Lithuanian Parliament has amended the Law of Civil Code of the Republic of Lithuania and government’s provisions of mortgage’s transaction of the Republic of Lithuania. The new amendments should facilitate a way of transaction of mortgage and facilitate court’s system and notary’s work; also these new amendments will allow the registration of capital in capital mortgage transactions to be simpler and faster. The new amendments are effective since 1st of July 2012.
The new amendments (Article 4.185 of Law of Civil Code) regulates that transactions of mortgage will be confirmed only by notaries, so for the transaction of mortgage there is no need for judge’s interference. Before the new amendments the legal acts regulated that for the mortgage of capital, persons had to sign a transaction of mortgage, get a confirmation of transaction from notary and from judge of mortgage and finally register it in the Central Mortgage Office of Republic of the Lithuania. New amendments reduce not only the expense of registering mortgage, but also would reduce other expenses of legal documents, which had to be produced to mortgage departments, and notary transcription’s statement expenses.
Mortgage bond as standardized transaction form was rejected by new amendments to make the signing procedure of transactions of mortgage less complicated. Now the parties may freely negotiate on conditions and matter of mortgage transaction, because special requirements for matter of transactions are not applied to mortgage transactions, except when legal acts regulate differently. The mortgage transaction becomes effective since drafting the transaction and registering the transaction will be effective only when using this transaction against third parties.
The Parliament also agreed on proposal to let companies mortgage. This is one of the biggest new amendments that Parliament agreed for, because in the previous edition of the Law of Civil Code of the Republic of Lithuania there was not an opportunity to mortgage the company and now this new amendment is regulated in article 4.177 of the Civil Code. In the transaction of mortgage it must be pointed, that this transaction is mortgage of company. Also, supplement of company’s mortgage transaction must be company capital’s inventory certificate. In the transaction of mortgage parties must point whole value of mortgage object. If there is no special conditions in the mortgage transaction, debtor commit that company’s value will not become smaller than the value, which was mentioned in the mortgage transaction. Company’s mortgage is registered in the Central Mortgage Office of Republic of the Lithuania. Legal fact, that legal person’s capital was mortgaged in accordance to with legal acts, is registered in the register of legal persons and in the register of real estate. This should allow mortgaging some part of company’s capital or all capital, for example, branch’s capital. Also, this new amendment should ease the way for companies to get a loan from banks, because banks in most of the ways will not have to demand guarantee personally for the loans with their own capital.
New amendments (Article 4.202 the Law of Civil Code) also regulates a mortgage of capital’s complex, which can be mortgaged even if the mortgage object is goods and they are changeable form and composition, that includes different equipment, reserves of merchandise, rights of requirement and others. This will extend the area of goods, which can be mortgaged, because before the new amendments became effective in the Civil Code of the Republic of Lithuania the only goods which could have been mortgaged were reserves of merchandise. For mortgaging goods as capital complex, there must be description about the goods indicating the mortgaging capital group. In the previous edition of the Civil Code, there was a regulation, which demanded to individualize goods, that were ready to mortgage. Now, for example, to mortgage rights of demands there is no need to individualize every right, there only must be pointed that all the rights are being mortgaged.
Another new and important amendment’s group (Article 4.201 the Law of Civil Code) is related to an opportunity to mortgage capital, which will emerge in the future, capital which is not created yet, and capital, whose ownership pledger will obtain in the future. This is a new regulation, because the previous edition of the Civil Code did not allowed an opportunity to mortgage capital, which will be created or obtained in the future. On the other hand, this new regulation means new and additional risks, which are related to this type of capital mortgage- in the period between capital’s creation and it’s mortgage, disposal of the capital can be restricted because of other person’s demands or become a capital of the company, which is next door to bankruptcy, or common cases when pledger was avoiding to mortgage capital or when pledger transferred the capital to other persons. Amendments of Civil Code now regulates opportunities to mortgage future capital, capital which is not yet registered in public register on the day, when the transaction is being signed, or capital which will be acquire in the future by the pledger- in these cases, mortgage will become effective and begin to stand since capital’s registration in the register of real estate, but this capital will be pledger’s possession.
The new amendments (Article 4.192 of the Law of Civil Code) regulate that courts will not participate in capital recovery procedure of capital which was mortgage in mortgage transaction. Now capital recovery may be prosecuted when applying to notary. It means that if the debtor does not prosecute his liability which was agreed in mortgage transaction before the appointed period expires or other conditions (which were agreed in mortgage transaction) emerge, creditor of mortgage may apply to notary for executive register fulfilment.
Finally, new amendments (Article 4.1941 of the Law of Civil Code) protect not only creditor’s rights, but also and pledgers rights. In any time of the period between liability’s period extinction and before the moment when object of mortgage is sold, debtor (pledger) has a right to cancel the mortgage by accomplishing liability. If the liability, which is secured by a mortgage, may be accomplished by parts, debtor (pledger) has a right to ask to stop recovery from the mortgage object by accomplishing part, whose period is extincted. New amendments guarantee that, debtor has a right to demand that creditor would compensate loss, which occurred because of creditors unlawful recovery, also losses, which occurred because of creditor’s unlawful administration of mortgage’s object losses for forced sale of object. On the other hand, creditor is responsible for actions of bailiff. Furthermore, creditor must execute recovery as cost-effectively as possible and cannot gratuitously enrich at debtor’s mortgage object’s recovery. Since the day of registration of executive register in the the Central Mortgage Office of Republic of the Lithuania debtor has a right to transfer mortgage object to someone else only when debtor gets agreement from creditor. Creditor, when is confidents about the vendee’s solvency, has to agree on the transaction of transfer, only if the selling price is equal to liability’s (which is secured by mortgage) value and compound interest, which emerge from liability. The sale’s sum of the mortgage object, which is needed to cover the creditor’s liability, must be transferred to notary’s (who confirmed the transaction of transfer) account. If the creditor begins unlawful recovery without any lawful reason or claimed demand, which has now lawful reason, debtor has a right to litigate creditor’s actions by bringing lawsuit to creditor. But lawsuit cannot stop the recovery, this can be done only by courts, when they agree to apply interim measures.
Donata Pundinaite
Assistant to the Attorney at Law
ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora
Mesiniu str. 5/2, LT-01133 Vilnius, Lithuania
Phone: +370 (5) 212-40-84 - Fax: +370 (5) 212-27-41
E-Mail: donata.pundinaite@ecovis.lt - Internet: www.ecovis.lt