Mortgage Policy and Real Estate Mortgage Policy and Real Estate Market in SloveniaMarket in Slovenia

COST G9 - Workshop 7

Thessaloniki, Greece

09. 06. - 11. 06. 2005

Miran Ferlan and Radoš Šumrada

UL, Faculty of Civil and Geodetic Engineering

Jamova 2, Si 1000 Ljubljana, Slovenia

4/21/23, 4/21/23

Legal BaseLegal Base

Mortgages in Slovenia are legally arranged by different laws:Mortgages in Slovenia are legally arranged by different laws:

Law of Property Code (2003) - rights,Law of Property Code (2003) - rights,

Execution of Judgments in Civil Matters and Insurance of Claims Execution of Judgments in Civil Matters and Insurance of Claims Act (2001) - foreclosure,Act (2001) - foreclosure,

Law on Land Register (Jun 2003) - inscription,Law on Land Register (Jun 2003) - inscription,

Housing Act (Jun 2003) - restrictions.Housing Act (Jun 2003) - restrictions.

Law of Property CodeLaw of Property Code

In Slovenia rights, restrictions and responsibilities on real estates are: In Slovenia rights, restrictions and responsibilities on real estates are:

ownership,ownership,

lien (lien on immovable - mortgage),lien (lien on immovable - mortgage),

land charge (land debt - zemljiški dolg),land charge (land debt - zemljiški dolg),

easement,easement,

right of superficies.right of superficies.

Parcel

Owner

PartOfParcel

1 1..*

Ownership

CadastralMunicipality

Mortgagee

+form : kind

MortgageDeed +form : kind

+type : right+side : list

Easement

<<RRR>>Encumbrance

1 1..*

ThirdParty

*

*

TenantOrUser

LandChargeDeed1

1..*

1 1..*

1..*1

*

*

1

0..*

AdministrativeUnit

1

1..*

*

* *

*

1

+form : kind

ObligationContract

1..*

1

LegalFact

1

1..*

+appurtenant+personnal+commercial

«enumeration»right

+contract+by law

«enumeration»kind

+dominant+servient

«enumeration»list

Right to Lien (in general)Right to Lien (in general)

A lien is the A lien is the rightright of a lienor in the event of the non-payment of a of a lienor in the event of the non-payment of a secured claim upon maturity to secured claim upon maturity to receive paymentreceive payment together together with interest with interest and costsand costs from the value of the pledged property ahead of all other from the value of the pledged property ahead of all other creditors of the pledger. creditors of the pledger.

The subject of a lienThe subject of a lien can be things, rights and securities provided they can be things, rights and securities provided they can be disposed of and have a pecuniary value. can be disposed of and have a pecuniary value.

A A mortgagemortgage is a lien on an immovable. is a lien on an immovable.

The The mortgagermortgager may establish a mortgage for insurance of his own may establish a mortgage for insurance of his own debt or the debt of another. debt or the debt of another.

Creation of a MortgageCreation of a Mortgage

A mortgage can be created on the basis of a:A mortgage can be created on the basis of a:

legal transaction;legal transaction;directly executable notarial protocol,directly executable notarial protocol,contract among parties.contract among parties.

law orlaw or

court decision.court decision.

Parcel

Owner Ownership

Mortgagee

+form : kind

MortgageDeed

<<RRR>>Encumbrance

* *

1 1..*

1..*

1

*

*

+contract+by law

«enumeration»kind

Important Facts about the Important Facts about the Mortgage System in SloveniaMortgage System in Slovenia

In accordance with the law the mortgage extends to:In accordance with the law the mortgage extends to:

the real estate itself,the real estate itself,

essential and unessential component parts, the alreadyessential and unessential component parts, the already separated fruits are included, separated fruits are included,

accessories,accessories,

claims arising from the lease of the encumbered real estate.claims arising from the lease of the encumbered real estate.

The Order of Recorded MortgagesThe Order of Recorded Mortgages

The successive order of recorded mortgages can be altered:The successive order of recorded mortgages can be altered:

by a new entry in land register orby a new entry in land register or

by a note in the land register (withdrawal from the successive order).by a note in the land register (withdrawal from the successive order).

Alternation requires the approval of persons entitled to these rights as Alternation requires the approval of persons entitled to these rights as well as the consent of the person with the ownership right.well as the consent of the person with the ownership right.

Mortgage VarietiesMortgage Varieties

Joint mortgage,Joint mortgage,

Maximum mortgage,Maximum mortgage,

More than one mortgage on the same property,More than one mortgage on the same property,

Super - mortgage,Super - mortgage,

Indivisibility of a mortgage:Indivisibility of a mortgage:

A mortgage secures a claim until its final repayment.A mortgage secures a claim until its final repayment.

If a claim is partly repaid, the mortgage is not reduced.If a claim is partly repaid, the mortgage is not reduced.

On the division of a real estate encumbered with a On the division of a real estate encumbered with a mortgage each of the parts of the real estate is mortgage each of the parts of the real estate is encumbered with the mortgage in full.encumbered with the mortgage in full.

Land Charge (or Land Debt)Land Charge (or Land Debt)

What is land charge (land debt)?What is land charge (land debt)?

Creation of a land charge:Creation of a land charge:

on the basis of an unilateral legal on the basis of an unilateral legal transaction (owner of real estate - transaction (owner of real estate - notation protocol),notation protocol),

with entry in the land register and with entry in the land register and

with the issuing of a with the issuing of a land letterland letter (by the court that keeps the land (by the court that keeps the land register).register).

A land charge is transferred A land charge is transferred together with the land letter. together with the land letter.

Parcel

Owner Ownership

<<RRR>>Encumbrance

ThirdParty

LandChargeDeed

1 1..*

*

*

+form : kind

ObligationContract

1..*

1

LegalFact

11..*

+contract+by law

«enumeration»kind

Land Charge CharacteristicsLand Charge Characteristics

Payment of a land charge:Payment of a land charge:

The owner of an encumbered real estate must pay the land charge The owner of an encumbered real estate must pay the land charge on maturity to the entitled holder of the land letter. on maturity to the entitled holder of the land letter.

A land letter is an executable title. A land letter is an executable title.

Extinguishment of a land charge:Extinguishment of a land charge:

with its deletion from the land register. with its deletion from the land register.

Can be deleted from the land register upon submission of the land Can be deleted from the land register upon submission of the land letter.letter.

Creation of Mortgage on Co-ownershipCreation of Mortgage on Co-ownership

If any of the co-ownership shares of the real estate is encumbered If any of the co-ownership shares of the real estate is encumbered with a mortgage or a land charge, a division agreement is only with a mortgage or a land charge, a division agreement is only possible with the consent of the creditor. possible with the consent of the creditor.

The division should not worsen the position of the creditor. The division should not worsen the position of the creditor.

A division agreement must determine the individual part of the A division agreement must determine the individual part of the building in divided co-ownership to which the encumbrance transfers.building in divided co-ownership to which the encumbrance transfers.

A mortgage or a land charge that encumber the entire real estate that A mortgage or a land charge that encumber the entire real estate that is divided into co-ownership shall be transfer be to all individual parts.is divided into co-ownership shall be transfer be to all individual parts.

Execution of Judgments in Civil Execution of Judgments in Civil Matters and Insurance of Claims ActMatters and Insurance of Claims Act

Repayment from a mortgage/land charge:Repayment from a mortgage/land charge:

debtor repays the claim,debtor repays the claim,

demand in a suit (pledged real estate will be sold),demand in a suit (pledged real estate will be sold),

on demand (directly executable notarial protocol).on demand (directly executable notarial protocol).

Mortgage / land charge and foreclosure (execution) procedure:Mortgage / land charge and foreclosure (execution) procedure:

note of foreclosure in land registry,note of foreclosure in land registry,

finding of value real estate,finding of value real estate,

sells of real estate,sells of real estate,

repayment of the creditors from amount got with sale.repayment of the creditors from amount got with sale.

Mortgage LoansMortgage Loans

Mortgage loans Period of repayment

Amount of loan

Method of paying interest

Insurance of loan

10 - 30 years

Depends on: period of repayment amount of regular month salary or income rate of interest market price of mortgaged real estate

D + Euribor + fixed additional payment

compulsory fire insurance

additional mortgage life insurance

Cost to Approve a Mortgage Loan in SiCost to Approve a Mortgage Loan in Si

Total amount of loan (Total amount of loan (20002000):): 5.000.000,00 SIT5.000.000,00 SIT

Average period of installment:Average period of installment: 120 month120 month

Monthly installment: 57.943,00 SITMonthly installment: 57.943,00 SIT

EffectiveEffective rate of interest rate of interest (EOM):(EOM): 8,0%8,0%

Costs of Costs of credit credit insurance:insurance: 129.001,00 SIT129.001,00 SIT

Costs of approval:Costs of approval: 40.000,00 SIT40.000,00 SIT

Total amount of loan (Total amount of loan (20020055):): 5.000.000,00 SIT5.000.000,00 SIT

Average period of installment:Average period of installment: 120 120 – 360 – 360 monthmonth

EffectiveEffective rate of interest rate of interest (EOM):(EOM): 5.05.0%%

Costs of approval:Costs of approval: 770.000,00 SIT0.000,00 SIT

an example (1 Euro 240 SIT)

Redemption plane Redemption plane Months Mortgage loan Monthly paid interests Monthly paid loan Current state of loan Bank expenses

1 100.000,00 833,33 44,24 99.955,76 41,67

2 99.955,76 832,96 44,61 99.911,15 41,65

3 99.911,15 832,59 44,98 99.866,17 41,63

4 99.866,18 832,22 45,35 99.820,83 41,61

5 99.820,82 831,84 45,73 99.775,09 41,59

6 99.775,09 831,46 46,11 99.728,98 41,57

7 99.728,98 831,07 46,50 99.682,48 41,55

8 99.682,48 830,69 46,88 99.635,60 41,53

9 99.635,60 830,30 47,27 99.588,33 41,51

10 99.588,32 829,90 47,67 99.540,65 41,50

11 99.540,65 829,51 48,06 99.492,59 41,48

12 99.492,59 829,10 48,47 99.444,12 41,46

           

210 75.231,14 626,93 250,64 74.980,50 31,35

211 74.980,49 624,84 252,73 74.727,76 31,24

212 74.727,76 622,73 254,84 74.472,92 31,14

213 74.472,92 620,61 256,96 74.215,96 31,03

           

357 3.438,36 28,65 848,92 2.589,44 1,43

358 2.589,44 21,58 855,99 1.733,45 1,08

359 1.733,45 14,45 863,12 870,33 0,72

360 870.32 7,25 870,32 0,00 0,36

Statistical Data (source Ministry of Finance - Si)Statistical Data (source Ministry of Finance - Si)

In 2000 long-term housing loans offered by commercial banks In 2000 long-term housing loans offered by commercial banks were estimated to be $267 million or 2.5% of Si GDP in 1998.were estimated to be $267 million or 2.5% of Si GDP in 1998.

Loans are offered for up to 20 years with an average of 5.5% Loans are offered for up to 20 years with an average of 5.5% real interest rate above inflation (all together 10-12%).real interest rate above inflation (all together 10-12%).

Mortgage with a maturity of up to 10 years account for 60% of Mortgage with a maturity of up to 10 years account for 60% of all loans to individuals (2000).all loans to individuals (2000).

Long-term mortgage loans with a maturity over 20 years do Long-term mortgage loans with a maturity over 20 years do not exist in Slovenia (2000).not exist in Slovenia (2000).

The number of mortgage loans increases by 10% yearly.The number of mortgage loans increases by 10% yearly.

The period has increased to 30 years.The period has increased to 30 years.

It is necessary in any case (demand of Slovene It is necessary in any case (demand of Slovene banks) that the real estate, which insures repayment banks) that the real estate, which insures repayment of mortgage fulfils the following conditions:of mortgage fulfils the following conditions:

Real estate under the mortgage must have fairly estimated market Real estate under the mortgage must have fairly estimated market value and must represent an important share in the entire property value and must represent an important share in the entire property of debtor/buyer.of debtor/buyer.

In every moment evaluation of market value must cover the unpaid In every moment evaluation of market value must cover the unpaid share of loan.share of loan.

Mortgage must be always repaid - that means easily received money Mortgage must be always repaid - that means easily received money (purchase) in strong currency and in suitable height directly (purchase) in strong currency and in suitable height directly assigned to the creditor.assigned to the creditor.

Property, which is under the mortgage, must be insured on actual Property, which is under the mortgage, must be insured on actual market value against hazards (fire, earthquake, burglary etc.)market value against hazards (fire, earthquake, burglary etc.)

Mortgager must as conscientious master maintain the real estate Mortgager must as conscientious master maintain the real estate under the mortgage and also keep it in a good state.under the mortgage and also keep it in a good state.

Friday, April 21, 2023 - 16:01:18

Questions and comments?Questions and comments?