What the Civil Code says about the mortgage

It is Chapter III of Title VII of Book Three of the Civil Code of 2020, Articles 1011 to 1016. Six articles: they set what a mortgage is and what makes it valid, and refer the rest to the real-property registry legislation.

It may be constituted over immovables and over the transferable real rights imposed on them. The asset remains in the hands of the debtor or of a third party. As with any real guarantee, it may be constituted by the debtor or by a third party over their own assets.

• That the instrument constituting it be recorded in the Property Registry, except where the law recognizes the mortgage as tacit.Verified against the official source
• That it fall on immovables or on transferable real rights imposed on them.Verified against the official source
• To assign the mortgage credit, complying with the formalities the law requires.Verified against the official source

• The instrument constituting the mortgage, which is what must be recorded for it to be validly constituted.

1. 1

   Step 1: What it is, and how it differs from the pledge

   Article 1011 defines it as a real security right that may be constituted over immovables which remain in the hands of the debtor or of a third party, to secure any kind of obligation. The phrase that makes the difference is "which remain in the hands of the debtor": in a pledge the asset is handed over, in a mortgage it is not. That is why you can go on living in a mortgaged house.

2. 2

   Step 2: What it can fall on

   Article 1012 delimits it: immovables and the transferable real rights imposed on those assets may be the object of a mortgage. Not only the land: also, for example, a transferable real right burdening it.

3. 3

   Step 3: Voluntary and legal

   Article 1013 splits them in two: mortgages are voluntary or legal, and legal ones are those for which the law grants a right to demand their constitution. The Code neither lists them nor names the statutes; nor does this guide, because we did not read them.

4. 4

   Step 4: Without recording there is no mortgage

   Article 1014 is the most important of the six: for the mortgage to be validly constituted it is indispensable that the instrument constituting it be recorded in the Property Registry, except where the law recognizes it as tacit. In other rights recording serves to assert the right against third parties; here it is a requirement of validity. A mortgage signed and not recorded is not a mortgage, save for the tacit ones the law recognizes.

5. 5

   Step 5: The credit can be sold

   Article 1015 allows it in one line: the mortgage credit may be transferred or assigned to a third party in whole or in part, with the formalities the law requires. A bank selling your loan to another entity is a possibility the Code expressly contemplates.

6. 6

   Step 6: And everything else is not here

   Article 1016 says it plainly: the form, extent and effects of the mortgage, as well as its constitution, modification and extinction, and everything else not regulated in this chapter, are governed by the real-property registry legislation. That is, almost everything a mortgage borrower needs to know lives outside the Civil Code. This guide did not read it and therefore does not summarize it.

7. 7

   Step 7: What does apply: the title’s common rules

   Though this chapter is short, the mortgage is a real security right and the general provisions of Chapter I reach it. Among them, the one that most protects the debtor: the creditor may not appropriate or dispose of the encumbered asset except by acquiring it through the corresponding execution, and any agreement to the contrary is null and treated as unwritten. Also indivisibility, real subrogation onto whatever replaces the asset, and the prohibition on the owner doing acts that diminish the guarantee’s value.

Before a notary for the instrument, and before the Property Registry for the recording Article 1014 makes indispensable for the mortgage to be validly constituted.

• Believing signing the deed is enough: without recording it is not validly constituted, save a tacit mortgage recognized by law.
• Thinking a mortgage means handing over the property: the asset remains with the debtor or a third party.
• Assuming only the land can be mortgaged: so can the transferable real rights imposed on it.
• Taking for granted that the creditor cannot sell your loan: the mortgage credit may be assigned in whole or in part.
• Looking in the Civil Code for the mortgage’s effects and extinction: Article 1016 sends them to registry law.
• Signing that the bank keeps the house without a foreclosure: that agreement is null under Article 998.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov