The different forms of mortgage cancellation

What is the legal definition of mortgage?

We assume that all our readers know what we are talking about when we talk about mortgages. Being as it is one of the most well-known, used and publicized banking products. However, its legal definition is not so obvious. In fact, the Mortgage Law does not contain a stricto sensu definition of mortgage. Neither does the Civil Code, the mortgage being a construction of Roman law, the so-called fiducia.

Its regulation is found in the Civil Code, specifically in article 1876 of the CC, which establishes that:

• It is a right in rem, and therefore, it is applicable to property, whether movable or immovable.
• A security  right that lacks its own substantivity, that is to say, it is an accessory right to a personal credit right.
• A formal right, which must be constituted in a document with access to the Property Registry.

The mortgage has another characteristic, it is a dynamic right. Its configuration is not static, but follows the mortgaged property in its historical development. This is evident in the light of Article 1877 of the Civil Code.

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What is the mortgage extinction?

Once explained what it is and how the mortgage is regulated, we enter directly in its termination.

The cancellation and extinguishment of the mortgage charge can sometimes be confused. When the mortgage is considered extinguished by payment, it does not mean that the mortgage has been cancelled. Therefore, first of all it is convenient to clarify what the extinguishment is.

The extinguishment of the property may be total (when it fully affects the right) or partial (when it partially affects the mortgaged property). It will be voluntary (if it depends on the will of the creditor) or forced (when it derives from a cause beyond the creditor’s control). Being absolute (total loss of the validity of the mortgage) or relative (if it is produced as a consequence of the extinction of some added effect).

Some causes of extinction are: renunciation of the right, execution, expiration, confusion and compulsory expropriation.

Extinguishment by payment of the obligation is the most common form of termination and makes its cancellation possible.

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Transfer of mortgages

The mortgage loan transfer is a somewhat complex institution. It is a legal business, by means of which the mortgagee assigns, with just cause, its credit to a third party

What is the mortgage cancellation?

Whatever the cause of extinction of the mortgage, once extinguished it will be necessary to proceed to its cancellation in the Registry of the Property. That is to say, to eliminate the inscription in the Registry so that the property becomes free of encumbrances.

The cancellation of the mortgage will depend on whether or not it has the consent of the creditor.

The cancellation usually is caused by the payment or the fulfillment of the guaranteed obligation having the consent of the creditor. Therefore, it will be sufficient for the creditor to  grant a public deed of cancellation of the mortgage loan.

But there will be occasions in which the mortgagee does not consent to the granting of this deed. In the absence of such consent, a judicial proceeding may be initiated, as we will see below.

It will also be able to cancel the mortgage loan by expiration. That will have to be done through the presentation of private request. Thus article 82 LH allows to request to the registral holder of the right on a property the cancellation of the loan. For this, it will not be necessary the granting of a deed. Rather, it will be produced by the expiration of the period of prescription of the mortgage action.

What are the alternatives to pay off a mortgage?

With the consent of the creditor

The mortgage loan is registered in the Land Registry. In the deed the term of amortization is generally foreseen, having exhausted it and having paid the obligation, the mortgage will be cancelled.

But the mortgage cannot be cancelled ex officio at the Land Registry. Rather, a public deed is required for the cancellation of the mortgage loan. This is provided for in art. 82.1 of the Mortgage Law.

At this point it is appropriate to point out that the certificate of zero debt issued by the banks is not sufficient. As mentioned above, in order to make the cancellation effective, the creditor must execute a public deed.

Without the creditor’s consent

Sometimes, due to circumstances derived from banks, such as their dissolution, it will not be possible to obtain the deed of cancellation. Or, for example, when the mortgagor is a natural person and cannot be located.

This, although hinders its cancellation, does not prevent it. It will be able to be cancelled by means of a firm sentence in an ordinary declaratory judgment (art. 82.1 LH and 179 RH). So we will be able to request the cancellation to the Judge of First Instance interposing as we say lawsuit of ordinary trial. Before the Court the situation in which the mortgagor was found will be accredited. And in addition, the total payment of the mortgage loan that had been granted.

Let us point out, that the registry cancellation is not preceptive. But if it is not carried out, the existence of the debt would continue appearing and thus it could not be accredited paid in front of third parties.

By expiration

The Mortgage Law establishes some cases in which the mortgage loan may be cancelled by private request. Thus, in addition to the cancellation by the granting of the creditor of a public deed or by judgment, there is also the possibility of cancellation by expiration.

We will refer to articles 82.5 and 210.1.8 LH but with great caution. These articles have a very similar wording but with very relevant differences, as we shall see below:

1) The first difference would be in the time limit for the exercise of the action, as follows:

• Article 82.5 provides for a statute of limitations for mortgage action of 20 years. Although it adds one more according to the last mention of the same article. Thus, the maturity of the obligation will finally be 21 years.
• On the other hand, Article 210.1.8 establishes a different term. That is, 20 years from the date of the last entry recording the claim of the secured obligation. Failing this, it will be 40 years from the last entry relating to the title to the guarantee.

2) The second difference would be in the capacity for the exercise of the action, as follows:

• Pursuant to art. 82.5 only the registrant may request that the cancellation be instigated. Proving the authenticity of the signature
• However, art. 210.1.8 makes it possible for any interested party to request cancellation.

3) The third difference concerns the registration itself:

• Art. 82.5 presupposes that the term of performance of the secured obligation is recorded in the Land Registry. Therefore, this registration will be used when the date of payment of the secured obligation is recorded in the registry.
• On the other hand, art. 210.1.8 presupposes that the date of maturity of the obligation is not on record. And, therefore, we will resort to art. 210.1.8 when the date does not appear in the Land Registry.

Conclusion

The mortgage is a Real right of accessory character and whose constitution is registered.

Normally, to cancel a mortgage  there are  three alternatives. Cancellation by consent of the creditor, by judicial declaration or by expiration.

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