Notary office in Saint-Jean-Cap-Ferrat - FRANCE

The main aspect to remember with regard to the reform of the law relating to security interests- Without claiming to be exhaustive, the reform¹ of the law relating to security interests makes many changes to real estate security law, including:

• The transformation of special real estate liens into special legal mortgages (I),
• The question of the mortgage mandate (II),
• The establishment of a future property mortgage (III),
• The question of incidentals in the context of a subrogation (IV),
• The establishment of an assignment of a receivable under ordinary law as security (V),
• The establishment t of the cash collateral pledge (VI),
• Clarification of the pledge of receivables (VII) and
  
• The simplification of the share pledge system (with an assignment clause or "pacte commissoire")(VIII).

I - The transformation of special real estate liens into special legal mortgages

One of the key elements of the reform of the security law is the transformation of special real estate liens into special legal mortgages.

These special real estate liens had the peculiarity of taking precedence, retroactively, to the date of conclusion of the deed giving rise to the secured claim, provided that they were recorded within two months of the execution of the deed in question.

This retroactivity has been criticised on the grounds that it created legal uncertainty. In fact, creditors registered before the creditor holding a special real estate lien could, at least in theory, be given priority by the latter, given the retroactive nature of the registration of the lien.

By becoming legal mortgages, the former special real estate liens have thus lost the advantage of their retroactive nature: legal mortgages will rank as of the date of their registration (C. civ., Art. 2418) and they must therefore be registered quickly in order to avoid the registration of intermediate mortgages.

In particular, a lender's lien (PPD) therefore became, on the occasion of the reform, a legal mortgage of the lender of funds (HPD).

Apart from the fact that its registration is not retroactive, the HDP is very similar to the former PPD in terms of both:

• its constitution (C. civ., Art. 2402, 2°): the need for an authentic deed of loan with a promise of use and a receipt in the deed of sale mentioning the origin of the funds;
• and its cost, as the registration of a legal mortgage is exempt from land registration tax (CGI, Art. 663 et seq.)
  

On the question of the form of the power of attorney to execute a deed giving rise to an HPD, see below. II.

***

___________________________________

¹ Under the transitional provisions, Article 37 of Ordinance No. 2021-1192 of 15 September 2021, specifies that the reform will be applicable, for the provisions dealt with in this note, as of 1 January 2022.

___________________________________