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Chapter Law Content

Title: Civil Code CH
Category: Ministry of Justice(法務部)
Part Ⅲ Rights In Rem
Chapter 6 Mortgage
Section 1 - General Mortgages
Article 860
A general mortgage is a preferential right of a creditor to receive satisfaction of a claim from the proceeds from sale of real property that a debtor or a third party has provided, without transferring possession, as security for the claim.
Article 861
Unless otherwise provided by a covenant, a mortgage secures the principal claim, interest, default interest, default penalties, and the cost of enforcing the mortgage.
The preferential right to satisfaction of a claim over interest, default interest, and such default penalties as are paid at regular periods of one year or less shall be limited to interest and penalties incurred during the five years preceding a mortgagee's enforcement of the mortgage or application for compulsory execution, and interest and penalties incurred during the process of compulsory execution.
Article 862
The effect of a mortgage extends to the accessories and accessory rights of the property mortgaged.
Rights acquired by a third party over such accessories before the creation of a mortgage are not affected by the provisions of the preceding paragraph.
When a building is the subject of a mortgage, any part added to the building and not independent of it is also subject to the effect of the mortgage. The provisions of Article 877 apply mutatis mutandis, however, when a part added to the building is an independent thing added after creation of the mortgage.
Article 862-1
The remnants of a mortgaged property after its destruction remain subject to the effect of the mortgage. The same shall be true of any component of the mortgaged property that is separated from it into independent personal property otherwise than in accordance with the ordinary use of the thing.
Under the circumstances described in the preceding paragraph, a mortgagee may claim possession of such remnants or personal property and exercise his or her rights in accordance with the provisions governing pledges.
Article 863
The effect of a mortgage extends to natural profits that are separated from the mortgaged property after the attachment of such property and that the mortgage holder is entitled to collect.
Article 864
The effect of a mortgage extends to civil profits that the mortgagor is entitled to collect on the mortgaged property after the attachment of such property. The mortgagee, however, may not claim against the obligor who shall pay such civil profits until he has notified such obligor of the fact of attachment of the mortgaged property.
Article 865
If the owner of a real property creates multiple mortgages on the same property for the purpose of securing multiple claims, the ranks of these mortgages are determined according to the order of their registration.
Article 866
After the creation of a mortgage, the owner of a real property may, on the same real property, create superficies or other rights in rem for the purpose of benefiting from their use, or establish a lease relationship, but the mortgage will not be affected thereby.
When a mortgagee's enforcement of a mortgage is affected by circumstances described in the preceding paragraph, a court may remove such rights or terminate such lease relationships and thereafter auction the property.
The preceding paragraph applies mutatis mutandis when an owner of a real property, after creating a mortgage on the real property, creates rights other than the rights specified in paragraph 1 on the same real property.
Article 867
After the creation of a mortgage, the owner of the real property may transfer the real property to another person, but the mortgage will not be affected thereby.
Article 868
When a mortgaged real property is partitioned or partially transferred, or when one property among multiple real properties securing the same claim is transferred to another person, the mortgage is not affected thereby.
Article 869
If a claim secured by a mortgage is partitioned or partially transferred, the mortgage is not affected thereby.
The provisions of the preceding paragraph apply when a debt is partitioned or partially assumed.
Article 870
A mortgage may neither be transferred nor furnished as security for any other claim by separating it from the claim that it secures.
Article 870-1
If there are multiple mortgages on the same mortgaged property, a mortgagee may adjust its proportional share of preferential right to satisfaction by the following means, provided that the interests of the other mortgagees are not thereby affected:
1. Assigning the priority ranking of its mortgage in favor of a specified mortgagee.
2. Waiving the priority ranking of its mortgage in favor of a specified mortgagee of lesser priority.
3. Waiving the priority ranking of its mortgage in favor of all mortgagees of lesser priority.
No assignment or waiver of the priority ranking of a mortgage pursuant to the preceding paragraph will take effect without registration. Prior to such registration, the mortgagee shall notify the debtor, the mortgagor, and any joint mortgagors.
A mortgagee who benefits from an adjustment in priority rankings under paragraph 1 also may enforce the mortgage with the higher pre-adjustment ranking.
When an adjustment is made to the proportional share of preferential right to satisfaction, if the claim secured by the higher ranking mortgage is also secured by real property of a third party, the mortgage to which the third party's real property is subject will be extinguished to the extent of any increase in encumbrance on the property that results from the adjustment, unless the third party has otherwise given its consent.
Article 870-2
When an adjustment is made to the proportional share of preferential right to satisfaction, if the claim secured by the higher ranking mortgage is also secured by a guarantor, the guarantor shall be exempted from liability to the extent of any loss of the benefits of preferential satisfaction that results from the adjustment, unless the adjustment is made with the consent of the guarantor.
Article 871
If an act of a mortgagor is likely to cause a reduction in the value of the mortgaged property, the mortgagee may demand cessation of the act. Under urgent circumstances, the mortgagee himself may make a necessary disposition to safeguard the mortgage.
Costs incurred for a demand or disposition specified in the preceding paragraph shall be borne by the mortgagor. Such costs shall have priority of satisfaction over claims secured by any mortgage on the property.
Article 872
If the value of a mortgaged property has been reduced for reasons attributable to the mortgagor, the mortgagee may set an appropriate time limit and demand that the mortgagor restore the status quo ante of the said property or that the mortgagor provide a security commensurate with the amount of the reduction in value.
When a mortgagor fails to perform a demand made by a mortgagee within the time limit set under the preceding paragraph, the mortgagee may set an appropriate time limit and demand that the debtor provide security commensurate with the reduction in value. If the mortgagor fails to provide such security within the time limit, the mortgagee may demand full repayment of the claim.
When the mortgagor is the debtor, the mortgagee may immediately proceed to demand full repayment of the claim without first making the demand referred to in the preceding paragraph.
If the value of a mortgaged property has been reduced for reasons not attributable to the mortgagor, the mortgagee is entitled to demand the provision of security only to the extent of the benefit thereby received by the mortgagor.
Article 873
A mortgagee who has not been paid upon maturity of the claim may apply to a court to have the mortgaged property sold by auction and to receive payment out of the proceeds of the sale.
Article 873-1
A stipulation that ownership of mortgaged property will be transferred to the mortgagee upon failure to pay the claim at maturity shall not be effective against a third party unless it has been registered.
When a mortgagee demands that the mortgagor transfer the ownership of a mortgaged property, any portion of the property's value in excess of the claim it secures shall be returned to the mortgagor; if the mortgaged property is insufficient to repay the claim it secures, the mortgagee may demand full repayment of the obligation by the debtor.
Before the ownership of a mortgaged property has been transferred to the mortgagee, the mortgagor may extinguish the mortgage by repaying the claim secured by the mortgage.
Article 873-2
When a mortgagee enforces a mortgage, the mortgage on the real property is extinguished by the sale at auction of the mortgaged property.
In the circumstances referred to in the preceding paragraph, any unexpired payment period on the claim secured by the mortgage will be deemed to have expired to the extent that payment may be effected from the proceeds from the sale at auction of the mortgaged property.
If no payment period is specified for the claim secured by the mortgage or the payment period has not yet expired, and the auction winner or the creditor succeeding to the mortgaged property declares a willingness to pay the claim to the extent of the value of the mortgaged property as auctioned or received through succession, and the mortgagee has consented, the provisions of the preceding two paragraphs shall not apply.
Article 874
Except as otherwise provided by law, the proceeds from the sale of the mortgaged property shall be distributed to the mortgagees according to their priority ranking by order of the creation of the mortgages. For mortgages of the same rank, proceeds shall be distributed pro rata to the amounts of the claims secured by the mortgages.
Article 875
If a mortgage is created on multiple real properties for the purpose of securing the same claim but without specifying the amount to be apportioned against each of those real properties individually, the mortgagee may demand performance of the whole or a part of his claim from the proceeds from the sale of any and each of those real properties.
Article 875-1
If a mortgage is created on multiple real properties for the purpose of securing the same claim, when some or all of the properties are auctioned at the same time and any property or properties among those auctioned is owned by the debtor, the mortgagee shall receive satisfaction first from the proceeds from sale of the debtor's mortgaged property or properties.
Article 875-2
If a mortgage is created on multiple real properties for the purpose of securing the same claim, the amount to be apportioned toward the claim from each of the mortgaged properties shall be calculated as follows:
1. When the apportionment from each individual mortgaged property has not been specified, the apportionment shall be made pro-rata to the values of the properties.
2. When the apportionment from each individual mortgaged property has been specified, the apportionment shall be made pro-rata to the amounts specified for apportionment from the properties.
3. When the apportionment has been specified for only some of the mortgaged properties, the apportionment shall be made pro-rata to the amounts specified for apportionment from the properties and, for those properties for which no amount has been specified, to the values of the properties.
When calculating the amounts to be apportioned under subparagraphs 2 and 3 of the preceding paragraph, when the amount specified for apportionment from any individual mortgaged property is higher than the value of that mortgaged property, the value of the mortgaged property shall be used in the calculation.
Article 875-3
If a mortgage is created on multiple real properties for the purpose of securing the same claim, if some or all of the mortgaged properties are sold by auction simultaneously, and the proceeds from their sale exceed the amount of the claim secured by the mortgages, the provisions of the preceding article apply mutatis mutandis to the calculation of the amount to be apportioned from each of the auctioned mortgaged properties toward payment of the claim.
Article 875-4
If a mortgage is created on multiple real properties for the purpose of securing the same claim, if individual mortgaged properties are sold by auction separately, the following provisions apply:
1. When a mortgaged property sold by auction is owned by a third party other than the debtor and the amount of satisfaction received on the claim by the mortgagee from the auction proceeds exceeds the amount apportionable from that property, the owner of the mortgaged property, within the extent of that excess amount, may demand reimbursement from any other third party or parties whose properties provided as security for the mortgage have not been auctioned, and may also succeed to the rights of the mortgagee in the mortgaged property of such other third parties, to the extent of their apportionment, unless such succession would be prejudicial to the rights of the mortgagee.
2. When a mortgaged property sold by auction is owned by a given person and the amount of the mortgagee's claim satisfied out of the proceeds from auctioning that property exceeds the amount apportionable from that property, then a mortgagee with a junior mortgage on that same property, within the extent of that excess amount, succeeds to the rights of the enforcing mortgagee in any remaining mortgaged properties provided as security by the same given person that have not yet been auctioned, unless such succession would be prejudicial to the rights of the mortgagee.
Article 876
If the land and a building on such land are both owned by the same person at the time a mortgage is created, and either the land or the building only is mortgaged, a superficies is deemed to have been created and to exist at the time when the mortgaged property is sold by auction, and the land rental, term, and scope of the superficies shall be determined by agreement between the parties. If such an agreement cannot be reached, the parties may apply to a court for a judgment determining these.
If the land and a building on such land are both owned by the same person at the time a mortgage is created, and both the land and the building are mortgaged, if the land and the building are thereafter sold by auction to different bidders, the provision of the preceding paragraph shall apply.
Article 877
If, after the creation of a mortgage, the landowner constructs buildings on the mortgaged land, the mortgagee may when necessary apply to a court in the course of compulsory execution procedures to have the buildings sold by auction together with the land, but shall have no preferential right to satisfaction from the proceeds from the sale of such buildings.
The provisions of the preceding paragraph shall apply mutatis mutandis to any building of a rights holder, or used by a person with the rights holder's consent, on the mortgaged property under the circumstances set out in Article 866, paragraphs 2 and 3.
Article 877-1
When a mortgage is created on a building and the mortgaged property is subject to court auction, such assignable rights as necessarily inhere in the mortgaged property shall be auctioned together with it. The mortgagee, however, shall have no preferential right to satisfaction from the proceeds from the sale of those rights.
Article 878
A mortgagee who has not received payment by the maturity of a claim may enter into a contract to acquire the ownership of the mortgaged property, or dispose of it by any means other than an auction, unless so doing would be prejudicial to the interests of the other mortgagees.
Article 879
When a third party who creates a mortgage for a debtor pays the debt in full for such debtor, or loses the ownership in rem of the mortgaged property through the enforcement of the mortgage by the mortgagee, the third party succeeds to the claims of the creditor against the debtor to the extent required for repayment, unless such succession would be prejudicial to the rights of the creditor.
When the debtor has a guarantor, the portion of the debt for which the guarantor is obligated shall be determined pro rata by the guarantor's liability for performance relative to the value of, or the specified monetary amount of apportionment from, the mortgaged property. When the amount of the claim secured by the mortgaged property is less than the value of the property, the amount of the claim secured by the property shall be used in calculation.
Under the circumstances of the preceding paragraph, the mortgagor may demand reimbursement from the guarantor of the portion for which the guarantor is obligated, to the extent that the portion for which the mortgagor is obligated has been exceeded.
Article 879-1
When a third party creates a mortgage for a debtor, if the creditor waives the guarantor's liability for performance, a portion of the mortgage will be extinguished commensurate with the portion for which the guarantor is obligated pursuant to paragraph 2 of the preceding article.
Article 880
For a claim secured by a mortgage, if the right of claim is extinguished by prescription, the mortgage will be extinguished if not enforced by the mortgagee within five years after the completion of such prescription.
Article 881
Unless otherwise provided by law, a mortgage is extinguished by the destruction of the mortgaged property, unless the mortgagor is entitled to receive compensation or other benefits as a result of such destruction.
The mortgagee enjoys a pledge of rights over any right to compensation or other right of claim exercisable by the mortgagor as referred to in the preceding paragraph. The seniority of the pledge shall be the same as that of the original mortgage.
If a payment obligor, intentionally or through gross negligence, makes a payment to the mortgagor, the payment has no effect against the mortgagee.
The provisions of the preceding three paragraphs apply mutatis mutandis with respect to compensation or other benefits that may be received as a result of damage to a mortgaged property.
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