Draft Law of Ukraine

"On Mortgage"

Pursuant to this draft, mortgage secures obligations by a collateral in the form of real estate. Real estate (subject of mortgage) may be represented by:

• land plots;
• other objects, being an integral part of a land plot;
• air and sea vessels;
• inland-waterways vessels;
• spacecrafts.

The specific feature of mortgage is that the right to own and use the real estate remains in possession of a mortgagor; however, mortgagee satisfies his/her claims for the account of the said realty if a mortgagor fails to fulfill his/her respective obligations.

Mortgage may take place on the grounds of an agreement or law.

In accordance with this draft, a mortgagor is to insure the subject of mortgage in full against accidental destruction or damage.

The subject of mortgage may be a subject of a subsequent mortgage if prior mortgagees do not object.

This draft law outlines peculiarities specific to the mortgage of:

• land plots of agricultural purpose;
• objects of unfinished construction.

This draft allows both mortgagor and mortgagee to enter into an agreement to satisfy mortgagee’s claims. Such agreement should envisage:

• possibility to transfer ownership of mortgaged property to mortgagee in order to secure main obligation;
• the right of a mortgagee to sell mortgaged realty to any person on the basis of a purchase and sale agreement.

At the same time, this draft establishes the procedure for selling the subject of mortgage in case of

• a court decision;
• a public tender.

According to this draft, Chapter II. Mortgage of the Law of Ukraine “On Pledge” is to be repealed.

Therefore, enactment of the draft law will allow to update regulations governing legal relations in the field of mortgage.