Libro Segundo · Título V Capítulo I. De la hipoteca

The mortgage is a real right that encumbers an immovable property to guarantee performance of an obligation.

The mortgage affects only the property upon which it is imposed, without the debtor remaining personally obligated even by express agreement.

The creation of the mortgage gives the creditor the right to promote the judicial sale of the encumbered property when the obligation is enforceable and is not performed.

The agreement for adjudication in payment stipulated upon creation of the mortgage is void.

The mortgage is indivisible and as such, subsists in full over the entirety of the mortgaged property even if the obligation is reduced.

The debtor has the unwaivable right to request from the creditor the reduction of the security through release of the mortgage encumbrance burdening one or several parcels, when the debtor has paid more than 50% of the debt and provided that the value of the immovables that remain encumbered bears a fair relation to the outstanding balance. If the determination of the parcels that must be excluded from the mortgage cannot be made by mutual agreement, it shall be made judicially by means of an oral trial.

When several estates are mortgaged at the same time for a single credit, all of them shall jointly secure payment thereof. However, the interested parties may assign to each estate the amount or portion of the encumbrance that it must secure. In this case, the creditor may not exercise its right over the mortgaged estates to the prejudice of a third party, except for the amount that shall have been assigned to each of them; but it may exercise it over the same estates, absent prejudice to a third party, for the amount that any of them shall have failed to cover.

If the paid part of the credit can be applied to the release of either of the encumbered properties, the debtor shall choose which one shall remain free.

Whoever mortgages property over which they hold a limited contingent right, or a right subject to suspensive, rescissory or resolutory conditions, which appear in the Property Register, does so with the conditions or limitations to which that right is subject even if not so expressed.

The mortgage shall take effect against a third party from its registration in the Register, if the obligation comes to be performed or the condition to be fulfilled.

The mortgage extends:

1°.To natural accessions and improvements;

2°.To new buildings that the owner builds and to new floors that he erects on the mortgaged buildings;

3°.To the rights of the debtor in the excesses of the surface area of the immovable;

4°.To indemnities relating to the mortgaged property granted or owed to the owner for insurance, forced expropriation or damage and losses; and

5°.To easements and other real rights in favor of the immovable.

In case of compensation, the mortgage creditors shall enforce their rights over the price paid, if it were for expropriation for public utility.

If the estate were insured and were destroyed by fire or other contingency, the mortgage shall subsist in the remains of the estate and in addition the value of the insurance shall remain subject to payment.

If there were several mortgage creditors, the amount of the compensation up to the limit of the obligations recorded in the register shall be deposited to the order of the judge so that the judge verifies the payments in accordance with the provisions of the following article.

The judge shall make payment of the indemnities according to the order of preference legally corresponding to the mortgage creditors.

No interest shall accrue on the sums withdrawn by the creditors.

If the compensation for forced expropriation or for damage and losses caused to mortgaged property over whose fruits or movables an agricultural pledge has been constituted, is not specifically applicable to the immovable property or to the pledged property, payment shall be made by the judge, in an equitable manner, taking into account the amount of the guaranteed capitals, the damage and losses suffered and other circumstances as may be necessary.

The property of an estate over which an agricultural pledge may be constituted shall not be included in the mortgage, unless it is free of encumbrance when performance of the obligation is enforced.

Only whoever may alienate may mortgage, and only immovable property that may be alienated may be mortgaged.

The owner of the property encumbered with mortgage may always alienate it or mortgage it notwithstanding any stipulation to the contrary, except as established in contracts referring to bank credits.

The common property may not be mortgaged except with the consent of all the owners. However, the rights that the co-owner has in the common property may be mortgaged.

The following may not be mortgaged:

1.The immovable property destined for family patrimony.

2.Property acquired by inheritance, legacy or donation, when the transferor has imposed such condition, but such condition may not exceed a term of five years. For minors, such term shall be counted from when they reach the age of majority.

The mortgage of the building or part of the building constructed on another's land does not affect the rights of the owner of the land.

The building organized under the horizontal property regime may be mortgaged in its entirety by unanimous decision of all the owners, or separately by the owner of the floor or independent property; but, in the first case, the amount or part of the encumbrance assigned to each floor of the building must be determined.

The creation and acceptance of the mortgage must be express.

If mortgages and other guarantees are constituted, the amount or portion of the encumbrance assigned to the mortgaged property and to the other guarantees shall be determined. However, if a pledge and a mortgage are constituted, the latter may secure the unpaid balance left by the pledge, but in this case there shall be no personal liability of the debtor, not even by express agreement.

Two or more properties may not be unified in the register when at least one of them is mortgaged, without a prior agreement of the owner with the mortgage creditors and those who hold any registered real right over the same.

The mortgage constituted as security for an obligation bearing interest shall not secure, to the prejudice of a third party, except the interest for the last two annual periods and such interest as accrues from the time the execution is recorded.

If the security were no longer sufficient because the value of the mortgaged property has decreased, the creditor may demand that the security be improved until it is sufficient to answer for the obligation.

If the insufficiency of the security is proved by means of expert evidence and the debtor does not improve it within the period set by the judge, the time limit shall be deemed expired and collection of the credit shall proceed.

Property auctioned upon enforcement by a mortgage creditor shall pass to the successful bidder or awardee free of lower-ranking mortgages encumbering such property and also of the other encumbrances, registrations and annotations registered subsequent to the registration of the mortgage giving rise to the enforcement.

The successful bidder or awardee also has the right to have prior mortgages cancelled, provided he pays in full the principal and interest up to the expiry of the time limits or the date of payment, if the time limits have already elapsed.

Immovable property auctioned by virtue of non-mortgage execution shall pass to the purchaser with the encumbrances, annotations and limitations registered prior to the annotation of the executive claim or of the attachment, as applicable.

After the co-owners, the mortgage creditors in their order shall have a preferential right during the auction to have the estate adjudicated to them for the best bid made.

From the price obtained in the judicial sale of the encumbered property, the following shall be paid:

1°.The expenses of strict preservation authorized by the judge;

2°.The debt for contributions of the parcel or parcels subject to execution, corresponding to the last five years;

3°.The debt for current insurance of the auctioned parcel or parcels;

4°.The expenses of the executive procedure, including fees of attorney, procurator, depositary or administrator-in-charge and experts, regulated in accordance with the law; and

5°.The mortgage, sub-mortgage or pledge creditors, according to the place and legal preference of their titles.

If there have been several executions, the payments referred to in subsection 4 of the preceding article shall be subject to the order of preference corresponding to each mortgage.

The credit secured with mortgage may be submortgaged in whole or in part, upon fulfilling the applicable formalities established for the creation of the mortgage.

The sub-mortgage shall be notified to the debtor so that it may be registered in the Register.

If the credit is sub-mortgaged or annotated, the debtor shall make payment with judicial intervention, if there is no agreement among the interested parties. The judge shall order the corresponding payments and the cancellation of the encumbrances or annotations securing them.

If the estate passes in ownership to the mortgage creditor, the mortgage is extinguished, but the sub-mortgage shall occupy its place as a mortgage, in favor of the respective creditor, without the liability of the immovable property being able to exceed the encumbered mortgage credit.

The obligation secured by mortgage shall be subject to a limitation period of ten years counted from the expiry of the obligation or from the date on which it is deemed expired by virtue of what was stipulated.

A mortgage may be constituted as security for current-account credit, the maximum amount for which the mortgaged property is liable being fixed in the deed of creation.

The mortgage constituted to secure an open credit with a limitation as to amount secures the partial sums delivered on account at any time, insofar as they do not exceed the pre-fixed sum.

A mortgage may be constituted as security for future obligations in favor of banking institutions. In this case, it is indispensable to designate the creditor, the maximum amount of the obligations secured and the term of validity of the security. In the deed in which the obligations are established or the loans are granted, it shall be recorded that they are secured by the pre-constituted mortgage and each obligation or loan shall also remain subject to the stipulations specified in each case in the respective contract or title.