The prenotation of mortgage is one of the strongest interim protective measures available to a creditor and is a widely used means of securing monetary claims. For this reason, it is very frequently encountered as a precondition in transactions with banks, for example in order to approve the conclusion of a loan agreement with natural or legal persons.
It may be effected either with the debtor’s consent or pursuant to a court (and/or arbitral) judgment. Following a recent amendment, the court with jurisdiction over the registration and removal of a prenotation is the Magistrate’s Court of the seat where the property to be prenotated is located.
The prenotation constitutes a form of conditional mortgage that may be converted into a definitive mortgage upon the fulfilment of two necessary conditions: the final and irrevocable adjudication of the secured claim in favour of the prenotation creditor and its timely conversion into a mortgage within ninety (90) days. Until the above conditions are fulfilled, the creditor merely holds an expectancy right to a mortgage, which nevertheless affords him the advantage of the principle of temporal priority.
The prenotation of mortgage has a primarily security character; that is, it ensures that the creditor will acquire a right of mortgage in the order in which the prenotation was registered. When the prenotation is converted into a mortgage, the mortgage is deemed to have been perfected on the day of registration of the prenotation and grants the right to commence or continue compulsory enforcement, as the creditor obtains a privileged ranking.
Those entitled to apply for prenotation are: the creditor of the secured claim, the debtor, the third party who has consented in favour of the debtor to the registration of the prenotation on his own property, the bankruptcy trustee and the debtor’s creditors, the guarantor, the guardian and the judicial assistant. Given that this is a conditional mortgage, it is possible that the condition will never be fulfilled, with the result that the prenotation will be extinguished (due to the weakening of the right) or lapse (due to its untimely conversion into a mortgage).
The cancellation of the prenotation must follow the same procedural form that allowed its initial registration, which means that the court with jurisdiction over its revocation is exactly the same court that ordered the registration of the prenotation on the property.
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FREQUENTLY ASKED QUESTIONS ON THE PRENOTATION OF MORTGAGE
1. What does the registration of a prenotation on my property mean for me?
A prenotation of mortgage is an interim security measure registered on the land registry sheet of your property in favour of a creditor, usually a bank, for a monetary claim. You do not lose ownership or use of the property; you may continue to live there or to exploit it. You may even sell it, although in practice this is difficult because no buyer will take on an encumbered property without settlement. If you repay the debt in full, the prenotation is extinguished. If, however, you fail to repay and the claim is finally and irrevocably adjudicated, it may be converted into a definitive mortgage, followed by compulsory enforcement against the property.
2. What can I do if the bank requests a prenotation on my property?
Your consent is given through personal appearance before the court, together with your lawyer. Before consenting, careful review is given to the amount for which registration is requested, the term of validity, whether it relates only to the specific loan or to broader claims, and whether a property of lesser value than that demanded by the bank may be offered. Banks often request a prenotation at 120% or 130% of the loan amount, a percentage which is negotiable. It is also examined whether alternative security exists (a guarantor, another property) so that your principal residence is not encumbered.
3. How can I have the prenotation removed after repayment?
After full repayment of the debt, the prenotation is not deleted automatically. Either consensual removal by the creditor or a court ruling is required. In the consensual case, the bank’s written consent to removal is requested and an application is filed before the Single-Member Court of First Instance of the district where the property is located. Once the judgment is issued, it is submitted to the competent Land Registry Office or Cadastral Office for deletion of the entry. If the bank delays or refuses to consent despite repayment, an application for revocation is submitted without its consent, on the basis of evidence of repayment. It is essential that the property be released from any encumbrance, particularly if you intend to sell or transfer it.
4. How long does the registration or removal procedure take?
The procedure follows the form of interim measures and is relatively quick. Consensual registration, when both parties appear, is usually completed within a few weeks from filing through to issuance and registration with the National Land Registry. Removal follows a similar procedure and timeframe. Where there is no consent and a judicial ruling is sought, the time required depends on the court’s caseload and the complexity of the case. Definitive registration with the National Land Registry following the judgment is effected within a few days, provided that all required documents are submitted by the lawyer.
5. What documents are required to initiate the procedure?
The title deed of the property is required, a recent certificate of land registry sheet or share from the Land Registry, certificates of encumbrances and of no claims, as well as the loan agreement or the document substantiating the claim. For consensual registration, a power of attorney and the debtor’s identification documents are required. For removal after repayment, a certificate of repayment from the creditor and a detailed statement of transactions are submitted. Where the area is cadastrally surveyed, a cadastral diagram extract is also required. Proper preparation of the file is critical, as deficiencies cause adjournments and additional costs at the hearing.
6. What is the role of the lawyer in such cases?
The lawyer reviews the terms proposed by the creditor and negotiates the amount, scope and subject matter of the security so that assets are not encumbered more than necessary. He drafts the application, represents the client before the Single-Member Court of First Instance, monitors registration with the National Land Registry or Land Registry Office and verifies the accuracy of the entry. In the case of removal after repayment, he ensures timely revocation so that the property is released. In cases of disagreement with the bank or risk of conversion into a mortgage and compulsory enforcement, he designs a defence strategy and employs every possible means of protecting your assets.