CONTENTS
- 1. Mortgage / Mortgage to Secure Maximum Amount | Concept and Differences
- - Concept of a Mortgage
- - Concept of a Mortgage to Secure Maximum Amount
- - Objects
- - Characteristics
- - Differences
- 2. Mortgage / Mortgage to Secure Maximum Amount | Creation and Effect of a Mortgage
- - Requirements for Creating a Mortgage
- - Effect of a Mortgage
- - Disposition and Extinguishment
- 3. Mortgage / Mortgage to Secure Maximum Amount | How to Respond to Infringement of a Mortgage
- - Real Right Claim
- - Right to Claim Damages
- - Right to Request Replenishment of Collateral
- - Right to Request Immediate Repayment
- 4. Mortgage / Mortgage to Secure Maximum Amount | How to Apply for Registration of a Mortgage to Secure Maximum Amount
- - Establishment Registration of a Mortgage to Secure Maximum Amount
- - Modification Registration of a Mortgage to Secure Maximum Amount
- - Cancellation Registration of a Mortgage to Secure Maximum Amount
- 5. Mortgage / Mortgage to Secure Maximum Amount | How to Prepare
- - Support System of Real Estate Attorneys
1. Mortgage / Mortgage to Secure Maximum Amount | Concept and Differences
The mortgage and the mortgage to secure maximum amount are concepts that are often confused within the real estate security system.
Both are security interests that allow a creditor to receive priority repayment through an auction when the debtor defaults.
However, there are important differences in the nature of the secured claim and in their effect.
Concept of a Mortgage
A mortgage is the right to receive priority repayment from real estate that the debtor or a third party has provided as security for an obligation, without transferring possession of that real estate (Article 356 of the 「Civil Act」).
It is established to secure a fixed claim, and when the claim is extinguished, the mortgage is extinguished together with it.
Concept of a Mortgage to Secure Maximum Amount
A mortgage to secure maximum amount is a mortgage established to secure an unspecified number of future claims that may arise from a continuous transactional relationship (Article 357 of the 「Civil Act」).
Its distinctive feature is that it secures claims that may arise from a transactional relationship, rather than a specific claim, within a certain maximum limit.
Objects
A mortgage and a mortgage to secure maximum amount may be established on the following rights (Article 371 of the 「Civil Act」).
∙ Superficies
∙ Jeonse rights
Characteristics
A mortgage takes effect only when it is registered.
∙ Principle of fixed priority (Articles 333 and 370 of the 「Civil Act」)
When several mortgages are established on the same real estate, priority is determined by the order in which the registrations were made.
∙ Right to request an auction (Article 363(1) of the 「Civil Act」)
If the debtor does not make repayment, the mortgagee may request an auction of the mortgaged property.
Differences
Category | Mortgage | Mortgage to Secure Maximum Amount |
Secured claim | A present, fixed amount | Unspecified future claims that increase, decrease, and fluctuate |
Accessory nature | Extinguished together when the present claim is extinguished | Maintained even if the secured claim is extinguished before the secured claim is fixed on the settlement date |
Effect of repayment | Repayment extinguishes the claim | Even if repayment is made, the claim is not extinguished if it is before the settlement period |
Registered amount | The amount of the secured claim | The maximum amount of the secured claim (even if the claim amount exceeds the maximum, there is no priority repayment right beyond the maximum amount) |
2. Mortgage / Mortgage to Secure Maximum Amount | Creation and Effect of a Mortgage
Among these two, the mortgage is a strong security system that uses real estate as collateral and allows the creditor to receive repayment in priority over the debtor.
To exercise it validly, certain requirements must be met, and its effect may extend to the fruits, substitute property, and accessories of the collateral.
Requirements for Creating a Mortgage
Because a mortgage is a real right, it is not created by a mere contract, and registration procedures must necessarily accompany it (see Article 186 of the 「Civil Act」).
A mortgage is validly created in law only when the following requirements are met.
- Mortgagee : must be the creditor of the secured claim
② Object of the mortgage
Only registrable rights may be the object of a mortgage
(real estate, superficies, jeonse rights, mining rights, fishery rights, automobiles, etc.)
③ Secured claim
In general, monetary claims arising from loans for consumption make up the majority, and future claims may also be included
Effect of a Mortgage
A mortgage grants a strong priority right over the collateral.
An established mortgage takes effect not only on the property itself but also on related profits, damages, substitute property, and the like, and it includes the following legal rights.
- The effect extends even to accessory things and appurtenances, fruits after attachment, compensation for public expropriation, and the like (Articles 358 through 370 of the 「Civil Act」)
② Effect on the secured claim
Principal, interest, penalty, damages, enforcement costs, and the like may be secured
However, only one year's worth of delay damages may be repaid in priority (Article 360 of the 「Civil Act」)
③ Right to priority repayment
The mortgagee may receive repayment in priority over other creditors through an auction (Article 363(1) of the 「Civil Act」)
Any portion not repaid through the mortgage may be claimed against other property as an ordinary creditor (Articles 340 and 370 of the 「Civil Act」)
Disposition and Extinguishment
Because a mortgage is a real right that secures a specific claim, by its nature there are certain limits on its free disposition, and it has the characteristic of sharing the fate of the claim.
Restrictions on the Disposition of a Mortgage
A mortgage cannot be transferred or provided as security separately from the claim it secures.
Accordingly, to transfer a mortgage to another person, it must necessarily be transferred together with the secured claim, in which case the provisions on assignment of claims apply, and a real-right agreement along with registration must be in place.
Extinguishment of a Mortgage
A mortgage is extinguished together with the claim it secured when that claim is extinguished.
However, a person who has established a mortgage on superficies or a jeonse right cannot extinguish the superficies or jeonse right without the consent of the mortgagee.
3. Mortgage / Mortgage to Secure Maximum Amount | How to Respond to Infringement of a Mortgage
Among these two, the mortgage is a strong security interest, but it may be exposed to outside infringement.
In such a case, the mortgagee can protect its rights through various rights under the Civil Act.
Real Right Claim
When a mortgagee is actually obstructed in its right or there is a concern that the right may be infringed, the mortgagee may claim the following (Articles 370 and 214 of the 「Civil Act」).
- Prevention of the infringement
- Security for damages
Right to Claim Damages
When an infringement of a mortgage is an unlawful act committed intentionally or through negligence, the mortgagee may claim damages (Article 750 of the 「Civil Act」).
▷ Obstruction of possession, etc.
A mortgagee who has suffered such an infringement may claim damages for a tort under the Civil Act.
Right to Request Replenishment of Collateral
When the value of the collateral has significantly decreased due to a cause attributable to the mortgagor, the mortgagee may demand that it be restored (Article 362 of the 「Civil Act」).
Right to Request Immediate Repayment
When the debtor intentionally damages or destroys the collateral, the mortgagee may request immediate repayment even before the due date arrives.
This is because, where the debtor has caused damage to, a decrease in, or destruction of the collateral, the debtor cannot assert the benefit of time (Article 388(1) of the 「Civil Act」).
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4. Mortgage / Mortgage to Secure Maximum Amount | How to Apply for Registration of a Mortgage to Secure Maximum Amount
Among these two, the mortgage to secure maximum amount is a system designed to secure unspecified claims arising from a continuous transactional relationship.
A mortgage to secure maximum amount requires not only the registration procedure at the time of establishment but also separate registration modification procedures when the creditor, the maximum claim amount, or the like needs to be changed, or when it is to be extinguished.
Establishment Registration of a Mortgage to Secure Maximum Amount
Establishment registration of a mortgage to secure maximum amount is the procedure of setting a maximum claim amount and registering it with the registry office in order to secure an unspecified number of claims that may arise in the future.
: Securing the creditor's priority repayment in repeated monetary transactions
- Setting a maximum claim amount is required
- Time of claim fixing
: When the settlement period arrives or upon notice to the debtor
Applicants
Both parties are involved in the establishment registration of a mortgage to secure maximum amount, as follows.
: The mortgagee (creditor)
- Person obligated to register
: The mortgagor (the real estate owner, etc.)
Establishment Registration Application Procedure
An establishment of a mortgage to secure maximum amount may be applied for in person or electronically, and the procedure is as follows.
② Attach registration revenue stamps
(Supreme Court registration revenue stamps can be purchased at the registry office or at a bank near it and affixed to the application form)
③ Submit the application form
(Bring identification and submit it to the general affairs section of the competent registry office)
④ Receive the registration-completed information notice or the registration-completion notice
⑤ Check the certified copy of registered matters
(Obtain a certified copy of registered matters and confirm that the applied matters have been properly registered)
Documents to Submit
∙ Registration license tax payment notice (including local education tax)
∙ Registration license tax payment receipt confirmation
∙ Mortgage to secure maximum amount establishment contract
∙ Power of attorney (only where applicable)
∙ Registration-completed information or registration-completed information notice
Modification Registration of a Mortgage to Secure Maximum Amount
Modification registration of a mortgage to secure maximum amount is the procedure of applying to the registry office to reflect changes when a discrepancy arises between the contents of a previously registered mortgage to secure maximum amount and the actual rights relationship.
Main Causes
Modification registration of a mortgage to secure maximum amount is applied for on the following grounds.
: When a contract to increase or decrease the maximum claim amount is concluded
∙ Change in the object
: Such as a change from a co-owned share to sole ownership
∙ Change of debtor
: Upon a release-based or cumulative assumption of debt
(possible even after the fixed claim has arisen)
Applicants
The person entitled to registration and the person obligated to register differ depending on the cause of the change.
Person entitled to registration : The mortgagee
Person obligated to register : The mortgagor
∙ Decrease in the maximum claim amount / reduction in the object share
Person entitled to registration : The mortgagor
Person obligated to register : The mortgagee
∙ Change of debtor
Person entitled to registration : The mortgagee
Person obligated to register : The mortgagor
How to Apply
Both in-person and electronic applications are possible, and an application may be made through the following procedure.
② Attach registration revenue stamps
(Supreme Court registration revenue stamps can be purchased at the registry office or at a bank near it and affixed to the application form)
③ Submit the application form
(Bring identification and submit it to the general affairs section of the competent registry office)
④ Receive the registration-completed information notice or the registration-completion notice
⑤ Check the certified copy of registered matters
(Obtain a certified copy of registered matters and confirm that the applied matters have been properly registered)
Documents to Submit
∙ Registration license tax payment notice (including local education tax)
∙ Registration license tax payment receipt confirmation
∙ Purchase of national housing bonds
∙ Purchase of Supreme Court registration revenue stamps
∙ Mortgage to secure maximum amount modification contract
∙ Power of attorney (only where applicable)
∙ Registration-completed information or registration-completed information notice
Cancellation Registration of a Mortgage to Secure Maximum Amount
Cancellation registration of a mortgage to secure maximum amount refers to the registration procedure applied for in order to cancel a mortgage to secure maximum amount from the register when it no longer exists in the substantive rights relationship due to a cause such as repayment of the debt or extinguishment of the right.
Grounds for Cancellation Registration
Cancellation of a mortgage to secure maximum amount arises on the following grounds, and when a ground for extinguishment occurs, the right must necessarily be removed from the register through cancellation registration.
∙ Extinguishment of the object right (superficies, jeonse right, etc.) (Article 288 of the Civil Act)
∙ Sale of the object real estate through an auction (Article 91(2) of the Civil Execution Act)
∙ Occurrence of a merger of rights (Article 191(1) of the Civil Act)
∙ Termination by agreement between the parties or arrival of a contractually agreed ground for extinguishment (Article 543 of the Civil Act, Article 54 of the Registration of Real Estate Act)
∙ Partial waiver of a joint mortgage
Applicants
Cancellation registration, which reflects the extinguishment of the registered rights relationship, is in principle filed jointly by the parties, and the applicants are as follows.
Person entitled to registration | The mortgagor (owner) |
Person obligated to register | The mortgagee (creditor) |
Documents to Submit
The following documents are required when applying for cancellation registration.
∙ Registration license tax payment notice
∙ Registration license tax payment receipt confirmation
∙ Supreme Court registration revenue stamps
∙ Power of attorney (only where applicable)
∙ Certificate of termination or certificate of waiver
∙ Registration-completed information or registration-completed information notice
Application Procedure
Cancellation registration of a mortgage to secure maximum amount may be applied for through the following procedure.
② Attach registration revenue stamps
(Supreme Court registration revenue stamps can be purchased at the registry office or at a bank near it and affixed to the application form)
③ Submit the application form
(Bring identification and submit it to the general affairs section of the competent registry office)
④ Receive the registration-completed information notice or the registration-completion notice
⑤ Check the certified copy of registered matters
(Obtain a certified copy of registered matters and confirm that the applied matters have been properly registered)
5. Mortgage / Mortgage to Secure Maximum Amount | How to Prepare
To establish a mortgage or a mortgage to secure maximum amount, registration must be made in the real estate register, and for this, the creditor-debtor relationship must be clarified and the necessary documents must be prepared.
Category | Items to prepare and explanation |
Agreement on the claim and debt | Clearly determine and document the loan amount, interest rate, repayment deadline, and the like (loan certificate or loan contract) |
Verification of the collateral property | Check the certified copy of registration → review whether any other rights are established on the real estate (such as a senior mortgage) |
Preparation of the establishment contract | Prepare a mortgage establishment contract or a mortgage to secure maximum amount establishment contract (joint signatures of the creditor and debtor are required) |
Preparation of a seal certificate, etc. | Prepare the documents necessary for registration, such as the debtor's seal certificate, resident registration certified copy, and certificate of title |
Submission of the registration application | Apply for mortgage establishment registration at the registry office → this is usually carried out in the name of the creditor or a judicial scrivener |
Support System of Real Estate Attorneys
This law firm has many specialist attorneys with an average of more than 10 years of experience, including real estate attorneys registered with the Korean Bar Association.
For a mortgage or a mortgage to secure maximum amount, legal review and procedural support can be provided throughout the entire process, from before establishment to termination and cancellation.
To avoid mistakes in the rights relationship or the registration procedure, you may seek the support of a real estate attorney and work toward stable securing of your rights.
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