The Law of Ukraine
Date of Entry into Force:
January 1, 2004
Mortgage arises on the basis of agreement, law or court decision. The mortgage that arises on the basis of law or court decision the rules regarding mortgage arising on the basis of agreement shall apply, unless otherwise is established by law. Mutual rights and obligations of a mortgagor and a mortgagee under the mortgage agreement arise from the moment of its notarization.
Mortgage may be the ensured fulfillment of valid obligation or satisfaction of demand which may arise in future on the basis of agreement that has come into force. Mortgage is derivative from the basic obligation and is valid until the termination of basic obligation.
Encumbrance of real estate by the mortgage shall be subject to state registration. In case of non-observation of this condition mortgage agreement shall remain valid, but a mortgagee's demand shall not gain priority with respect to relatively registered rights or demands of other persons to the real estate that is transferred into mortgage.
Real estate shall be transferred into mortgage together with all its properties, unless otherwise is set by the mortgage agreement. The risk of accidental loss or damage of the subject of mortgage shall be incurred by a mortgagor, unless otherwise is provided by the mortgage agreement.
At the expense of the object of mortgage a mortgagee shall have the right to satisfy its demand under the basic obligation in full or in the part set by the mortgage agreement that is determined for the period of fulfillment of this demand, including payment of interests, forfeit, basic debt amount and any increase of this amount, which was envisaged directly by the terms of the agreement conditioning the basic obligation.
A mortgagor is entitled to own and use the object of mortgage according to its purpose use. While using the object of mortgage a mortgagor shall not allow worsening of state of the object of mortgage and decrease of its value over the ordinary amortization (wear).
In the event of transfer of the ownership right (the right of economic management) to the object of mortgage from a mortgagor to another person, also under inheritance or succession procedure, the mortgage shall be valid for the getter of the respective real estate, even in case if it is not informed about encumbrance of the property by mortgage.
The Law covers the peculiarities of mortgage of the objects of state or communal property, land plots and unfinished building objects.
A mortgagee (a mortgage bond owner) may perform transactions with owned by it mortgage bond for refinancing of own activity by attraction of additional money from the other persons until the term of fulfillment by a debtor of its mortgage bond obligations comes. Refinancing may be performed as follows:
- alienation (sale) of mortgage bond by commitment of endorsement with compensation to the endorser of the mortgage value in the amount set by the parties;
- sale of mortgage bond with the obligation of return redemption (REPO transaction);
- transfer of mortgage bond in pledge for ensuring fulfillment of obligations before other creditors;
- issue of mortgage securities;
- other way that does not contradict the law.
Imposition of penalty on the object of mortgage is performed on the basis of court decision, writ of execution or according to the agreement on satisfaction of a mortgagee's demands.
The sale price of the object of mortgage is set on agreement between a mortgagor and a mortgagee or on the basis of property evaluation on the level not lower than usual prices for this type of property.
Sale of the object of mortgage, at which fine is imposed under the court decision or writ of execution, is performed by sale at public auction, unless otherwise is envisaged by the court decision. The participants of public auction may be legal entities and natural persons that paid guarantee contribution and may, according to the law, be the purchasers of sold real estate. The amount of guarantee contributions is defined by the specialized organization, but it shall not exceed 5% of the initial sale price of the object of mortgage. The mortgagor and all mortgagees participate in public auction without payment of guarantee contribution.
Distribution of proceeds from sale of the object of mortgage between the mortgagees and other persons that have registered rights or demands to the object of mortgage shall be performed according to the set priority and volume of these rights or demands. The rest of proceeds shall be returned to the mortgagor.