News
This new Client Memorandum sets forth the conditions under which it is possible to renew existing mortgage registration, once the Lender has accepted to renew a mortgage loan. To proceed with a renewal, does the notary need to receive a new authentic instrument?
In summary, the solution of renewing an existing mortgage registration by simply depositing a docket to the Land registry office services (without a new authentic deed), with a view to changing the name of the holder of the claim or renewing the existing mortgage registrations for the future, may constitute an interesting and economical solution.
In any case, this technique of renewing registrations allows the parties to avoid having to instruct the notary to receive a new authentic instrument, the so-called “extension”.
In conclusion of the following developments, the main points are as follows:
- The renewal of registrations relating to a maturing loan does not imply the extension of the credit by authenticated deed, provided that the transaction does not aggravate the situation of the settlor by an increase in the principal claim, the interest rate or the security right;
- Indeed, in the absence of novation, the creditor retains the title of execution attached to the initial authentic loan and the securities that guarantee the claim: the only issue is the renewal of the mortgage registration, which exclusively conditions the enforceability against third parties of the maintenance of the initial rank;
- Such a renewal of registrations without prior extension of the credit is all the more opportune as the renewal of the registration, when it occurs after the maturity of the loan, gives the creditor the benefit of a longer registration in time;
- Finally, it is possible to extend a pre-existing loan and create a new loan secured by new mortgages in the same deed, provided that this does not contravene the principle of speciality of the mortgage and the registration.
DEVELOPMENTS
In the following, we will discuss the conditions under which the lender can bypass the modality of a new authentic instrument in the case of the extension of an existing loan, and propose the alternative solution of “renewal of registrations”, especially in the case of a bullet (in fine) loan.1
Introductory remarks on the 2022 security law reform.
As a preliminary matter, it is necessary to consider whether the new provisions of the Order of 15 September 2021, which came into force on 1 January 2022, should be applied.
Should the old provisions or the new rules apply to the renewal of liens?
To answer this question, reference should be made to Article 37 of the Ordinance, point I, which states that “the provisions of this Ordinance shall enter into force on 1 January 2022”.
Article 37 II specifies that “guarantees concluded before the date provided for in the first paragraph of I shall remain subject to the old law, including for their legal effects and for the provisions of public order”.
It can be seen that the drafters of the ordinance expressly wished to exclude any immediate application of the reform to current guarantee contracts.
Since only the guarantee is covered, the legal effects of security interests created before 1 January 2022 should be considered to be subject, as from that date, to the provisions of the Ordinance (see for an immediate application of a law to the legal effects of an ongoing contract: - Cass. 3rd civ. 17 Nov. 2016, no. 15-24.552).
And it is reasonable to assume that the issue of renewal of a mortgage is not a contractual mechanism: it is a requirement of the law to ensure the continued effectiveness of the security.
The procedure is therefore subject to the new law, which comes into force on the 1st of January 2022.
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1 This loan would initially be governed by general law (so-called “professional” loans) or alternatively governed by Directive 2014/17/EU of 4 February 2014 on credit agreements for consumers relating to immovable property for residential use (so-called “personal” loans).