against third parties from the moment they are registered. When the mortgage of property becomes effective against third parties, it gives the mortgagee the right to demand the mortgaged property before anyone else, even if someone else has possession of it.

4. Termination of property mortgage

A mortgage of property shall terminate in any of the following cases:

• The obligation which is secured by the mortgage has terminated.

• The mortgage of the property has been cancelled or substituted with another security.

• The mortgaged property has been realized.

• As agreed by the parties.

This article, “Mortgage of property – Basic content you need to know” is provided by TNTP for your reference. If you have any questions or need further clarification, please feel free to contact TNTP for timely assistance.