01/07/2022 09:04

Issues and deficiencies when applying mortgage security measures under the Civil Code 2015 in Vietnam

Issues and deficiencies when applying mortgage security measures under the Civil Code 2015 in Vietnam

The issue of determining collateral is particularly important, because during the mortgage period, the mortgaged property is still under the management and use of the mortgagor. Therefore, in order to limit the arising disputes, it is necessary to improve some regulation of Vietnam's law.

1. Identifying the issue

In the security measures specified in Article 292 of the Civil Code 2015, the mortgage is considered the "queen" of the security measures. Because of the advantage of this method, the mortgagor does not have to transfer the property during the effective period of the security. Therefore, the asset value is still exploited and the interests of the parties are still achieved. Therefore, a mortgage is a great measure that the parties to the transaction prefer to choose to use. However, the disadvantage of this method is that the mortgagee may face the risk that the collateral is no longer available or reduced. Therefore, completing relevant legal provisions and allowing the mortgagee to monitor and supervise the mortgaged property to promptly handle fluctuations related to the property to ensure debt recovery is important.

2. Some issues and deficiencies in the application of mortgage security measures under the Civil Code 2015.

2.1. The legal consequences have not been specified if the mortgagor arbitrarily sells the mortgaged property.

As for the mortgage measure, the mortgagee does not directly hold the property; that is, the mortgagor is still allowed to use the mortgaged property to serve production and business activities. Therefore, in order to ensure the interests of the mortgagee, the Civil Code 2015 has regulations restricting the right to dispose of the mortgagee. Specifically, the mortgagor may not sell, replace, exchange, or donate the mortgaged property, except for the mortgaged property that is a movable commodity, as agreed by the mortgagee, or as required by law. In fact, although the parties have agreed very closely in the contract not to sell the collateral, there are still cases where the mortgagor arbitrarily transfers the mortgaged property without notifying the mortgagee.

For this case, Decree No. 163/2006/ND-CP stipulates the rights of the mortgagee if the mortgagee sells, exchanges, or donates the mortgaged property as follows:

First, if the mortgagor sells, exchanges, or donates the mortgaged property which is not goods circulated in the process of production and business without the consent of the mortgagee, the mortgagee shall The mortgagee has the right to recover the mortgaged property, except for the following cases:

- The purchase and exchange of assets is done before the time of registration of the mortgage, and the buyer and the exchange receiver are in good faith;

- The buyer and the exchange recipient of a motor vehicle have been registered for mortgage, but the content of the mortgage registration does not accurately describe the chassis and engine number of the motor vehicle and the buyer, the party accepting the exchange of collateral in good faith.

Second, in the event that the mortgagee fails to exercise the right to recover the mortgaged property, the proceeds, the right to demand payment, or other properties obtained from the sale, purchase, or exchange of the mortgaged property shall be returned to the mortgagee. The assets sold or exchanged become collateral to replace the assets.

For a registered secured transaction, the mortgagee may request the registration of changes in the security of the collateral. The registration of change of collateral in this case does not change the time of registration.

Third, except in the first case mentioned above, the exchange-receiving buyer or seller shall have ownership rights to the mortgaged property in the following cases: the mortgagor sells or exchanges the mortgaged property with the consent of the mortgagee; and the purchase, sale, and exchange of mortgaged property fall under two cases.

However, the above cases only apply to mortgaged assets registered for secured transactions. According to the provisions of Decree 8020/VBHN-BTP 2013 on assets subject to registration as security, including: mortgage of land use rights; mortgage of aircraft; ship mortgage and other cases if so prescribed by law. Assets that do not fall into the above categories can only be registered at the request of individuals or organizations.

If the mortgaged property is not registered for a secured transaction, with the provisions of the Civil Code 2015, it is difficult to guarantee the interests of the mortgagee for the following reasons:

First, compared with Article 117 of the Civil Code 2015, the above case does not violate the valid conditions of civil transactions. The law does not prohibit the mortgagor from transferring the property; the law only requires that the mortgagor consult the mortgagee and obtain the consent of the mortgagee. In this case, the mortgagee fails to comply with that condition.

Second, assuming the mortgagor transfers the property to a third party, the assignee also has no basis to request the cancellation of the contract. Because, according to the provisions of Article 423 of the Civil Code 2015, only the contracting parties are allowed to request the cancellation of the contract.

Thus, if the mortgagor arbitrarily transfers the mortgaged property without consulting the mortgagee, the current provisions of the 2015 Civil Code do not really guarantee the interests of the mortgagee's assets without registering secured transactions, as the law does not specify the legal consequences of the transaction. Therefore, in order to limit this situation, it is recommended that the Civil Code 2015 have regulations on the legal consequences of the mortgagor arbitrarily selling the mortgaged property without the consent of the mortgagee in order to have a basis for handling when violations occur.

2.2. There is no reasonable regulation on the handling of property attached (land use right) to the mortgaged property.

Land use rights and assets attached to land are two of the most common objects used by subjects to make mortgages. Therefore, the Civil Code of 2015 added two new laws, Article 325 and Article 326, to correct this issue. Accordingly, Article 325 provides for the mortgage of land use rights without mortgage of land-attached assets as follows:

"1. In the case of the mortgage of land use rights without the mortgage of land-attached assets and the land user is concurrently the owner of land-attached assets, the property to be handled includes property on land, unless otherwise agreed.

2. In cases where the land use right is mortgaged but the land user is not concurrently the owner of the property on land, when handling the land use right, the owner of the property on land may continue to use it. The parties may use land within the scope of their rights and obligations; the rights and obligations of the mortgagor in relation to the owner of the property on land shall be transferred to the transferee of the land use right, unless otherwise agreed."

Thus, according to the law, property attached to land is automatically mortgaged. Because it is not subject to mortgage but is still handled together with the mortgaged property, which is the land use right.

Research shows that there are two opposing views on this regulation:

From the first point of view, the provisions such as Clause 1, Article 325 of the Civil Code 2015 are completely appropriate. Because of the fact that land use rights and land-attached assets are a unified whole in terms of current status and legal status, the transfer of rights (including ownership rights) to attached assets with land is always associated with the transfer of land use rights. On the other hand, the construction of a concurrent handling mechanism will create favorable conditions for the handling of security assets, minimizing obstacles and difficulties in the actual purchase, sale, and transfer of real estate after having the results of handling the secured assets.

The second point of view is that the provisions of Clause 1, Article 325 of the Civil Code 2015 are not appropriate because the law does not protect the interests of creditors without security measures. For example, A mortgages the land use right to B at the same time that A has other creditors, C and D. According to the above regulations, assets attached to land are "security assets" and thus "B" will be given priority. payment for the property attached to the land use right even though it is not possible to agree on the mortgage of the property attached to the land.

We believe that, in order to confirm a reasonable point of view, it is necessary to consider the basic principle of the Civil Code, which is the principle of voluntary agreement. If, based on the law, it is determined that when mortgating the property, the parties do not agree that the property attached to the land is the subject of the mortgage, then there is no basis to handle that property together with the land use right. We cannot do that because it enables us to facilitate the handling of security assets without respecting the will of the parties agreed in the contract. On the other hand, in addition to the principle of voluntariness and agreement between the parties, the law must also respect the principle of equality between the subjects (in this case, between creditors) that need to be guaranteed payment. same.

Therefore, in order to ensure the interests of the mortgagee and at the same time ensure the principle of equality and agreement in civil transactions, Clause 1, Article 325 of the Civil Code 2015 should be amended and supplemented in the following direction: "mortgage of land use rights without mortgage of land-attached assets, the property shall be disposed of, including land-attached assets, if the owners of land-attached assets agree, unless otherwise prescibed" or it may be prescribed in the direction of allowing the disposal of land-attached assets, but not to secure the performance of such mortgaged obligations but to preserve the value of land-attached assets.

2.3. There is no reasonable regulation that the subject of a mortgage is movable goods.

Besides common types of collateral such as land use rights, houses or other assets attached to land, etc., the Civil Code 2015 also recognizes movable goods as the subject of mortgage. However, unlike other types of assets, although circulating goods are subject to mortgage, they are still sold, replaced, or exchanged in the process of production and business. The Civil Code 2015 does not provide a definition of circulating goods, but Decree No. 163/2006/ND-CP on the registration of secured transactions defines circulating goods as follows: Goods circulated in the production process, business means movable property used for exchange, purchase, sale, or lease within the scope of production and business activities of the guarantor.

According to the provisions of Clause 4, Article 321 of the Civil Code 2015, in case the mortgagor sells circulating goods, he/she has the right to request the purchaser to pay the money, the proceeds, property formed from the proceeds, and property replaced or exchanged as collateral. With this regulation, the Civil Code 2015 allows the mortgagor to have the right to sell the mortgaged property, but the mortgagee does not have the right to recover the mortgaged property, even if the circulating goods are registered for security transactions. Specifically, the Civil Code 2015 does not stipulate that goods circulated as mortgages must be registered for security transactions. However, if the transaction parties have a demand, they can still register for secured transactions. According to the provisions of Clause 1, Article 20 of Decree No. 163/2006/ND-CP on registration of secured transactions, the mortgagee is only entitled to recover the mortgaged property if mortgagor sells, exchanges, or donates mortgaged property which is not goods circulated in the process of production and business without the consent of the mortgagee. Thus, if the mortgaged property is a circulating commodity, and if a secured transaction is registered, the mortgagor is still allowed to sell the mortgaged property. That means that the law only protects the interests of the mortgagee and not the mortgagee himself. On the other hand, if the law allows the mortgagee to sell circulating goods even after a secured transaction has been registered, it will invalidate the meaning of the secured transaction registration mechanism, and at the same time not respect the security transaction. the will of the parties to the transaction.

In this regard, the Commercial Law 2005 (amended and supplemented in 2017) stipulates quite reasonably: if the goods sold are the subject of a measure to secure the performance of a civil obligation, the seller must inform the purchaser about the security measure and must obtain the agreement of the secured party on the sale of such goods. However, in practice, we can't always refer to the Commercial Law to apply it. Therefore, in order to ensure the interests of the mortgagee of movable goods, Clause 4, Article 321 of the Civil Code 2015 should be amended and supplemented in the direction of: "Selling, replacing, or exchanging mortgaged assets , if such property is goods circulated in the process of production and business, unless such property has been registered for security transaction. In this case, the right to demand the purchaser to pay the money, the proceeds, and the property formed from the proceeds, the replaced or exchanged property becomes the mortgaged property."

2.4. There is no reasonable regulation that the subject of the mortgage is the property to be formed in the future.

 3. Conclusion

Property that is subject to mortgage, in addition to existing property, also includes property to be formed in the future. According to the provisions of Clause 2, Article 108 of the 2015 Civil Code, assets formed in the future fall into one of two forms: unformed assets or assets that have been formed but the subject establishes ownership rights after the transaction is established.

Assets formed in the future are regulated quite differently in legal documents. The Law on Real Estate Business 2014 stipulates: houses and construction works to be formed in the future are houses and construction works that are in the process of being built and have not yet been accepted and put into use. Law on Housing 2014 stipulates: Houses to be formed in the future are houses that are in the process of investment and construction and have not been tested and put into use. The Civil Code 2015 stipulates that assets to be formed in the future include assets that have not yet been formed and assets that have been formed but the subject establishes ownership of the property after the time of transaction establishment.

The study of the above legal documents shows that the regulations on properties formed in the future in the Civil Code 2015 are different from the Law on Real Estate Business 2014 and the Law on Housing 2014. Accordingly, housing and construction works have been formed and have been tested for acceptance and put into use, and at the same time the owner establishes property ownership after the transaction is established, the Civil Code 2015 determines that it is an asset formed in the future. future. But the Law on Real Estate Business 2014 and the Law on Housing 2014 determined that it is not a property to be formed in the future. On the other hand, the scope of regulations on assets to be formed in the future as of the Civil Code 2015 is too broad. Therefore, there is a view that the regulation on assets formed in the future in Clause 2, Article 108 of the Civil Code "seems to expand this type of property, which seems a bit overkill when there are no conditions to determine the limit for the asset to form in the future." As a result, Article 295 of the Code stipulates that mortgaged property, including assets formed in the future, will make it difficult for subjects participating in civil transaction relations to determine a capable object. Ability is an asset to form in the future or not.

Normally, in order to ensure the interests of the transaction parties related to the object of the property formed in the future, the law needs to have objective guarantees about the formation of the property or the guarantee of compensation for damage. For example, the Law on Real Estate Business stipulates: "Prior to the sale or lease-purchase of future houses, the investor of a real estate project must obtain a guarantee from a capable commercial bank. financial obligations of the investor to the customer when the investor does not hand over the house according to the schedule committed to the customer. This rule will give peace of mind to the buyer, because they have a guarantee of adequate compensation in case for some reason the property does not form as committed.

With the current regulations as the Civil Code of 2015, mortgaging properties formed in the future is a big risk for the mortgagee. Therefore, there is a view that mortgaging something that has not yet been formed is absurd, because the obligation to secure with property arises immediately after the mortgage. Judging by this view, we think it's too "strict" for mortgages to be formed in the future. Because, "unformed" assets in this case must be assets that are forming according to a clear, reliable route and are completely dependent on the will of the transaction subject, not on even partially, on the will of another subject. However, regulations like the 2015 Civil Code are not really reasonable. Since there is still the possibility that future assets may not be formed, this presents a risk to the mortgagee. Therefore, we believe that in order to limit disputes between the mortgagor and the mortgagee, it is necessary to have a document guiding specific conditions to determine the property to be formed in the future or the Civil Code in 2015 should be supplementing a law stipulating the security mechanism for the mortgaged object being the mortgaged property formed in the future.

 3. Conclusion

The issue of determining collateral is particularly important, because during the mortgage period, the mortgaged property is still under the management and use of the mortgagor. Therefore, in order to limit the arising disputes, in addition to perfecting a number of provisions of the law that we have mentioned in the article, it is also necessary to learn from the experiences of other countries. Specifically, build and perfect the system of registration of secured transactions or build and complete the system of transaction insurance. The requirement when building a register system is how to make the register can be visualized as a complete picture describing the legal status of the property, especially the situation affected. of physical rights can affect the economic value of the property. In parallel with that, it is necessary to deploy an insurance transaction system as a support tool for secured transactions in cases where it is impossible to control and manage collateral by means of registration and also not Is there any other way to track the movement of assets.

Nguồn: Electronic People's Court Magazine

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