The mortgage in Bulgaria

According to Article 149 of the Bulgarian law of obligations and contracts, a mortgage on real property may be established to secure a claim. Mortgages may be established both for one's own obligation or for another person's obligation. The mortgage follows the secured claim when it is transferred and extinguishes if the claim is extinguished – it is therefore an accessory right. Should the obligation be divided among the debtor's heirs, the mortgage continues to be valid for the whole obligation on the entire chattel or on all chattels even though it might be divided among the heirs. If the mortgage secures someone else's obligation, the owner of the mortgaged property may plead against the creditor all defenses at the debtor's disposal, as well as claim set-offs with the debtor's claims against the creditor.

An agreement which stipulates in advance that if the obligation is not performed the creditor shall become the owner of the property, as well as any other agreement which stipulates in advance the way of satisfying the creditor other than the one provided for by the law shall be invalid. In the event there are several mortgages on one property the creditors shall be satisfied preferentially in the order the mortgages were created in, even though the secured claim might not have existed at the time of the creation thereof.

If the debtor has transferred the mortgaged property to a third party and the transferee pays or is subjected to forcible execution, the latter shall assume the rights of the satisfied creditor against the debtor, guarantors and the persons who have acquired from the debtor the ownership of other pledged or mortgaged properties for the same obligation later than him. The same rights are enjoyed by an owner who has mortgaged his property for another person's obligation. However, in this case he shall assume the creditor's rights against the guarantors up to the amount which he could claim against them if he were a guarantor.

Creation of the mortgage

The mortgage shall be created through registration in the Property Register on the grounds of a contract or by operation of law. It may be established only on separately specified properties and for a specific sum of money. The mortgage contract shall be concluded by way of a title deed. The deed must include the following facts: the full name, domicile and occupation of the creditor and the debtor, as well as of the owner of the property if the mortgage is created for another person's obligation, and if any of the above parties is a legal entity - its trade name; the property on which the mortgage is created; the secured claim, its maturity and the interest rate if interest is agreed, as well as the amount of the sum the mortgage is created for if the claim is a non-monetary one. A mortgage may be created only on property that belongs to the mortgagor at the time of concluding the contract.

A mortgage by operation of law:

  1. in favour of the alienator of immovable property - on the alienated property as security for his claims under the contract, and
  2. in favour of the co-partitioners to whom a supplementing of the share is due - on immovable property left in the share of a co-partitioner who is liable for the supplementing of the share.

The mortgage by operation of law shall be registered upon the creditor's application, which should have the deed of alienation or partition attached thereto. It has to indicate all of the above mentioned facts as well.

A mortgage receives its rank upon its registration

The creation of a mortgage is invalid if either the mortgage contract or the application for creation of a mortgage by operation of law or the deed pursuant to which it is filed does not specify the identity of the creditor or the owner or the debtor, or does not specify the identity of the property or the secured claim or the amount of the sum the mortgage is created for.

The transfer and pledging of a claim secured by mortgage, the assumption of such a claim and levying a distraint on it, as well as its renewal and substitution in obligation secured by mortgage, must be made in writing with notarised signatures and entered in the Property Register in order for them to have effect with respect to the mortgage. The registration is valid for 10 years from the date it was made on. It may be extended if the registration is renewed prior to the expiration of the above period. Should the time period expire without a renewal being made the mortgage may be registered anew. In that case it shall be ranked as from the new registration. The registration shall be renewed upon an application with a copy of the contract or a copy of the application for creating the mortgage attached thereto.

A creditor whose claim is secured by a mortgage is entitled to be satisfied preferentially from the mortgaged property's price, whoever its owner might be. The right to a preferential satisfaction also applies to the income from the property from the date on which the owner must give account of such income under forcible execution pursuant to the Code of Civil Procedure. If the claim is for a specified amount of money, or if liquidated damages in cash have been agreed for it, the creditor may on the basis of the deed of registration of the mortgage require issuing of an order for immediate execution pursuant to the provisions of Art. 418 of the Civil Procedure Code.

The mortgage secures the claim irrespective of any changes that might occur in the latter, but only to the amount shown in the registration. However, if it is registered that the claim is interest-bearing, the mortgage secures also the interest for the two years preceding the year of serving a writ of summons for voluntary performance on the owner, for the current year and all the following years until the date the property is sold. Besides, the mortgage secures the creditor's claims for expenses incurred for its creation and renewal, and court and execution expenses.

In case of public sale of the property all mortgages and property rights that arose with the first mortgage become extinguished. The mortgage creditors are entitled to a preferential satisfaction according to the ranking order of the mortgages.

In case of public sale of the property, the mortgage may be preserved if the purchaser assumes the secured claim with the consent of the mortgage creditor. Under these circumstances, the registration in the Property Register shall note the protocol with which the state or private bailiff certifies this consent.

If a third party bearing no personal obligation regarding the secured claim purchases the mortgaged property and afterwards that property is sold at a public sale, the property rights that he has obtained before the purchase of the property are restored ex jure except for the mortgages. The purchaser joins the distribution of the proceeds according to their ranking order. If the owner of the sold mortgaged property is not personally obliged, he is primarily eligible for the distribution of the proceeds towards the mortgage creditor. He is also entitled to receive from the property's price for his expenses made for the property and any increase in its value due to useful expenses. He is liable towards the mortgage creditor for damages caused by gross negligence. A person who purchases a mortgaged property from the debtor under the secured claim without assuming the obligation may pay the mortgage creditor up to the amount of the price he owes. In this case he shall be deemed to have assumed the rights of the satisfied creditor with respect to the creditors whose mortgages had been created before he purchased the property.

Deletion of the mortgage

The deletion of a mortgage is only possible with the creditor’s consent – in a notarised form, or on the basis of an effective court ruling. The deletion shall be made upon an application with the deed of consent or a copy of the effective court ruling attached thereto. It shall be made through entering a note in the lot of the mortgaged property. The deletion extinguishes the mortgage. However, if the deed the deletion was based on is declared null and void, the mortgage may be registered anew. In that case, it shall be ranked from the date of the new registration.